European rules allowing the government to guarantee the bundling of some non-performing loans and a private fund set up to help take them off bank balance sheets provide Italy with the tools needed to tackle the problem of soured debt.

"The Italian banking system can adopt effective and sustainable market solutions," Economy Minister Pier Carlo Padoan said during question time in the lower house of parliament.

Italian banks had some 83 billion euros (£69.5 billion) of net bad debt at the end of February, according to the International Monetary Fund, Padoan added.

(Reporting by Giuseppe Fonte, writing by Steve Scherer)