Jeroen Dijsselbloem, the head of the Eurogroup of eurozone finance ministers, spoke out Monday against spending more public money on struggling banks, with Italian lenders particularly in the spotlight.
Stock market values for Italian banks have tumbled following the Brexit referendum on June 23. The worst hit by the crash has been Monte dei Paschi di Siena (MPS), whose stock value has fallen by 50 per cent to a record low of about 0.27 euros (0.30 dollars).
Rome has been in talks with the European Commission on ways to carry out public bank rescues - a move that could run counter to EU rules aimed at putting the onus of bailouts on shareholders and creditors, rather than taxpayers.
The new regulations were agreed to in the wake of the 2008 financial crisis, when governments paid hundreds of billions of euros to rescue banks.
Italy now wants an escape clause from these so-called bail-in rules, arguing that imposing losses on investors, at a time when Italian bank sector shares have plunged in value, would further scare markets and increase the risk of bank runs.
But Dijsselbloem said he would "very strongly" resist any proposals that involve spending public money on bank recapitalizations.
"The problems in the banks need to be sorted out in the banks and by the banks," Dijsselbloem said ahead of Eurogroup talks in Brussels on Monday.
He later explained that he had reacted "aggressively" to comments from some banking executives who were calling for "very large sums" of public money to be made available to Europe's lenders, and was not commenting specifically on the Italian situation.
Deutsche Bank chief economist David Folkerts-Landau recently floated the idea of a 150-billion-euro (166-billion-dollar) safety net for bank recapitalization, arguing that this could justify a breach of the EU's bank bail-in rules.
Dijsselbloem argued, however, that it was important to "respect what we agreed between us, because otherwise everything will be questioned in Europe."
Meanwhile, German Finance Minister Wolfgang Schaeuble said the new European rules provide "ample opportunity to react to every situation appropriately," while also calling for patience until bank stress test results are published later this month.
"Europe has few rules, but they are to be followed," added Austrian Finance Minister Hans Joerg Schelling.
"What is happening in Italy has nothing to do with Brexit," Schelling said, warning that Britain's decision to exit the EU "should not be used as an excuse."
Faced with journalists' questions, Italian Finance Minister Pier Carlo Padoan stressed that the issue was not formally on the agenda for Monday's Eurogroup talks or a meeting of all 28 EU finance ministers the following day.
"The savers will be protected by the Italian government," he added, referring to work that is under way on precautionary instruments that "will only be used if necessary."
"There is no looming banking crisis," Padoan later told EU lawmakers, noting that the numbers on Italian non-performing loans reported in the press are "simply nonsense."
European Commission Vice President Valdis Dombrovskis said there are a "number of ways" to respond to liquidity problems or capital needs in Italy's banking sector which respect EU rules and "without harming financial stability."