Euro zone rescue fund must be able to lend to banks: ECB's Coene

(Reuters) - The euro zone's EFSF rescue fund must be able to lend money directly to banks, European Central Bank Governing Council member Luc Coene said on Friday.

Coene said a 'vicious circle' of the problems of the banking sector and of sovereign debt feeding on each other needed to be broken.

"I think if want to break through we must head towards a solution, which is being considered among others for Spain, with the EFSF able to lend capital directly to financial institutions," he told a news conference to present the Belgian central bank's financial stability report.

Euro zone ministers have been preparing to provide up to 100 billion euros ($126 billion) in aid for Spain so it can shore up its stricken banks.

The International Monetary Fund on Thursday also urged the euro zone to channel aid directly to struggling banks, rather than via governments, though Germany and others are opposed to such direct lending, which is not possible under current rules.

(Reporting by Philip Blenkinsop, writing by Ben Deighton)