Berlin  - The federal government is to demand that Germany's 16 states shoulder about one third of the end costs of a massive rescue of banks, an associate of Chancellor Angela Merkel said in Berlin Monday.

Ronald Pofalla, general secretary of the party Merkel leads, the Christian Democratic Union (CDU), said, "The idea is that the states carry 35 per cent of the costs that have to be met when this is all over."

He spoke just before Merkel was to unveil the plan, which senior parliamentarians said would comprise 70 billion euros to inject equity and take over tainted derivatives from the banks.

An additional 400 billion euros would be earmarked for government guarantees for interbank lending, but only 5 per cent of that was expected to be called when banks default, according to numbers in the draft bill obtained by Deutsche Presse-Agentur dpa.

The main party in Bavaria signalled immediate opposition to taking over any part of the burden.

The refusal was voiced by Horst Seehofer, designated leader of the Christian Social Union (CSU. Last month, the CSU, a Merkel ally, won 43 per cent of the vote at a state election and is set to lead the next Bavarian government.

"This rescue is essentially a job for the federal government," responded Seehofer, who is currently Germany's agriculture minister. (dpa)