G8 finance ministers met in Italy over the weekend to discuss the current state of the global economy and what could be done. It ended in a scattergun of platitudes, but no real commitment to anything, except to avoid the newest elephant in the back of the meeting room.

That’s the growing concern over the health of Europe’s banks. The International Monetary Fund is worried about the Euozone financial system, but the finance ministers from Germany, Italy and France all ignored the concerns at the G8 meeting.

The fear is that Europe could be the straw that crushes the current rebound in markets, if a bank gets into trouble and re-ignites those dark fears from last October-January about collapse.

Some people are getting a bit windy about European banks, especially those in Germany, Austria and Spain where the economies are in worse shape than the national governments admit.

A gathering crisis in the Baltic economies, where Latvia may have avoided a nasty devaluation, but the continuing weakness in eastern Europe, have made analysts concerned about the health of banks.

A story in the London Telegraph late last week said that European central Bank officials were watching 25 banks in the Eurozone, especially if the slump continues into 2010.

“The European Central Bank fears another banking crisis in 2010 if the recession drags on, according to ECB financial stability expert Dejan Krusec in the story in the Daily Telegraph.

If there is a quick “V-shaped” recovery the banks would be strong enough to weather the downturn, he said.

“If this is ‘U-shaped’, the banks will have problems. There are 25 banks we monitor that are strategically important,” Krusec was quoted as saying to a Fitch Ratings conference on Eastern Europe.

“The problem is not 2009. Euro-area banks are well enough capitalised to cover losses. The problem is 2010. We are concerned about the length (of the recession),” said Krusec.

The ECB has forecast of a 4.6% contraction this year with no recovery until mid-2010. And figures last Friday showing a surprisingly larger than expected fall in European output in April have increased the odds of a bigger slump this year and a very sluggish 2010.