The German government will decide next week whether to set up a 'bad bank' to absorb banks' illiquid assets to help restart lending activity, a Finance Ministry spokeswoman said.

The 21 April meeting isn't likely to result in the immediate launch of the plan, but probably will set the broad parameters. 'It'll be a preliminary vote,' Finance Ministry spokeswoman Jeanette Schwamberger said on Thursday.

The government has been discussing how to rid the banking system of toxic assets for several weeks.

The bad-bank idea received a further impetus last week, after Ireland became the first euro-zone nation to use an industrywide bad-bank plan.

Wall Street Journal