* Ends speculation it would scrap deal
* Faces Oct. 2 deadline to propose new remedy to EU
* Recapitalisation to be decided next month
(Adds ABN CEO comment on Deutsche Bank)
By Ben Berkowitz and Gilbert Kreijger
AMSTERDAM, Sept 28 (Reuters) - The Dutch finance ministry still intends to pursue a combination of nationalised banks ABN AMRO and Fortis Bank Nederland, it said in a letter to parliament, dousing talk it might scrap the plan.
Before it can merge the two banks, the state has to comply with a European Commission order from late 2007 on competition in the Dutch market, the original remedy for which was the sale of some ABN AMRO assets to Deutsche Bank AG.
That deal fell apart Sept. 17 and the state requested and received a two-week extension from the EU to come up with an alternative proposal.
But ABN AMRO company Gerrit Zalm left the door open on Monday for a possible revival of the deal, which sources close to Deutsche Bank have said it could be interested in under certain circumstances.
"I will answer in soccer terms: It is always possible Germany scores in the last minute," Zalm told industry executives at a Holland Financial Centre event in Amsterdam.
When a group including Fortis struck a deal to buy ABN AMRO Group and carve it up in 2007, the EU ordered Fortis to sell a bundle of Dutch ABN AMRO assets to address competition concerns in the small and medium-sized enterprise market.
The bundle included commercial bank HBU, 13 advisory branches and two corporate client units. When the state nationalised Fortis's local operations in Oct. 2008, the remedy order remained. The state's ultimate plan had been a combination of the two entities and then an IPO in 2011 or later.
While scrapping that deal has been talked about in the past, two sources well connected in local banking circles told Reuters last week the state could be considering selling Fortis Bank Nederland's commercial banking unit instead.
Zalm, speaking on the sidelines of the Holland Financial Centre event, told reporters the government was looking at all options and it wanted the deal that would best satisfy the EU's remedy demands.
In Monday's letter the finance ministry also said it would come back in October with a proposal to parliament on recapitalizing the banks, depending on what deals can be struck and other related factors.
The finance ministry said the factors to be considered would include capital requirements put in place by the central bank, the costs of disentangling various legacy businesses and the costs of the eventual integration of the banks. (Reporting by Ben Berkowitz; Editing by Dan Lalor and Rupert Winchester)