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By Jan Lopatka and Jana Mlcochova
PRAGUE, Feb 25 (Reuters) - The Czech Republic favours a discussion on aid to central and east European countries worst affected by the global financial crisis but clear distinctions must be made between those who need it and who don't, Czech Finance Minister Miroslav Kalousek said on Wednesday.
Kalousek said the Czech Republic, which holds the European Union's rotating presidency, did not need foreign aid and was trying to prove that fact by steps such as participating in a lending package to badly-hit Latvia.
Kalousek told Reuters in an interview he was not keen on an Austrian plan to help out banks in the region in its proposed form.
"I admit I am exceptionally reserved toward the plan as it has been proposed, because the region is thrown into the same bag," he said. "I believe this is an untrue and distorted picture."
Austria proposed a bank stability aid package last month in which western states whose banks own most of emerging Europe's lenders, the emerging states themselves, and the EU could finance a package to avert a possible banking crisis.
The World Bank has called on western European countries to provide funds to help international institutions secure financing for the region.
"Our view of course is (in favour of) an individual approach," Kalousek said.
"I think that each country which gets into such trouble needs its own individual approach."
Czech authorities including the central bank have been on an offensive to paint the Czech Republic as a place that is safer than some other countries due to relatively low exposure to foreign debt, and relatively small budget gaps and a stable banking system.
The country's large manufacturing sector has however been badly hit by collapse of demand in key west European markets, and output has been shrinking since the last quarter of 2008.
The crown currency has dropped 5.7 percent to the euro so far this year to 28.335, and has lost 19 percent since its peak last year.
Kalousek said aid should be discussed, but each country needed to be considered on its own merits.
"We are opposed to calling this project aid to countries in central and eastern Europe because then in the eyes of the markets we are all countries threatened... and that is simply not true."
"I have no reason to think that we would be in a situation now that we would have to ask anybody for international aid," he said.
He added the Czech Republic had pledged to lend 200 million euros to Latvia as part of an international financing package, which he said was an indication the Czechs were on a different path.
Analysts have said that while the Czechs were better placed than other countries to survive the crisis, they would still be hit hard by the drop in output. (Editing by Stephen Nisbet)