(Adds detail on toxic assets, background)
BRUSSELS, Feb 10 (Reuters) - Bond yield spreads between German and other European issues are still a problem despite having narrowed, German Finance Minister Peer Steinbrueck said on Tuesday.
Steinbrueck told reporters in Brussels that spreads were discussed in general terms at a regular meeting of European finance ministers in the Belgian capital.
The premium demanded by investors for holding non-German euro zone government debt has tightened sharply since peaking in January. The Greece/Germany spread went as low as 220 basis points on Tuesday from a January peak of 300.
"They have narrowed but are nonetheless still a problem," Steinbrueck said, adding: "I regard speculation about the stability of the euro zone as absurd."
Turning to banks' toxic assets, Steinbrueck said there was a need for a level playing field in Europe on dealing with them but added that individual states needed a degree of flexibility.
"We shouldn't make the aid parameters so tight that we can't breathe any more," he said.
"One of the biggest problems for the EU is agreeing how to value toxic assets," Steinbrueck said. "We haven't solved that yet."
Steinbrueck added that he was against having a centralised "bad bank" for housing toxic assets, and preferred the idea of individual "bad banks" for individual institutions. (Reporting by Paul Carrel and Ilona Wissenbach, editing by Dale Hudson)