BRUSSELS, Jan 10 (Reuters) - The euro zone's ESM permanent rescue fund must be allowed to directly recapitalise banks struggling with bad debt built up in the past and not just tackle new problems, the president of the Eurogroup said on Thursday.
"There is a major question over the legacy issue and whether we should limit the intervention of the ESM to new problems," Jean-Claude Juncker, who chairs monthly meetings of euro zone finance ministers, told the European Parliament.
"I think there must be some degree of retroactivity in the mechanism, otherwise it will lose most of its sense," he said.
Juncker, who is expected to step down as head of the Eurogroup this month, said he expected the issue to be decided in the first three months of 2013. (Reporting by Robin Emmott; editing by Rex Merrifield)