Deutsche Bank has backed out of talks to buy a package of assets from nationalised bank ABN AMRO under a deal mandated by the European Commission, the Dutch finance ministry said on Thursday.

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. Fortis struck a deal to sell that package to Deutsche Bank for around 700 million euros ($1.03 billion).

When the state nationalised Fortis's Dutch assets in October 2008, ABN AMRO attempted to back out of the deal. It later changed that position, but the two sides have been negotiating on a revised deal for months with no success.

Deutsche Bank declined immediate comment. ABN AMRO also declined to comment.

The Dutch government's ultimate plan is to merge ABN AMRO Bank and Fortis Bank Nederland (FBN) into a new entity and privatise it in 2011 or later. However, the completion of the EU-mandated ABN asset sale is a precondition of that merger being allowed.

($1=.6777 Euro)

(Reporting by Ben Berkowitz; Editing by Jon Loades-Carter)