Governments guarantee Dexia’s loans
The Belgian, French and Luxembourg governments rescue the troubled bank again Thursday, guaranteeing up to EUR 4.5B of its loans.9 October 2008
BRUSSELS -- The Belgian, French and Luxembourg governments on Thursday offered struggling bank Dexia guarantees on up to EUR 4.5 billion on its loans, they said.
Under the measure agreed during late night negotiations, the Belgian state will guarantee 60.5 percent of Dexia's borrowing, France 36.5 percent and Luxembourg 3.0 percent.
"This agreement that we have just reached is an expression of the three governments' very firm support for Dexia", said Luxembourg Treasury Minister Luc Frieden.
This is the second time in 10 days that the three governments worked together to rescue Dexia. They quickly arranged a cash injection of EUR 6.4 billion of taxpayer money into the troubled bank on 30 September.
Like a growing number of banks, Dexia experienced trouble as money lending slowed dramatically during the current financial crisis.
"After the recapitalisation, the guarantee is an important step for Dexia", Luxembourg's Frieden said. "It's in the interest of the bank and its clients, who can rest assured about their deposits".
Under the agreement, Dexia will not follow Fortis and be broken up.
Dexia shares fell more than 15 percent on Wednesday and dropped more than 70 percent in 2008 as the US financial crisis continues to affect Europe.
[AFP / Expatica]