Fortis salvage efforts cause friction in Benelux
Only a week ago, Benelux leaders radiated harmony and decisiveness at a joint press conference where they announced a cross-border deal to rescue the ailing financial group Fortis. Last weekend, as financial woes deepened, the common stance crumbled and old national sensitivities resurfaced in an atmosphere of increasing acrimony.
Smiles and a firm handshake between Belgian PM Yves Leterme (left) and Dutch FM Wouter Bos (right) after the Fortis rescue deal was reached.
Concluded after a weekend of crisis talks, the 11.2 billion euro deal to save Fortis meant each government would hold a 49-percent share of their national branch of the company. Belgium and Luxembourg paid their money on the following Monday. The Dutch, however, held out - according to a Reuters source - as talks with shareholders were still ongoing.
It was a small but key irritant between the Benelux governments as they strived to end a period of grave uncertainty for the Fortis group.
The Belgian banking and insurance company has been in trouble for some months. Emergency shareholder meetings took place last summer, eventually forcing out Jean-Paul Votron in July for his part in the takeover of Dutch bank ABN AMRO.
That takeover, which cost 24 billion euros, was at the top of the market, just before the US sub-prime crisis triggered the current credit crunch. The capital needed to pay for the purchase brought Fortis to its knees. Two months later, when Fortis share prices reach an all time low, interim CEO Herman Verwilst was replaced by Filip Dierckx.
In spite of the Benelux rescue plan, share prices fell once again last Monday. After leaks in the media that another Dutch bank, ING, intended to take over ABN AMRO and subsequently a dramatic fall in its share prices, ING was forced to announce it did not intend any such thing. ABN AMRO even placed a full-page advertisement in newspapers to restore confidence in the bank.
And then, on Friday, Dutch Finance Minister Wouter Bos announced the nationalisation of the Dutch units of Fortis for 16.8 billion euros in response to savers removing their deposits from the bank and lenders keeping it at arm's length. As a result the Belgian and Luxembourg governments were livid. Belgian editorials called the latest move "Dutch revenge".
Fortis had up to now been the pride of the linguistically split country. A precursor of the company even predates the Kingdom of Belgium itself. And last summer's joint takeover with the Royal Bank of Scotland and Banco Santander of ABN AMRO had for once given Belgium the upper hand over its overbearing northern neighbour, the Netherlands.
Now Belgian pride lies in tatters and Mr Bos "is laughing all the way to the bank" as the Belgian business daily De Tijd puts it, having got himself a bargain. Mr Bos even fanned Belgian resentment telling journalists, "many of the problems were hidden in the Belgian part of the Fortis group".
Meanwhile, BNP Paribas has taken over Fortis Belgium and Fortis Luxembourg in a bid to save the money of millions of depositors as well as tens of thousands of jobs. The Belgian and Luxembourg governments have been left holding a minority stake with veto rights. The Dutch government has reacted positively to the news, calling it a win-win situation.
In spite of all the effort to resolve the situation, European share prices were in free fall on Monday morning shortly after the stock exchanges opened. And consumers have been left wondering what's happening to their money.
By Nicola Chadwick
7 October 2008