EU approves Dexia rescue, probes restructuring

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The European Commission on Wednesday gave its three-month approval for state guarantees put up by Belgium, France and Luxembourg for the rescue of Dexia bank.

"The purpose of the guarantee is to enable the bank to draw up a restructuring plan, or -- should Dexia SA prove not to be viable -- a liquidation plan, which the three member states undertake to submit to the Commission within three months," the EU executive said in a statement.

France, Belgium and Luxembourg decided in October to dismantle Dexia after the bank had first to be rescued in 2008 at the height of the global financial crisis.

The Commission said it was giving temporary approval to guarantees worth "a maximum capital value of 45 billion euros ($58 billion)," 60.5 percent of which was put up by Belgium, 36.5 percent by France and 3.0 percent by Luxembourg.

"The Commission considers that the guarantee mechanism is necessary in order to preserve the financial stability of the member states concerned, given the systemic importance of Dexia SA," the European Union's competition watchdog said.

"It does, however, have doubts at this stage as to whether the temporary guarantee measure is compatible with the single market," it added, highlighting the previous restructuring plan.

Brussels authorities "will take a final decision on the temporary guarantee as part of its assessment of the restructuring plan," it added.

© 2011 AFP

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