French towns face ballooning loan payments: report

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Thousands of French towns are struggling to repay high-risk loans from Dexia, a Franco-Belgian bank that specialises in lending to local authorities, French daily Liberation reported on Wednesday citing internal bank data.

The left-of-centre daily was given access to a confidential database listing 5,500 local authorities, including public hospitals, that had signed up for 25 billion euros ($34 billion) in elaborate loan schemes with Dexia between 1995 and 2009.

These schemes, promoted at the time as cheaper alternatives to classic fixed-rate lending, often included floating interest rates pegged to foreign exchange rates.

The daily reported that since the eurozone debt crisis resurfaced this summer -- which in particular sent the Swiss franc soaring on safe haven sentiment -- some borrowers have seen their interest payments swell by 10 or 15 percent.

According to the internal data, overall loan costs have risen by 3.9 billion euros since late 2009 and with the euro still sliding against other currencies, that burden could still grow.

Antibes, the Mediterranean port town, borrowed 60 million euros from Dexia and is now on the hook for an additional 21 million euros, the daily said.

The public hospital in Dijon, in central France, borrowed 111 million euros and is now expected to pay 31 million euros in interest payments.

© 2011 AFP

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