Reuters - Dexia 100 Per Cent Nationalised

Discussion in 'Wall St. News' started by THE-BEAKER, Oct 9, 2011.

  1. Im assuming imminent downgrade of belgium , france and luxembourg as in honesty they have not got the money too bail them out.

    (Reuters) - France, Belgium and Luxembourg agreed a rescue plan for Dexia SA on Sunday ahead of a planned board meeting expected to decide on a break-up of the first lender to fall victim to the euro zone crisis.

    French Prime Minister Francois Fillon, his Belgian counterpart Yves Leterme and Luc Frieden, the finance minister of Luxembourg, where Dexia has a large presence, had found a solution for the stricken Franco-Belgian bank, Leterme's office said early Sunday afternoon.

    "The governments ... have reaffirmed their solidarity in finding a solution to secure the future of Dexia," it said in a statement after two hours of talks at Egmont Palace in Brussels -- also the site of talks on a previous Dexia rescue bid in 2008.

    "The suggested solution, which is also the result of intense consultations with all partners involved, will be submitted to Dexia's board of directors for approval," Leterme's office said without providing details of the rescue plan.

    Dexia's board was due to meet from 3 p.m. (1300 GMT) in Brussels. It was forced to seek government help this week after a liquidity crunch hobbled the lender and sent its shares down 42 percent over the past week.

    At stake in the talks is how much each government will have to contribute to help wind down Dexia, a thorny subject given that Belgium and France are already struggling to contain large deficits.

    The need to recapitalize banks is emerging as another strain for European governments whose budgets are already stretched. Belgium had a debt-to-gross domestic product ratio of 96.2 percent last year, lower only than Greece and Italy among euro zone members and on a par with bailout recipient Ireland.

    The burden of bailing out Dexia led ratings agency Moody's to warn Belgium late on Friday that its Aa1 government bond ratings may fall.

    The negotiations to dismantle Dexia, which has global credit risk exposure of $700 billion -- more than twice Greece's GDP -- are being watched closely for signs that Europe might be capable of decisive action to resolve its banking crisis.

    "I am convinced that it is possible ... by tomorrow morning to have an agreement in which Belgium resolves the issue without pushing up the debt level of our country too high," Leterme told Belgian television before the talks began on Sunday.

    Dexia, which used short-term funding to finance long-term lendings, has found credit drying up as the euro zone debt crisis worsened. This problem has been exacerbated by the bank's

    heavy exposure to Greece.

    Dexia's near collapse stoked investors' anxieties about the strength of European banks and coincided with growing talk about coordinated EU action to recapitalize banks across the continent.

    French President Nicolas Sarkozy was due to meet German Chancellor Angela Merkel on Sunday in Berlin to thrash out differences on how to use the euro zone's financial firepower to salve a sovereign debt crisis that threatens the global economy.