France, Belgium, Luxembourg agree on Dexia

BRUSSELS?? The governments of France, Belgium and Luxembourg said Sunday they had approved a plan for the future of embattled bank Dexia after shares tanked last week amid fears it could go bankrupt.

In a three-sentence statement issued by the Belgian prime minister's office, they said they supported a proposal by the bank's management that will be submitted to its board of directors, but offered few details. The board was holding a crisis meeting late Sunday in Brussels amid reports that the bank might be split up.

A bank spokesman said a news conference was expected Sunday evening or Monday morning.

Finding a solution is particularly urgent for Belgium because on Friday Moody's Investors Service placed the country's Aa1 rating on review for possible downgrade, due in part to the expected expense of guaranteeing that Dexia's depositors will lose no money.

The French government, too, is under acute pressure to save Dexia as the bank is one of the country's largest lenders to towns and cities.

The government statement said the "suggested solution" had been "the result of intense consultations with all partners involved" ? which would include the three countries. France and Belgium became part owners of the bank during a ?6 billion ($7.8 billion) 2008 bailout. They have promised to ensure that no Dexia depositors lose money. Luxembourg holds a smaller stake.

The terse government statement followed a meeting in Brussels attended by Belgium's caretaker prime minister, Yves Leterme, French Prime Minister Francois Fillon, and Luxembourg Finance Minister Luc Frieden.

Asked whether a resolution would be achieved Sunday, Leterme replied, "It will depend on the board," the Belgian newspaper La Capitale reported on its website. Leterme's spokesman could not be reached Sunday evening.

After Dexia's shares plunged last week, the French and Belgian governments stepped in and guaranteed its financing and deposits. The bank said in a statement Friday that trading in its shares would remain frozen until it could "communicate more precisely on the various choices and options concerning the future of the group."

The bank has significant exposure to Greek debt, and there are fears Greece may default in some fashion. French and Belgian governments have said in recent days that they would step in and guarantee the bank's financing and deposits.

There was speculation last week that one way forward would be to break up the bank and isolate Dexia's toxic assets ? totaling ?100 billion ($132 billion) ? in a "bad bank" while its healthy parts would be sold individually.

Speaking on Belgium's VRT network, Leterme did not want to use the label "bad bank" to describe where the toxic assets may be parked, and voiced his hope that in the long-term they could earn "good money."

If the bank were to break up, it would be the first such casualty of the euro crisis, which has bedeviled European Union officials for nearly two years.

However, there was no confirmation Sunday from either government or bank officials that breaking up the bank was part of the proposed solution.

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Source: http://www.msnbc.msn.com/id/44834088/ns/business-world_business/

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