Dexia: The burden on Belgian and French taxpayers

Dexia Dexia is comparable in size to all the Greek banks put together

The near collapse of the Franco-Belgian bank Dexia is the event that focused the minds of eurozone leaders on the urgency of putting in place a comprehensive plan to strengthen European banks in general.

Dexia won't need to be part of that plan, itself, because today it has been rescued by Belgian, French and Luxembourg governments.

The biggest financial commitment is being made by Belgium, which is buying Dexia's retail operations.

Two nationalised French financial firms, Caisse des Depots et Consignations and La Banque Postale, are taking over Dexia's economically important business providing financing to municipal government.

And Belgium, France and - to a tiny extent - Luxembourg are also providing guarantees that lenders of up to 90bn euros to Dexia over the coming ten years would get their money back (they are guaranteeing up to 90bn euros of inter-bank and bond funding for up to a decade).

Given the size of Dexia, with a 500bn euro plus balance sheet - comparable in size to all Greek banks put together - eurozone governments viewed its rescue as vital to avoid more market turmoil. But that rescue has come at some burden for Belgian and French taxpayers.

The vital question is whether - as and when the cost of bank bailouts is disclosed in the form of the promised proposal to inject capital into all European banks that need strengthening - loans to eurozone countries like Belgium and France will be seen to be more or less at risk.

Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 1.

    The problem for me is that over the last few months, there have been a lot of crisis meetings with lots of hand shaking and head nodding, but precious little action.

    I have little faith that we'll see any concrete action until at least one country defaults, and even then it'll probably just be every nation for itself.

  • rate this

    Comment number 2.

    October 2008 all over again.
    But this time they don't have the ammunition.
    The printing press in the last line of defence before they get over run.
    The beginning of the end for capitalism.

  • rate this

    Comment number 3.

    I wonder how the Belgian government (and more importantly the people) will respond. Whilst there is NO real government in that country my view is that there is nobody to accept accountability; with a divided country and divided politicians, where will the buck stop? With the people themselves - perhaps but only for a limited time I believe, and then.....

  • rate this

    Comment number 4.

    Another disgraceful botch up and attack on democracy. In the US the people are taking over Wall Street behind that is TARP another railroaded pseudo fix. Monetary Reform is the answer
    end dishonest money now.

  • rate this

    Comment number 5.

    Yet again we find that "economics" and "economic theory" are about as much use as Russell Grant's predictions (something that we never hear from banks and financial commentators). And Dexia was apparently one of the outfits to pass a stress test with flying colours - a few weeks pass and apparently it's as solid as a chocolate teapot! Your 'avin a larf, Robert.


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