World financial crisis

France to help bail out Dexia

Article published on the 2008-09-30 Latest update 2008-09-30 13:30 TU

A Dexia office in Brussels
(Photo: Reuters)

Following Monday’s 11.2 billion euro bailout of Fortis Bank by Belgium, the Netherlands and Luxembourg, now it’s the Franco-Belgian insurance bank Dexia. Belgian Prime Minister Yves Leterme announced Tuesday morning that Belgium, French and Luxembourg will bail out Dexia to the tune of 6.4 billion euros.

"Our ambition was to have very strong political involvement in order to send a signal to the markets," Leterme told journalists in Brussels after the deal was reached overnight.

The negotiations concluded before the opening of the European markets, to avoid further drops in stock prices. Dexia’s stock lost 30 percent of its value on Monday.

Shares were suspended from trading on Tuesday, at the request of authorities.

Belgium and France agreed to pump three billion euros each into Dexia, with Luxembourg investing 376 million through a convertible loan.

The French minister of finance, Christine Lagarde, said that the French government’s intervention is as a shareholder. France holds 11.80 per cent of Dexia.

Despite the effort to bring confidence back to the European markets, markets open low. London started with a 2.32 per cent loss and the CAC 40 in Paris dropped 1.96 per cent.