Belgium and Eurostat haggle over Dexia deal

Sat Dec 1, 2012 12:06pm EST
 

BRUSSELS (Reuters) - European statistics agency Eurostat and Belgium are at odds over whether a 2.92 billion euro ($3.80 billion) capital injection into ailing financial group Dexia (DEXI.BR: Quote) should count towards the country's current budget, a spokesman said on Saturday.

Belgium plans to classify the money pumped into Dexia as an investment rather than a cost, and in so doing stop it from inflating its budget deficit.

In an initial finding, Eurostat has informed Belgium that this was not possible.

"It is only a preliminary recommendation, the start of a procedure which gives us time to explain ourselves," a finance ministry spokesman said, adding that Eurostat did not have all the necessary information yet to come to a conclusion.

He added that Belgium had until December 12 to bring forward its point of view.

In November, Belgium's federal government agreed an extra 3.4 billion euros ($4.4 billion) of tax hikes and savings to cut its 2013 deficit to 2.15 percent of GDP from 2.8 percent this year. These are both below the deficit limit of 3 percent set by the European Union.

Belgium aims for a balanced budget in 2015.

France and Belgium jointly provided 5.5 billion euros of capital to Dexia, once the world's largest municipal lender, to take almost full control of the group in its third bailout since 2008.

The Dexia deal will add to the country's sovereign debt, which is already near 100 percent of annual economic output.

(Reporting By Robert-Jan Bartunek; editing by Keiron Henderson)

 
The Dexia tower is seen in La Defense, near Paris, November 8, 2012. Belgium and France will pay 5.5 billion euros ($7 billion) to take almost full control of Dexia in the hope this third bailout will be the last for the bank that was once the world's largest municipal lender. REUTERS/John Schults