France, Belgium set to finalize Dexia break-up

Sat Oct 8, 2011 6:33pm EDT
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By Christian Plumb and Philip Blenkinsop

BRUSSELS (Reuters) - France and Belgium were set finalize the break-up Sunday of Dexia, the first bank to fall victim to the euro zone sovereign debt crisis, with global credit risk exposure of 512 billion euros ($691 billion).

Dexia, whose board was also due to meet Sunday, was forced to seek government help this week after a liquidity crunch hobbled the lender and sent its shares into a tailspin.

Belgian caretaker Prime Minister Yves Leterme told a news conference Saturday evening that final negotiations between France and Belgium would take place in Brussels Sunday.

Finance Minister Didier Reynders said Belgium had been in touch with France, Luxembourg and the European Commission.

"I hope tomorrow we will reach our goals," he said.

The Franco-Belgian bank's near collapse stoked investors' anxieties about the strength of European banks and coincided with growing talk about coordinated EU action to recapitalise banks across the continent.

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

Some investors view the response to Dexia's woes as a test of European governments' ability to take decisive action to rescue banks if the euro zone debt crisis worsens.   Continued...

<p>The logo of Belgian-French financial services group Dexia is seen at the bank headquarters in central Brussels October 5, 2011. REUTERS/Thierry Roge</p>