France, Belgium agree to pump cash into Dexia

BRUSSELS - Reuters

Workers removing the Dexia bank logo from the building headquarters in Brussels.

France and Belgium have agreed to pump 5.5 billion euros ($7.02 billion) into Dexia, the stricken lender the two states were forced to bail out a year ago, the Belgian finance ministry said yesterday.
 
The prospect of throwing more money into Dexia, which already absorbed 6.4 billion euros in funds in 2008, threatens to undermine both countries’ efforts to rein in their deficits at a time of intense scrutiny of euro zone budgets.
Belgium will inject 2.915 billion euros, or 53 percent of
the amount, with France providing the remaining 2.585 billion euros, the ministry said in a statement.
 
The two states would receive in return preference shares with voting rights, so that any financial gains Dexia might make would then flow back to them.
 
As part of the deal, the two governments have also agreed to readjust the division of guarantees to cover Dexia’s borrowings.
 
In future, Belgium would take on 51.41 percent of these guarantees and France 45.59 percent.