Belgium Buys Subsidiary of Financially Troubled Dexia Bank

Posted October 10th, 2011 at 5:50 pm (UTC-5)
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Belgium is buying a subsidiary of the financially troubled Dexia bank, the first European bank heading toward possible collapse because of the regional debt crisis.

The government says it is paying $5.4 billion for Dexia's Belgian subsidiary. Members of Qatar's royal family already have said they will pay $1.4 billion to buy the bank's Luxembourg division. Dexia's board is negotiating the sale of its French local public finance unit to two French state-owned financial institutions.

The French, Luxembourg and Belgian governments also say they will provide an additional $121 billion in funding guarantees for the bank for up to 10 years.

The three governments stepped in to sell off the healthy parts of the troubled bank, which was severely hurt by holding too much debt from Greece, Italy and some local U.S. governments. Other banks increasingly were reluctant to lend money to Dexia, worried that it would collapse and they would not be repaid.

Belgian officials say the infusion of cash and loan guarantees that customer deposits at Dexia are secure.

Greece said Monday it has concluded talks with international creditors who have been reviewing the country's austerity budget measures. Greece needs their approval to get an $11 billion payment from its $159 billion bailout from last year. Greek Finance Minister Evangelos Venizelos said he expects to get the $11 billion before the country runs out of cash next month, so that it can avoid a default.

U.S. Vice President Joe Biden will travel to Greece in December to continue what the White House calls its close dialogue and cooperation with the Greek government. Mr. Biden also will attend the Global Entrepreneurship Summit in Istanbul, Turkey.

European leaders have been hard-pressed to stay a step ahead of the spreading debt crisis, which has worried investors across the globe.

French President Nicolas Sarkozy and German Chancellor Angela Merkel met in Berlin and promised a “global, lasting and quick response” to Europe's financial problems. They declined to give any details of their plans, which Mrs. Merkel said are still a work in progress. But Mr. Sarkozy said they include adding new funding for banks faced with losses.

U.S. President Barack Obama telephoned Mr. Sarkozy and British Prime Minister David Cameron Monday. The White House says all three agreed on the need for decisive action to resolve Europe's debt crisis and assure a global economic recovery.

In Slovakia, lawmakers are struggling to reach agreement on whether to approve expansion of the eurozone's bailout fund to assist countries that need international aid.

Slovak Prime Minister Iveta Radicova threatened to resign if the measure is not approved in a vote set for Tuesday. Opponents say the country is too poor to guarantee a proposed $10 billion share of the proposed $589 billion fund.

Slovakia is the only eurozone country yet to approve the expanded fund. Malta's parliament voted unanimously in favor of the measure Monday.