France, Belgium and Luxembourg are having to negotiate a temporary deal on funding guarantees for failed financial group Dexia, a newspaper claimed, as they wrangle over the terms of the full €90 billion deal outlined in October.
"Belgium wanted Paris to guarantee more than had been agreed so far, because France can fund itself at a cheaper rate than our country," Belgian daily De Tijd said.
The three countries that rescued the bank with the proposed €90 billion bail-out package are now looking at how the resulting "bad bank" could finance itself in financial markets, the newspaper said.
The negotiations were taking place under the watchful eye of the European Union, the newspaper said.
"There are also top-level discussions in Paris, because France knows that Belgium cannot solve the issue by itself, and it is not an option to let Dexia go under," the newspaper said, without quoting sources.
In October, Dexia secured state guarantees from the three countries for up to €90 billion of borrowings over the next 10 years. But the deal has still to be confirmed, leaving the bank dependent on emergency liquidity assistance of about €30 to €40 billion, De Tijd said.
France, Belgium and Luxembourg are now working on plans to guarantee the latter amount to get Dexia off emergency funding and therefore lower the group's cost of borrowing, it said.
The countries would be sharing the burden in the same way as in October, with 60.5 per cent of these guarantees for Belgium, 36.5 per cent for France and 3 per cent for Luxembourg.
Such a temporary deal would buy time, the paper said, while the governments seek to finalise the broader agreement.
Reuters
