France, Belgium and Luxembourg have revealed plans for a massive bail-out of failing bank Dexia. Brussels is going to nationalise Dexia's Belgian division at the cost of 4bn euros, while France and Luxembourg are going to contribute to a 90bn euro package designed to secure borrowing over the next ten years.
The value of Dexia's shares plummeted 36 per cent yesterday when trading re-opened. There has been some suggestion that a Qatari investment group is prepapring a bid for the bank's operations in Luxembourg.
The move comes amid growing concern over the state of the Belgian economy, particularly its rising debt burden, which is approaching 100 per cent of its GDP. Speaking at a news conference yesterday, Belgian Prime Minister Yves Leterme said, "We found an agreement on the fair division of the costs related to the management of the 'rest bank' " and insisted the move was affordable and necessary.