Bailout frenzy for Euro Banks


ZONE leaders scrambled to bail out another two banks yesterday after unveiling a €4bn (£3.5bn) rescue of Dexia, the bankrupt Belgian lender.

The EU was also forced to postpone a summit scheduled for next Monday in order to give politicians more time to “allow [us] to finalise our comprehensive strategy” to bail out banks, Brussels said.

But the failure of two more banks yesterday showed that time is running out: Denmark’s Max Bank and Greece’s Proton Bank both sought government aid to avoid collapse, following the bailout for Dexia agreed on Sunday that will see Belgium, Luxembourg and France guarantee up to €90bn in losses.

Max Bank, which was felled by property loan write-downs, will see its toxic assets taken over and guaranteed by the Danish government, while Sparekassen Sjaelland snaps up its good assets. Proton Bank was also split in two, with its losses underwritten by Greece’s new €30bn bank bailout fund.

Chancellor George Osborne called on Eurozone countries to accelerate the pace of bailouts and to “set out the backstops they have in place to raise capital… or provide public capital if they cannot”.

Despite arguing that Europe should pursue a mass rescue, he boasted the coalition had reduced the bailout guarantee enjoyed by British banks. “This is the direction policy should be moving in,” he claimed. And he repeated his call for the Eurozone to “move towards greater fiscal integration to underpin the single currency”.

In a sign that the debt crisis is taking its toll, Eastern Europe’s second biggest lender, Austria’s Erste Group, was forced to postpone paying back a bailout loan early due to the uncertainty. It was also hit by €1.5bn in write-downs, triggering a 9.2 per cent plunge in its stock despite overall equity gains yesterday.

China also joined the bailout frenzy, grabbing equity in four of its major lenders to shore them up against a slowing property market. It was not clear how much its sovereign fund had spent on the shares.

The growing enthusiasm for pouring money into bank rescues comes despite suggestions that it will have a limited impact on the fundamentals of the euro crisis. Moody’s said yesterday that even if Europe agrees on a regional bailout scheme, “any relief... would be brief”.