Dexia closer to winning fresh aid guarantees

STRICKEN bank Dexia has secured temporary financing guarantees from Belgium, France and Luxembourg to keep it running while the countries cement the bailout they put together in October.

Yesterday the Franco-Belgian bank said a draft temporary guarantee agreement had been submitted to its board of directors and to the European Commission, which will need to determine whether the rescue complies with state aid rules.

KBC Securities said in a note that the agreement gave Dexia temporary relief, although it was still tapping a considerable amount of funds from the European Central Bank and the guarantee fee was a potential negative.

Dexia was rescued by the three states in October, receiving €90bn (£77bn) of guarantees to cover its borrowings and accepting that Belgium would take over its operations there for €4bn.

However, these guarantee have yet to take effect, sparking talk the states were wrangling about how the burden should be shared.

Dexia said the temporary guarantee agreement would cover as much as €45bn of its financing needs up to 31 May.