Brussels, 01/06/2012 (Agence Europe) - On 31 May, the European Commission refused to endorse the bank wind-up plan for Dexia, submitted by Belgium, France and Luxembourg on 21-22 March, because the plan made no distinction between restructuring and orderly liquidation.
The Commission says the resolution plan is based on the assumption that the three member states involved will provide additional guarantees for refinancing measures until the end of 2021 and remuneration for the guarantees will be virtually zero and therefore will not comply with the state aid rules, particularly if taxpayers' money is used to make new loans. The Commission points out that under the plan as submitted, Dexia Municipal Agency (DMA - a subsidiary of Dexia Credit Local, which refinances public sector loans) would be sold to the French State, to Caisses des Dépôts et Consignations and to La Banque Postale, to continue business under the aegis of a new bank, but the sale would only be possible by the provision of aid and additional guarantees to Dexia. The Commission therefore says that the aid received by Dexia must not be used to continue Dexia's failed business model under the aegis of DMA, and doubts whether DMA continuing in business is the solution that causes the fewest distortions of competition or the cheapest solution for the three member states. The Commission has asked the countries in question for information about Arcofin's involvement in Dexia's recapitalisation in 2008, which might have amounted to state aid.
Meanwhile, to prevent Dexia from going bankrupt (it is having cash flow problems), the Commission has agreed to extend until 30 September the temporary €45bn guarantee granted by the three countries, which would otherwise have ended on 30 May and without which, Dexia cannot drum up any cash from the money markets. The Commission will take a final decision on the guarantee when it makes its final decision on the Dexia restructuration plan. (FG/transl.fl)