Oct. 12 (Bloomberg) -- France’s government plans to guarantee as much as 10 billion euros ($13.8 billion) of existing structured municipal loans that Caisse des Depots et Consignations is taking over from Dexia SA.
The first 500 million euros in potential losses on these loans will still be shouldered by Dexia, the Belgian-French lender that is being broken up, according to a statement issued today by President Nicolas Sarkozy’s office. Dexia will also assume 30 percent of any additional losses, the statement said.
Sarkozy’s cabinet met earlier today to consider the plan to offer state support to Dexia. The proposal will be considered by lawmakers next week.
The decision to dismantle Dexia coincides with a vow by Sarkozy and German Chancellor Angela Merkel to outline a plan this month to recapitalize European banks as investors hesitate to extend short-term funding on concern they will have to write down their holdings of Greek and other peripheral European sovereign debt.
--Editors: Dylan Griffiths, Francis Harris.
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