Dexia to receive 6.4 bn euros: Belgian PM

BRUSSELS: Dexia became on Tuesday the latest European bank to need a state bailout with Belgium, France and Luxembourg pumping 6.4 bn euros into the group so that the financial crisis would not claim another victim.

The capital injection, worth 9.2 bn dollars, was agreed during crunch talks through the night after shares in the Belgian-French banking group plummeted by nearly 30 percent on Monday.

"Our ambition was to have very strong political involvement in order to send a signal to the markets," Belgian Prime Minister Yves Leterme told journalists after the deal was reached.

Shares in Dexia, which have lost 51 per cent of their value since the beginning of the year, surged 19.94 per cent to 8.48 euros after a trading suspension was lifted late Tuesday morning.

"Drawing conclusions from the current financial crisis and its impact on the Dexia Group," the company said in a statement that chairman Pierre Richard and chief executive Axel Miller had resigned.

"We are facing today an environment of historic upheaval in the global banking sector," Miller told journalists during a conference call minutes after his resignation was announced.

Under the deal's terms, various Belgian authorities and some big Belgian shareholders will contribute three bn euros to the rescue by subscribing to a capital increase, a statement from Leterme's office said.

The French government and the French state financial institution Caisse des Depots will add another three bn euros to the pot while Luxembourg will invest 376 million euros through a convertible loan.

Dexia was founded in 1996 as a merger of France's Credit Local and Belgium's Credit Communal. While it specialises in local government finance, it also has 5.5 mn individual clients in Belgium, Luxembourg, Slovakia and Turkey.

On Sunday, the governments of Belgium, The Netherlands and Luxembourg had part-nationalised the leading Belgian bank, Fortis, as the shockwaves from the US financial crisis reverberated in Europe.

The Benelux governments agreed to inject 11.2 bn euros into Fortis after it became the biggest European bank to be threatened by the US-born financial crisis.

"We saved Fortis and Dexia, but more than that it's the financial system that is strengthened by this concerted action among three governments," said Luxembourg Budget Minister Luc Frieden.

"Our aim, as with Fortis, was to protect the savings and jobs of thousands of people" at Dexia, he added. "We think that this agreement, along with that for Fortis, will allow savers to have confidence in the banking system."

After sliding nearly 33 per cent in early trading in the Belgian capital on Monday, Dexia's shares plunged nearly 30 per cent on the Paris bourse.

Dexia, whose corporate motto is "short term has no future", has run into trouble supporting its US bond insurer FSA, which has suffered from exposure to the slumping US mortgage market.

Dexia's troubles come amid a growing storm in the global financial sector which is seeing the biggest upheaval since the Great Depression, with banks going bust and getting rescued and taken over in the United States.

Stock markets around the world plunged on Monday after US House members, wary an angry public will punish them on Election Day five weeks from now, voted to shoot down what would be the biggest government bailout in history.