Will it be the first victim of this long, interminable European sovereign debt crisis? It is very likely. And, let's face it, she is also an announced victim. In finance, memory is short, very short: Dexia, the Franco-Belgian banking giant, now shaky, had already come close to bankruptcy in September 2008, after the collapse of Lehman Brothers. Then it was France and Belgium who saved it in extremis, alias their respective taxpayers. This time it will be the same music. In the morning François Baroin, French finance minister, and his Belgian counterpart Didier Reynders ensured that will guarantee "the funding raised by Dexia". The announcement was not enough to stop the descent into hell of the action, which in a few minutes this morning had lost a third of its value. And that still this afternoon, around 16 pm, it dropped almost 20%.
The most probable prospect (and we need to hurry) is the dismantling of Dexia. That is: to collect in a "bad bank" all the assets at risk, perhaps also the Italian subsidiary Crediop and the Spanish one Dexia Sabadell, too exposed to the government bonds of their respective countries and also to local authorities (precisely their financing is one of the "specialties" of the banking giant). All of these activities will be guaranteed by French and Belgian public funds. The other assets will probably be sold: some, with apparently good prospects, such as the Turkish branch Denizbank, should easily find the buyer (in this specific case, the British of Standard Chartered would have already come forward). For the rest, still public funds to the rescue: the Caisse des dépots et consignations (Cdc), in Paris equivalent to our Cassa Depositi e Prestiti, and the French Postal Banque should take over quite a lot.
France and Belgium had already played their part in 2008, practically taking over the Bank. Which was (and is) "too big to fail": its bankruptcy would result in immense losses for Belgian savers (Dexia has an important retail business in their country) and major financing problems for local authorities in France and elsewhere. Until 2008 Dexia had a bad habit of acquiring bonds over very long periods of time by financing them in the short term. That was all the problem. In the autumn of that year they amounted to 265 billion euros, with the impossibility, in the midst of the post-Lehman Brothers chaos, to finance them. Since then, the managing director Pierre Mariani has begun to reduce this "loot". Which has now been reduced to 96 billion, still too many. Today Dexia is once again short of liquidity for their financing.
If Dexia will also be saved, some considerations are already possible. Trivial, in their own way. Financing long-term investments with market speculation is risky. And to do so when it comes to public investments, such as those of local authorities, entangled in the nets of derivatives (the province of Pisa has even sued Crediop), is absurd. Another consideration: the usual suspects will pay. Taxpayers. Those of France and Belgium, two countries already in the eye of the crosshairs in this phase of financial storm. And the problems, for them and for the others, are perhaps not over yet.
