Belgian Dexia Bank Involved in Detroit Bankruptcy

Belgium, 20 Jul - 02 Aug 2013
Bad bank keeps haunting government and taxpayers ++ Political bickering on the retirement age ++ Sunshine after the rain! by Daan Fonck
Bad bank keeps haunting government and taxpayers

Soon after it was released that the city of Detroit was filing bankruptcy news spread about the large number of European banks that were exposed. The Belgo-French Dexia Bank is amongst them. Dexia is involved in securities of Detroit’s Pension Fund and could lose over 100 million euros.

Although the bank already had foreseen a reserve to prepare for the plausible bankruptcy, that amount was based on a scenario where the State of Michigan would bailout Detroit, which did not occur.

Finance minister Koen Geens at first contradicted the high numbers, but later the Bank itself admitted that it risks losing over 110 million euros. In total the bank is exposed for an amount of 305 million dollars (231 million euros), with only a part of that money covered by a credit insurer.

The bank’s CEO, Karel De Boeck, said, “we shouldn’t provoke panic reactions". According to De Boeck losses are fully in line with the bank’s resolution plan and within the agreed limits set by the European Commission. Yet, despite the attempt for damage control, a day later the bank had to announce that the foreseen asset sale of Dexia Asset Management (DAM) to the Hong Kong based GCS Capital will not take place.

Dexia is a so-called ‘bad bank’ of which the Belgian and French state are the shareholders. In 2011 Dexia was strongly hit by the European sovereign debt crisis and was dismantled. The healthy part of the bank was nationalised, cut off and now operates under the name Belfius. The remaining bad bank still operates under its old name. In the US alone it still issues over 10 billion euros to local cities and governments.

Political bickering on the retirement age

In preparation of a party congress, two young MP’s of the Flemish Christian Democratic party CD&V proposed to link the retirement age and career length to changing life expectations. They instigated a discussion on the legal retirement age among all political parties.

“It basically means someone who is now about forty years old can only start enjoying his easy days on his seventieth, if health conditions would allow so”, one of the MP’s explained. A bad idea, said their own party leadership that blew the whistle on the two youngsters. But also the socialists, the liberals, the greens and the unions wanted to have their say. All of them stress that it is unwise to stare at the legal retirement age.

The liberal Pensions Minister Alexander De Croo welcomed the debate on the retirement age, but pointed out that the real focus should be on that of early retirement schemes that allow people to stop working before they reach the legal retirement age. The Socialist party instead stressed the big difference in life expectation, which varies greatly depending on the type of work and the degree of education one has. They were backed by their union, which pointed to studies that show that low educated people only remain in good shape until 53 years old.

Finally, the Green party put the emphasis on regulating the years effectively at work instead of a fixed retirement age: “just like with a car, you don’t count the year of construction but rather its mileage", said MP Wouter De Vriendt.

Sunshine after the rain!

As an old Flemish saying goes: “Is februari nat en koel, dan wordt juli dikwijls heet en zwoel” (“If February is cold and rainy, July will most likely be hot and sultry”). After having experienced the coldest spring in forty years (see second Cosmopublic Report from May 2013), Belgium seems to be rewarded for its patience with extremely exotic weather.

In July, the Royal Meteorological Institute registered an average temperature of 20.2 degrees Celsius, compared to 18 degrees normally. Last week, Belgium also experienced a heat wave, and Friday the 2nd of August was the hottest day of the year so far: temperatures climbed to 36 degrees. The all-time record of 37.4 degrees (27 June 1947) was not broken however.

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