October 8, 2008 / 5:14 PM / 10 years ago

UPDATE 2-France, Belgium, Luxembourg meet on Dexia-sources

(Adds Leterme’s spokesman, background)

BRUSSELS, Oct 8 (Reuters) - Senior ministers of France, Belgium and Luxembourg will meet in Brussels on Wednesday evening to discuss the future of troubled financial group Dexia (DEXI.BR)DEXI.PA, diplomatic sources said.

The meeting will take place after Belgium’s inner cabinet gathered at Prime Minister Yves Leterme’s office with new Dexia CEO Pierre Mariani and Chairman Jean-Luc Dehaene.

Leterme was also planning to be in contact with all key Dexia shareholders on Wednesday evening, his spokesman said, although he would not talk with all of them face-to-face.

Mariani and Dehaene were appointed on Monday as shares in the cross-border municipal lender and retail bank continued to fall despite a 6.4 billion euro ($8.72 billion) emergency rescue by the three governments and public bodies last week.

One diplomatic source said France, now with a direct and indirect 25 percent blocking minority, has been pressing to break up the group along national lines.

However, the French would be unlikely to accept a simple split because they would end up holding Financial Security Assurance (FSA), Dexia’s money-losing U.S. bond insurance unit.

One option would be to separate FSA from Dexia.

Leterme said after meeting French President Nicolas Sarkozy in Paris on Monday that they would wait for the new management to assess the situation and make recommendations.

Dexia shares lost another 15.4 percent on Wednesday to close at 4.99 euros on the Euronext market after Standard & Poor’s downgraded Dexia’s core entities on Tuesday for the second time in a week. It also said it may cut FSA’s triple-A rating.

Leterme urged depositors on television on Tuesday not to withdraw funds from Dexia, vowing the government would stand by the bank.

“We will take responsibility, as we did in the case of Fortis FOR.BR. Above all, I have to say people should remain calm. There is absolutely no reason to withdraw deposits. Dexia is a healthy bank,” the prime minister said.

Reynders said Belgium was likely to raise its raise deposit guarantees to 100,000 euros ($135,900) from 20,000 euros now.

Dexia’s situation is complicated by the fact that it is largely in the hands of public bodies, including Belgium’s three regions and local authorities, who signed up for last week’s capital injection at 9.90 euros per share.

One Belgian lawmaker proposed on Tuesday that the key shareholders buy out the 26.7 percent of shares held by other institutions and individuals.

The new top duo are seen as clear political appointments. Mariani, 52, was chief of staff for Sarkozy when the current French president was budget minister in 1993-95.

Dehaene, 68, was Belgian prime minister from 1992 to 1999. ($1=.7338 euro) (Reporting by Paul Taylor, Philip Blenkinsop, Anna Willard and Michele Sinner, editing by Dale Hudson, Richard Chang)

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