France, Belgium, Luxembourg guarantee Dexia bank

France, Belgium, Luxembourg guarantee Dexia bank Brussels  - The governments of France, Belgium and Luxembourg have agreed to guarantee the financing of regional banking group Dexia for at least a year, the three administrations confirmed in a statement Thursday.

"In order to support the group's activity and consolidate its development, the three governments have jointly undertaken to guarantee new interbank and institutional financing ... starting today and lasting until 31 October 2009," the statement said.

The guarantee, which can be renewed for a further year, "assures depositors that Dexia has sufficient liquidity to live up to the engagements it has made to its clients," the statement published by Belgian Prime Minister Yves Leterme said.

And it will be rewarded with "a return reflecting the advantage the bodies of the Dexia group concerned have thus gained," it said.

Dexia's shares rose sharply on the news, climbing 18 per cent in the first 15 minutes of trading on Thursday.

The Franco-Belgian bank is one of the top 20 banks in the 15-country eurozone, with some 5.5 million clients in Belgium, France, Luxembourg, Slovakia and Turkey.

But it suffered badly in the international banking crisis, receiving on September 30 an emergency cash injection of 6.4 billion euros (8.7 billion dollars) from the French, Belgian and Luxembourg governments.

Since then, the financial firestorm sweeping world markets has made it increasingly difficult for beleaguered banks to borrow the funds they need.

On Monday, the leaders of the European Union's 27 member states issued a joint statement vowing to take "all necessary measures" to guarantee the stability of the financial system, including by cash injections, interventions in individual banks and deposit guarantees.

On Thursday, Leterme announced that the Belgian state was ready to extend the guarantee it has given Dexia to "system-critical Belgian banks" under the same conditions. (dpa)