By Lisa Bryant from Paris
Europe's financial crisis has deepened this week as worries rose about the health of another bank - the Franco-Belgian-owned Dexia. Dexia's board meets Saturday to discuss the bank's future. Dexia's woes underscore growing criticism about the region's handling of its crisis.
This is not the first time Dexia has been in trouble. French and German authorities bailed out the bank in 2008. Now it is on the financial brink again because of its high exposure to Greek debt.
Dexia is reportedly trying to sell its affiliate in Luxembourg
French and Belgian authorities have vowed to take all necessary to help save Dexia and protect its clients, a promise echoed Thursday by Belgium
Speaking on France's RTL radio, Leterme said the Belgian and French governments would do everything to ensure Dexia continues to function and to guarantee the bank's continuity.
Like many other European banks, Dexia passed a European stress test to assess its financial health. That was just three months ago.
For Karel Lannoo, head of the Brussels-based Center for European Policy Studies, the new reports about Dexia's struggles highlight a bigger problem - European officials are not being transparent about the region's banking crisis.
"The authorities... want to cover it up. And apparently have not learned a lesson from the crisis; that if you cover it up, it gets even worse when it explodes," said Lannoo/ "We have seen similar periods in 2008, early 2009 with other banks, where authorities try to hide problems, but it is even worse when you see it. "
Dexia is not the only European bank that is struggling because of high exposure to the debts of Greece
"Dexia could be the tip of the iceberg, probably the weakest of the banks which are around," said Lannoo. "But as soon as we have anther hit somewhere, the sovereign problems which Europe has today, these banks will be in trouble."
More broadly, analysts fear Europe as a whole may be tipping toward another recession. At his final news conference Thursday, outgoing European Central Bank chief Jean-Claude Trichet delivered a sober assessment.
"Ongoing tensions in financial markets and unfavorable effects on financing conditions are likely to dampen the pace of economic growth in the euro area in the second half of the year. The economic outlook remains subject to particularly high uncertainty and intensified downside risks," said Trichet.
Europe's debt and banking crises are certain to top the agenda when leaders of the Group of 20 meets in France
"The problems Europe is having today could have a very real effect on our economy at a time when it is already fragile," said Obama.
Analyst Lannoo said Dexia's crisis also is notching up the alarm felt by many ordinary Europeans at a time of high unemployment and weakening economies.
"People will be even more concerned about the state of the financial system and even have less trust in the financial system," said Lannoo.
As a result, Lannoo predicts that Europeans may instead begin sinking their savings into real estate or other areas they feel are safer than their banking system. ---VOA News
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