France government to loan EUR4.5 billion to pay Credit Lyonnais debts by year-end - French official

By Rizza Sta. Ana

Nov 10, 2013 09:23 AM EST

On Sunday, an unnamed official from the Finance Ministry of France said the government would need to come up with funds to pay Credit Lyonnais bank's debts. The official added that the French government planned to borrow EUR4.5 billion or USD6.01 billion. The loan would reportedly settle the French bank's debts a year earlier.

French newspaper Le Parisien earlier reported the debt issue. The paper said the collapse of the French bank had cost taxpayers in France a total amount of EUR14.7 billion.

The official disclosed to Reuters, "Since borrowing conditions are at historically low levels, they've decided to go ahead now."

Credit Lyonnais was known as a historic bank in France. Established in 1863, it grew into the world's biggest bank by 1900. The bank was nationalized, or taken public by the French government in 1945 just after a war. However, poor management since 1988 deteriorated Crédit Lyonnais's reputation and resulted to billions of dollars of losses. It also prompted the European Commission of the European Union to step in and intermediate the bank's bailout by France. Naturally, French taxpayers were not too happy about the bailout package offered to Credit Lyonnais. A series of controlling interest exchanges had led to Crédit Agricole owning a significant stake in the French bank. Crédit Agricole had spinned off and absorbed some of Credit Lyonnais's business units.

The bailout plan offered by the French government still had loose ends to be finished. Reuters said France could borrow somewhere close to all-time low interest rates in May. This, the news agency added, could be done despite receiving a credit rating downgrade from Standard & Poor's from AA+ to AA. 10-year benchmark bond yields are currently at 2.2%.

The French official also said a bill would be presentend this week that would include the authorization of the new debt that the French government would be issued. The new debt would be included in France's budget for 2013.

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