Shares lose, as Dexia shows signs it might become Europe’s Lehman Brothers

Hong Kong (AsiaNews/Agencies) – Asian and European shares are all down because of the Greek debt crisis and especially the fall of Franco-Belgian bank Dexia, which opened down by 37 per cent in early trading today, gaining somewhat to cut losses to 20 per cent.

Described by European banking authorities as one of Europe’s strongest banks not long ago, Dexia is heavily exposed to Greek government debt for € 3.4 billion (US$ 4.5 billion). Its total exposure to Greece, including to private-sector Greek borrowers, is € 4.8 billion.

The governments of France and Belgium, which are joint shareholders in Dexia, moved to guarantee the debts of the institution, which has a real chance of going under.

After a meeting of the board of directors, some have floated the idea of selling the bank’s Belgian interests and setting up a bad bank that would take on toxic assets (estimated at € 95 billion).

For a number of economists, Dexia’s debacle could have a domino effect in crisis-stricken Europe, setting off a process similar to what led to the 2008 collapse of Lehman Brothers in the United States.

Meanwhile, Asian shares are all down. Hong Kong dropped by 3.4 per cent, Tokyo fell 1.05 per cent, whilst Seoul slumped 3.59 per cent. Shanghai was closed for a public holiday.

European shares were also in negative territory by midday. London's FTSE 100 index shed 1.40 per cent, Frankfurt's DAX 30 dropped 1.72 per cent, in Paris, the CAC 40 slid 1.49 per cent, and Milan lost 2.9 per cent.