October 4, 2011
European finance ministers agreed on Tuesday to safeguard their banks as doubts grew about whether a planned second bailout package for debt-laden Greece would go ahead.
Hours earlier French-Belgian municipal lender Dexia SA became the first European bank to have to be bailed out due to the euro zone's sovereign debt crisis.
French Belgian lender Dexia will effectively be broken up, with the sale of healthier operations while toxic assets, including Greek and other peripheral euro zone government bonds, will be placed in a state-supported "bad bank.
Shares in Dexia, which had to be rescued a first time in2008 because it had loaded up on toxic sub-prime debt, plunged by more than 22 percent on Tuesday after losing 10 percent on Monday.
"Everyone said the big concern is that worrying developments on the financial markets will escalate into a banking crisis," German Finance Minister Wolfgang Schaeuble told a news conference after EU ministers met in Luxembourg.
The growing prospect of a debt default by Greece in the coming months has stoked fears of a major banking crisis in Europe that would aggravate the global economic slowdown.
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