France to borrow €4.5b to settle Credit Lyonnais debts

Maintenance workers climb the facade of the Credit Lyonnais bank headquarters in Paris, March 25, 2010. — Reuters pic
Maintenance workers climb the facade of the Credit Lyonnais bank headquarters in Paris, March 25, 2010. — Reuters pic

PARIS, Nov 11 — The French government said yesterday it would borrow €4.5 billion (RM19.2 billion) by the end of 2013 to settle debts left by the collapse of the Credit Lyonnais bank two decades ago.

Paris had until the end of 2014 to settle the amount but a budget ministry spokesperson confirmed that the government had decided to move now and pay the debts by year’s end.

“We’re taking action a year ahead of the deadline because borrowing conditions are favourable,” the spokesperson said.

Despite suffering several humiliating credit downgrades that should theoretically scare some investors away, France has bond yields at 2.2 per cent and can borrow at almost record low rates.

Finance Minister Pierre Moscovici said on France 5 television that the timing of the payment was in the interest of taxpayers, who were hit hard when partly state-owned Credit Lyonnais had to be bailed out in 1993.

The proposal for France’s debt management office to borrow €4.5 billion will be presented in a bill on Wednesday.

“If parliament accepts the measure, the state will bring final closure to the financial fallout of this bankruptcy,” said Le Parisien newspaper, which first reported the move earlier yesterday.

The demise of Credit Lyonnais, long France’s flagship bank, will have cost French taxpayers a total of €14.7 billion over 20 years, according to Le Parisien.

The judicial saga is still in full swing however, with French business tycoon Bernard Tapie facing charges of organised fraud threatening to embroil current IMF chief Christine Lagarde over the massive state payout he received for the 1993-94 sale of his Adidas sports group, which he alleged Credit Lyonnais had undervalued. — AFP