* Dexia gets green light from EU for restructuring
* Says will cut balance sheet by around 35 percent
* Shares end down 5 percent
(Recasts with Dexia confirmation, comment)
By Mathieu Protard and Philip Blenkinsop
PARIS/BRUSSELS, Feb 5 (Reuters) - European financial
services group Dexia SA got the green light from the European
Commission for its state-led rescue and said it would divest
assets across Europe as part of the plan.
The Franco-Belgian bancassurer pledged to cut its balance
sheet by 35 percent by 2014 from the 2008 level as part of the
deal and divest activities in Italy, Spain and Slovakia and its
insurance business in Turkey.
It also said it would cut its short-term borrowing to 10
percent by 2014.
"The agreement allows us to continue our activities in
Belgium, Luxembourg and France in the twin tasks of financing
local authorities and having a banking system in a condition to
improve profitably," Dexia Chairman Jean-Luc Dehaene told a news
briefing in Brussels on Friday.
He added Dexia's board, meeting late on Friday, still needed
to approve the deal.
A source had told Reuters earlier that Dexia was poised to
get Commission approval for its plan, on condition that it
divested more assets.
The European Commission said it had held "very constructive"
discussions with Dexia and with the French, Belgian and
Luxembourg authorities.
"(Competition) Commissioner (Neelie) Kroes is satisfied that
there will be sufficient restructuring of the bank to ensure its
future viability and a sufficient reduction of its activities to
offset a distortion of competition caused by subsidies
received," Commission spokesman Jonathan Todd said before Dexia
confirmed an agreement had been reached.
Todd said it would be for Kroes's successor, Joaquin
Almunia, who is due to take over the competition portfolio on
Tuesday, to complete the Commission's approval process.
HARD HIT
The Commission has imposed a series of sanctions on
bailed-out EU financial groups, although ING Group NV last month
said it and the Dutch government would mount a challenge to
restrictions it called disproportionate.
Dexia's shares ended Friday down 5.0 percent at 4.025 euros,
broadly in line with financial sector peers, although knocked
slightly by reports of the EU deal. The DJ Stoxx European
banking index closed 2.3 percent lower.
Dexia received 6.4 billion euros ($8.8 billion) from
Belgium, France, Luxembourg and key shareholders in September
2008 after being hit hard by the financial crisis.
It later won state guarantees for its new borrowing and to
cover riskier securities linked to subprime mortgages.
Dexia, a leading lender to local authorities, suffered
during the financial crisis since a large part of its long-term
lending relied on short-term interbank borrowing -- a market
which dried up during the credit crunch.
It has already sold off its loss-making U.S. bond insurer
Financial Security Assurance (FSA) to Assured Guaranty and a 20
percent stake in Credit du Nord to Societe Generale.
France's Caisse des Depots (CDC), Dexia's largest
shareholder with a 17.6 percent stake, said last month it was
strongly opposed to any break-up of Dexia.
(Additional reporting by Foo Yun Chee and Marcel Michelson;
editing by David Holmes and Karen Foster)
($1=.7292 EURO)
