European bank Dexia brought down by euro debt crisis
The symbol of the European common currency, the euro, stands before the headquarters of the European Central Bank in Frankfurt am Main, Germany.
Steve Chiotakis: The European bank Dexia is in big financial trouble following concerns over its exposure to Greek debt. But French and Belgian finance ministers said today their countries will guarantee financing for the bank. The Dexia fallout could affect cities and towns right here in the United States.
The BBC's Andrew Walker is with us now from London with more on that. Hi Andrew.
Andrew Walker: Hello there.
Chiotakis: What's the link between this particular bank and all these cities across the United States?
Walker: Dexia has a long history of being involved in the market for American municipal borrowing -- it's something it's trying to run down, but it is still involved. And it is involved in a particular type of borrowing, providing guarantees for debts that are kind of re-marketed, almost on a weekly basis. So the interest rate can change over very short periods. And, as the worries have grown about Dexia's stability, so the interest rate that some American cities are having to pay on this debt has risen quite markedly in the last few months.
Chiotakis: Gone up. So, how much trouble is Dexia in, Andrew?
Walker: Quite a lot. I mean, there are real worries, partly because it's very dependent on raising money in the short-term in financial markets. That market is under severe strain because lenders are worried about the strength of European banks. And Dexia has got a particular problem because it has a very large exposure to the debts of some of those eurozone governments that are in such trouble -- particularly Greece, but has also got a big holding of bonds of Italy, Spain, and some others.
Chiotakis: The BBC's Andrew Walker in London. Andrew, thanks.
Walker: My pleasure.