PARIS: The French government will set up a special fund to help the numerous local authorities that are struggling with the burden of “toxic” loans, the finance ministry said yesterday.
The fund is to be set up with local authorities to help them wind down such structured bank loans in a way that would be acceptable for all parties, the ministry said in a statement.
It would have “significant resources” and would be partly financed by the banking sector, the ministry said without giving a specific figure. Les Echos newspaper reported that the sum could be close to ¤1bn ($1.33bn).
Dozens of towns and cities across France are fighting risky structured loans that went sour after the financial crisis, saddling them with double-digit repayment rates and in some cases pushing mayors to go on debtors’ strikes.
The northern Paris suburb of Seine-Saint-Denis recently won a court case against bailed-out municipal lender Dexia, raising the hopes of other local authorities they could do the same.
The towns accuse banks such as Dexia of having missold them the loans, which were indexed to everything from foreign currencies to US loans. The bank says it acted lawfully.
Reuters
