French Government To Borrow $6B To Settle Debts From Credit Lyonnais Bankruptcy This Year

 
on November 11 2013 12:16 AM

The French government on Sunday said it would borrow 4.5 billion euros (about $6 billion) by the end of this year to settle debts from the collapse of the formerly state-run bank, Credit Lyonnais, two decades ago. And, though the government has time until the end of 2014 to settle the dues, it has decided to pay it all off by the end of this year.

"Why? Because we currently have exceptional borrowing conditions," French Finance Minister Pierre Moscovici said, on France 5 television, according to Reuters. "We've got to put this behind us."

Despite France having suffered several credit-rating downgrades over the past few months, benchmark bond yields in the country -- at 2.2 percent -- are near record lows. The latest to downgrade France was Standard & Poor's, which cut its credit rating to AA from AA+ on Friday.

The government will present the bill authorizing France's debt management office to borrow 4.5 billion euros on Wednesday, local media reported.

"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 debt repayment on Sunday.

Credit Lyonnais -- the largest French bank in the early 1990s -- collapsed in 1993, mainly due to alleged mismanagement, leading to a bailout by the government. The bank lost billions of francs with its debt touching about 150 billion French Francs (nearly $30 billion) at the time. The bank was privatized in 1999 and was taken over by Credit Agricole in 2003.

According to Le Parisien, the bank’s collapse has cost French taxpayers a total of about 14.7 billion euros in the last two decades. 

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