Belgian infighting delays Dexia rescue

BRUSSELS (Reuters) - Belgium's federal government and its regions clashed on Friday over the fate of the Belgian banking activities of stricken DEXIA (DX.PA)(DEXB.BR), delaying a joint Franco-Belgian rescue of the group.

Dexia, whose shares have slid 42 percent this week, is on the verge of being split up after twin blows from its heavy exposure to Greece and increasing troubles accessing wholesale funding.

Dexia's board plans to meet on Saturday to discuss the future of the group, although this threatened to be pushed back after Belgium struggled to find a common stance to bring to negotiations with France.

The Belgian government favors nationalization of Dexia's Belgian unit Dexia Bank Belgium.

However, the regions of Flanders, Brussels and Wallonia, often divided by their linguistic differences, were united in opposition.

They fear the loss of all or most of the 1 billion euros they contributed to an initial Dexia bailout in 2008 and a loss of influence in a business that lends to local authorities across Belgium.

"The regions are speaking with one voice. We now have to find one voice for Belgium," Rudy Demotte, the premier of the French-speaking Wallonia region, told reporters after a meeting of regional chiefs with Belgium's prime minister and finance minister.

"I can say that my colleagues, both at federal and regional level, are doing everything to find a good solution but that there's still some work," said Demotte's Flemish counterpart Kris Peeters.

Finance Minister Didier Reynders said a final decision on the fate of Dexia Belgium would be taken after consultations with the regions, local authorities and shareholders.

France and Belgium both hold 5.7 percent stakes in Dexia, the same amount as Belgium's regions combined. French state bank Caisse des Depots et Consignations is Dexia's largest shareholder with a 17.6 percent holding.

A grouping of all 589 Belgian municipalities holds 14.1 percent and Arco Group, a holding for unions and certain local bodies, 13.8 percent.

Caretaker Prime Minister Yves Leterme was due to meet union representatives on Friday afternoon. They favored a "Belgian solution" as well as avoiding any job losses.

Belgian and French financial experts began talks on Thursday, but politicians from each country have yet to enter discussions.

Belgium told France on Thursday that it was not willing to foot the whole bill for rescuing the bank.

Reynders said the government would not comment on what options were under discussion and would only announce a final decision when it was made.

Dexia's shares remained suspended on Friday, after dropping 17.2 percent on Thursday. Trading will not resume until Monday because the Belgian market regulator had said Dexia needed to provide more details about the sale of its Luxembourg arm.

Dexia announced on Thursday that it had started talks with an international investor to sell Dexia Banque Internationale a Luxembourg.

Some media reports said the buyer was Qatar and it was set to pay 900 million euros.

(Editing by David Cowell)

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