BELGIUM IS leaning on France to pay more into emergency support for failed lender Dexia, newspapers have reported, spooking investors who thought a €90 billion rescue deal only needed rubber-stamping.

The countries are wrangling about short-term funding guarantees meant to wean Dexia’s “bad bank” off emergency liquidity and allow it to re-enter financial markets, two Belgian newspapers reported.

“Belgium wanted Paris to guarantee more than had been agreed so far, because France can fund itself at a cheaper rate than our country,” Belgian daily De Tijd said, following a similar report in De Standaard. The newspaper did not name its sources.

Both countries denied yesterday that the restructuring plan for Dexia was being renegotiated, with Belgian finance minister Didier Reynders saying he hoped to reach an agreement with the European Commission in the coming days.

In October, Dexia secured state guarantees from the two countries and Luxembourg for up to €90 billion of borrowings over the next 10 years, but talks on the fine print are showing little progress, De Tijd said.

As long as there is no final agreement, Dexia remains dependent on expensive emergency liquidity provided by central banks of about €30-40 billion in so-called emergency liquidity assistance, De Tijd said.

The countries want to get Dexia out of emergency liquidity assistance and issue government guarantees instead, ahead of closing a final deal on the €90 billion package. The effort is closely overseen by the EU, according to De Tijd.

They had agreed to share the burden for the interim guarantees in the same way as the October deal, with 60.5 per cent falling to Belgium, 36.5 per cent to France and 3 per cent to Luxembourg.

“France struck a very good deal on Dexia . . . It would not be surprising that some people within the Belgian apparatus might feel uncomfortable with this,” a banker familiar with the rescue of Dexia said. “Reopening negotiations would be like opening Pandora’s box – it could be endless and very dangerous for Dexia’s stability.”

Yields on government bonds rose on the news and French bank stocks, including BNP Paribas and Société Générale, and Belgium’s KBC, were among the worst hit in early trading on Wednesday.

Shares in Dexia – worth only a fraction of what they were at the beginning of the year – rose 10 per cent to €0.26. The stock was bouncing after rumours about increased guarantees had hurt it in the past days, a trader said.

Fears about interbank funding spooked markets last week, with unsecured interbank lending practically drying up, and some banks struggling to secure enough collateral to get access to European Central Bank emergency funding.

French finance minister François Baroin on Tuesday vehemently denied that Belgium had asked his country to renegotiate the Dexia deal.