Dexia granted $118 billion bailout

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BRUSSELS, Dec. 29 (UPI) -- The European Commission has granted struggling bank Dexia its third bailout since 2008, with plans to break the firm into two smaller companies.

The commission approved $112.2 billion loan guarantees and a capital injection of $7.26 billion, Radio France Internationale reported Saturday.

The bailout "ensures that the continued market presence of some parts of the Dexia group is truly justified ... and that competition distortions resulting from the aid received are minimized," said European Union Competition Commissioner Joaquin Almunia.

"The plan brings the cost for the taxpayer down to the level strictly necessary to carry out the orderly resolution process," he said.

The restructuring calls for Dexia's core business to be wound down, leaving behind Belfius -- which is owned by Belgium and will maintain the bank's retail and insurance businesses -- and the Dexia Municipal Agency, which will continue the bank's financing for regional and local governments in France and Belgium.

Dexia, which found itself overexposed when the financial crisis hit, was once valued at $396 billion.