Finance minister to appeal EU ban on Arco guarantees

Acting federal finance minister Koen Geens has said the government will appeal against a decision by the EU Commission that states that a government guarantee on funds deposited with Arco is illegal.

Arco is the investment arm of ACW, the General Union of Christian Workers, and was a major shareholder in Dexia Bank when it collapsed in 2011. Unlike ordinary shareholders, who lost all or most of their investment, Arco savers, known as co-operants, had a state guarantee, which in the end covered €1.5 billion in investments by some 800,000 people.

The situation was contested by other investors that claimed discrimination, partially because then prime minister Yves Leterme and finance minister Steven Vanackere are both members of CD&V, which has particularly strong links to ACW. Geens is also politically close to ACW.  The Constitutional Court is due to rule soon on a discrimination case brought by other shareholders.

The EU Commission has now decided that the guarantee is a form of illegal state aid and cannot be paid out. Arco’s co-operants are not in the same position as savings account holders – who are protected by law – but rather that of ordinary shareholders, with all of the risks that entails.

Geens’ position is that the trust placed by the co-operants in the government in 2008 must be respected. When Dexia began to suffer difficulties, they could have withdrawn their savings and caused an immediate and catastrophic crash; instead they stayed on board on the strength of a promise of a state guarantee.

Geens intends to appeal to the European Court of First Instance in Luxembourg, a procedure that will take at least a year. Had the decision of the Commission been in favour of the guarantee, co-operants would have received their money then anyway, when the liquidation of Arco is complete in 2015.

“If Luxembourg says we were wrong, then we have to take care of an alternative ourselves,” said Geens.