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The governments of France, Belgium and Luxembourg announced Thursday they will give struggling lender Dexia SA a yearlong guarantee on its new loans and deposits, sending the company’s shares soaring.

They announced the decision after Dexia’s shares fell three days in a row - by more than 15% on Wednesday alone — despite getting a €6.4 billion ($8.8 billion) cash injection from the three governments last week.

Brussels traders welcomed the news with shares surging 18% in early Thursday trading.

Belgian Prime Minister Yves Leterme said the guarantee will cover all new agreements with international lenders, new interbank deposits and new institutional loans of up to three years. "This guarantee gives assurance to depositors that Dexia will have enough liquidity to meet its commitments to customers," he said, reading out a statement from the three nations.

French Finance Minister Christine Lagarde said the guarantee showed the governments would not allow the failure of a bank they saw as crucial to the financial system. She said there were no plans to split the bank along national lines — as happened to Belgian-Dutch bank Fortis in a similar government bailout last week.

"I should reiterate our wish to be together (on this), to capitalize together, to guarantee together," she told reporters.

The governments would not say how much the guarantee might cost them. It lasts until Oct. 31, 2009 and can be renewed for one year.

The Belgian-French bank is the biggest lender to French local governments and also lends widely to cities from Spain to the U online instant cash advance.S.

It is the first time three European states have jointly guaranteed a bank and comes a week after they organized a government and shareholder bailout for Dexia.

Britain, Spain and Ireland have moved unilaterally to guarantee their banking sectors to help them survive the current financial storm - but Germany last week shot down a French suggestion for a $412 billion bailout for the entire EU.

Lagarde said a guarantee for the entire French banking sector "was absolutely not necessary."

Under the deal agreed last week, France became the largest Dexia shareholder with a 25-percent stake, most of it held indirectly by the state investment arm CDC.

Unhappy with the previous management, the three governments on Tuesday appointed a new CEO, Pierre Mariani - a close friend of French President Nicolas Sarkozy and a former executive of French bank BNP Paribas. Former Belgian prime minister Jean-Luc Dehaene became Dexia’s chairman.

Dexia ran into trouble with its U.S. bond insurance unit FSA when it was hit hard by the subprime housing crisis, which saw loans made to people with poor credit drop sharply in value on worries that borrowers could not make repayments. Holders of bonds based on those mortgages suffered heavy losses.

Dexia was also hurt by the collapse of U.S. investment bank Lehman Brothers, saying it expects that to cause it $480.6 million in losses. 

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