25. 06. 10. - 15:00

EC go-ahead for extended bank aid

The European Commission (EC) has given the green light for an extension of the Austrian bank assistance package.

EC officials said today (Fri) the Austrian coalition – formed by the Social Democrats (SPÖ) and the conservative People’s Party (ÖVP) – was allowed to support institutes with up to 100 billion Euros for another six months.

The agreement to subsidise the banks was set to expire at the end of this month.

SPÖ Chancellor Werner Faymann and ÖVP Vice Chancellor Josef Pröll defended their decision to back Austria’s leading banks against opposition leaders’ criticism. Faymann and Pröll claimed thousands of jobs across the country would be put at risk without state aid for Erste Bank, Bank Austria (BA) and several other institutes.

The government leaders argued Austrian taxpayers would have to cough up significantly more if a leading Austrian bank would go bust, adding that they would ensure every single cent will be paid back.

The coalition decided to nationalise Carinthian Hypo Group Alpe Adria (HGAA) last year. The bank, now headed by Gottwald Kranebitter, was provided with 900 million Euros in an immediate first step to avoid bankruptcy.

The government will have supported the Klagenfurt-based institute with 1.35 billion Euros by the end of this month, while the provincial government contributes 150 million Euros. But the pressure on bosses is increasing as EC financial experts expressed doubts over whether the struggling bank will make a full recovery. EC officials said they were sceptical over whether HGAA will manage to reduce its financial leverage.

Bavaria’s BayernLB (Bayerische Landesbank) suffered losses of around 3.7 billion Euros by taking over HGAA three years ago.

Prosecutors and special investigators assigned by the Austrian and Bavarian government are meanwhile investigating in Klagenfurt and Munich over insider knowledge, bribery, embezzlement and money-laundering accusations that former bosses and political decision-makers are confronted with.

The EC’s go-ahead for further Austrian state aid comes as Austrian National Bank (OeNB) Governor Ewald Nowotny said he would welcome a continuation for the scheme.

Former SPÖ Finance Minister Hannes Androsch said earlier this week he was optimistic most banks will be able to pay back the received subsidies in time. Androsch – who holds interest in several Austrian business consortiums and banks – added he backed an extension of the state aid programme to avoid a suffocating of the recovering real economy.