Austrian banks’ 2009 balances saved by CEE business
Austrian banks benefited from their investments in Central and Eastern Europe last year, it was claimed today (Thurs).Andreas Ittner, director of the Austrian National Bank (OeNB), said that OeNBs estimate was that the countrys banks had earned 0.9 per cent more year on year in 2009 due to CEE engagements.Ittner said that OeNBs studies had shown the financial institutions would have earned 248 million Euros last year had they not been active in CEE at all. He explained that would have been a drastic decrease compared to their overall 2008 earnings of 1.89 billion Euros.Risk costs, however, were described as a dominating factor in activities in the region.Ittner said they had soared by a third year on year to 8.32 billion Euros last year. He warned that they were expected to rise even more over the next few years.Austrian banking houses faced harsh criticism for their vast engagements in CEE after the global economic crisis kicked in.Dominique Strauss-Kahn, the head of the International Monetary Fund (IMF), even apologised to Austrias Finance Minister Josef Pröll of the Peoples Party (ÖVP) last May for what he admitted had been mistakes in estimating investment risk in Eastern Europe (EE).Strauss-Kahn called the errors a “human mistake” but added that they were “not acceptable.”Pröll lashed out at world-famous US economist Paul Krugman last year for his controversial statement about the Austrian economy and its exposure to EE.The Nobel Prize laureate warned that Austria faced possible national bankruptcy because the countrys banks had extended too much credit in EE. Krugman cited Ireland and Iceland as other examples of developed countries that faced the threat of national bankruptcy.Pröll reacted by calling Krugmans remarks about Austria “unqualified” and a threat to Austria as a business location. He said: “The Krugman scenario is completely absurd. His remarks have no basis in actual fact.”Meanwhile, Raiffeisenzentralbank (RZB) Austrias biggest private employer and a major player in CEE announced earlier this week it was planning to merge with its CEE business subsidy RI (Raiffeisen International).RZB chief Walter Rothensteiner said the decision had nothing to do with financial problems at RZB.