AAA rating not at risk, says Fekter

Finance Minister Maria Fekter has claimed Austria’s triple A rating is “safe” despite banks’ struggles in Eastern Europe (EE).

The People’s Party (ÖVP) minister told radio station Ö1 on Saturday that she saw no imminent risk to Austria losing its top rating currently established by the world’s leading credit rating agencies. However, the minister admitted that the state may “get into trouble” if it must take responsibility for domestic finance institutes’ losses in EE.

Andreas Treichl, head of Erste Bank Group AG (Erste Bank), said only on Friday that his bank would need another 750 million Euros to meet the increased restrictions established by the European Banking Authority (EBA) by next June. The authority appealed to Europe’s banks to ensure they had an equity ratio of nine per cent to weather future crisis scenarios.

Austria’s banks came under fire in the global crisis of 2008 and 2009 due to their strong engagement in EE, but have been seen to be in a comfortable position ever since due to the surprisingly quick economic recovery of most countries of the region. Now, as pessimistic forecasts tarnish the outlook for the whole continent, the decisions of the alpine country’s finance institutes are under close scrutiny once again. In what is seen as a reference to write-offs and other actions at Erste Bank to prevail, Fekter said on Saturday she appreciated recent “measures” of banks regarding their EE activities.

Erste Bank is one of the leading financial institutes with its various affiliates in EE. The banking group sustained a loss of 1.49 billion Euros in the third quarter of 2011. Treichl announced on Friday that the Erste Bank board would repay parts of its bonuses for 2010 due to the current developments. Only last May, some Erste Bank stakeholders accused bosses of the bank of acting greedily by doubling the annual salary of every Erste Bank supervisory board member to 700,000 Euros from 2009 to 2010.

Treichl ruled out a second ‘crisis wave’ in EE for the coming years in an interview in December 2010 – but warned of a greater risk for the Eurozone at the same time. The term means the 17 European Union (EU) member countries which use the Euro. The banker claimed at that time that federal governments in EE introduced more stringent cost-cutting measures much earlier on to react to economic difficulties than Western European countries did.

Fekter claimed that appeals to banks to increase their equity and Austria’s engagement in the international rescue operation for economically challenged Eurozone member Greece were not putting the alpine country’s AAA rating at risk. She pointed out that credits given by Austria to Greece so far were not affected by the recently agreed haircut which describes the EU’s decision to cancel 50 per cent of Greece’s debts.

The finance minister vowed to fight to get Greece to pay back the 1.3 billion Euros to Austria in the medium or long term. Fekter told Ö1 Europe’s banks voluntarily declared their participation in the initiative for Greece. Reviewing the discussions between EU leaders and bankers over whether the banks should write off some of their engagements in Greece, the Austrian finance minister said: “The situation was really critical.”

Fekter had to apologise for her choice of words last month after comparing the public criticism of bankers with the German Third Reich Nazis’ persecution of Europe’s Jewish community ahead and during World War Two (WWII). Asked whether why her party was struggling in polls, the ex-interior minister expressed criticism of the ÖVP’s communication strategies and the party’s obligation to deal with issues with negative connotation like taxes and financial support for other EU states.

Surveys show the Social Democrats (SPÖ), who cooperate with the ÖVP, ahead of the Freedom Party (FPÖ). The ÖVP, which came second in the most recent federal election in 2008, is seen only in third place. The next general ballot is scheduled for 2013. Styrian SPÖ Governor Franz Voves recently admitted that the election campaign would start as early as in mid-2012.

The ÖVP formed a government coalition with the FPÖ between 2000 and 2005 before cooperating with the Alliance for the Future of Austria (BZÖ) for two years. The BZÖ was founded by late FPÖ leader Jörg Haider in 2005. It may not make the four per cent hurdle in the next vote to remain represented in parliament, according to analysts.

The FPÖ – Austria’s strongest opposition faction – claimed at the weekend that the ÖVP positioned itself as the “party of bankers and billionaires” while the Greens criticised Fekter for “announcing nothing but empty phrases.”