Anger as BA expert makes aware of social expenditure

An economist has rubbished claims that only the financial sector is to blame for the crisis.

Stefan Bruckbauer, the chief economist of Bank Austria (BA), said on Saturday: “I don’t claim that banks are totally innocent since they financed the debtors.”

Bruckbauer told the Kurier the Republic of Austria had to invest 1.7 billion Euros into the country’s leading finance institutes since 2008 when a stability fund was created to protect them from effects of the economic downturn – while the state forked out “almost 57 billion Euros” on social services such as pensions and unemployment benefits each year.

Bruno Rossmann of the Austrian Labour Chamber (AK) harshly criticised Bruckbauer for his statement. He said the economist was trying to disguise facts. “It is obvious that we are facing a crisis of the financial sector which sparked an economic crisis,” Rossmann said.

Bruckbauer caused controversy in December by claiming that Austria may not be strong enough for being part of a Northern Eurozone. He warned that the country could be forced to reintroduce the Schilling – which was replaced by the Euro 10 years ago – if European Union (EU) leaders failed to send a clear signal to the financial markets.

The chief economist of BA said Germany would not have enough financial power to keep Austria in new Eurozone of comparably solid states as far as their budgets were concerned. Bruckbauer warned that the splitting of the current 17-member Eurozone would leave no other option to Austria but abandoning the Euro.

Bruckbauer’s decision to justify the state’s financial support for its biggest banks due to the comparably low costs comes shortly after the CEO of the country’s leading financial institute hit out at political leaders once more.

Erste Group Bank AG (Erste Bank) boss Andreas Treichl said Austria’s politicians could have avoided a downgrading of the country’s solvency by American rating agency Standard & Poor’s (S&P) from AAA to AA+ by starting credible measures against the large budget deficit much sooner. Social Democratic (SPÖ) whip Josef Cap said he was “bewildered” by Treichl’s statements.

The banker’s attack came less than a year after he labelled Austrian politicians as “too stupid” to understand the economy. Treichl said they should have fought the introduction of Basel III which is a set of tougher rules for Europe’s banks. Treichl criticised that Basel III meant more stringent restrictions for providing companies with credits. He said too little had happened against high-risk speculative deals since the outbreak of the crisis.

Erste Bank is one of the main investors in Central and Eastern Europe (CEE). The bank, which suffered immense losses last year, recently decided to lower its workforce level in Hungary by around 400 within the coming years. Austrian companies and banks run 2,000 branches in the cash-strapped country which hopes for fresh capital from the International Monetary Fund (IMF) as experts refuse to rule out the possibility of a state bankruptcy.

BA, which manages Italian bank UniCredit’s Eastern European (EE) operations, announced in December it intended to concentrate on business in Turkey, Poland, Russia and the Czech Republic in the foreseeable future – instead of opening new branches in Hungary and Romania. The Viennese bank headed by Willibald Cernko initially planned to do so. Cernko vehemently rejected reports that UniCredit planned to sell BA. The banker also said claims that the Italian financial sector firm considered renaming BA were untrue.