UPDATE 1-Hypo bank sell-off may cost Austria up to $7.1 bln more
VIENNA, Sept 3
VIENNA, Sept 3 (Reuters) - Selling off bailed-out Hypo Alpe Adria bank may cost Austria up to 5.4 billion euros ($7.1 billion) in fresh capital by 2017 under a plan approved on Tuesday by the European Commission, Austrian finance ministry officials said.
Hypo may need 2.6 billion euros in extra cash under a "base scenario" and as much as 5.4 billion in a "stress pessimistic scenario" between now and 2017 to break itself up and wind down.
Austria says it has already pumped in 3.1 billion euros of aid. The European Commission says that figure is higher.
The plan also earmarks a further 2.5-3.2 billion euros in liquidity assistance in 2017 for the bank that Vienna had to take over in 2009 to avoid a collapse with regional implications.
Hypo needs between 1.9 billion and 3 billion euros more capital this year alone, including 700 million now set aside in the budget, the government said. Last week the bank reported a first-half group loss of 860 million euros.
Finance Minister Maria Fekter said she saw no reason to change state forecasts for cutting debt and deficits, but that the government that takes office after Sept. 29 elections would need to reaffirm the targets.
"We need a balanced budget by 2016, but we don't want to put together a new austerity package," she told reporters.
Finance ministry and bank officials said the projections for more state aid did not include the impact of an envisaged "bad bank"-style wind-down unit for toxic assets at Hypo.
The state aims to have healthier banks hold a majority stake in this vehicle so that its debts are kept off state books and taxpayers are spared as much of the burden as possible.
Backed by generous guarantees from its home province of Carinthia, Hypo pushed itself to the brink of insolvency with a decade of breakneck expansion and a drive into the Balkans before the 2008 financial crisis struck.
It now has to sell its Balkans banking network by mid-2015 and has halted new business at its Italian bank unit. Hypo has already agreed the sale of its Austrian bank unit.
Dismayed by the slow pace of restructuring at Hypo, Brussels had originally wanted all its operating units sold by the end of this year, a radical step that Austrian officials said would have saddled the country with a 16 billion euro hit.