VIENNA Jan 19 Austria will not exceed the 5.8
billion-euro ($7.9 billion) limit it has set for helping its
ailing banks, despite the toxic assets racked up by national
lender Hypo Alpe Adria, Finance Minister Michael Spindelegger
told a Sunday newspaper.
Hypo's [HAABI.UL} chronic need for state aid since Austria
took it over in 2009 is complicating the country's efforts to
cut deficits and posing a challenge for the renewed coalition of
Social Democrats and Spindelegger's conservatives that took
office last month.
The bank used guarantees from its home province of Carinthia
to fuel unbridled expansion in the years leading up to the
financial crisis that brought it to the brink of insolvency. It
now has some 18 billion euros of bad loans and non-performing
Asked by the Oesterreich paper if the 5.8 billion bank aid
cap would suffice, Spindelegger said: "We most seriously assume
this and want to spend even less."
To clean up Hypo the government is considering either
creating a "bad bank" - majority owned by healthy banks so its
debts stay off state books - or else parking toxic assets in a
public vehicle that could boost state debt to 80 percent of
economic output, a red line for rating agencies.
Spindelegger declined to indicate which course of action he
preferred, saying only he wanted to spare taxpayers - who have
funded 4.8 billion euros in capital, direct cash infusions and
guarantees since 2008 - any additional burdens
from Hypo, which Austria took over from Germany's BayernLB
to prevent a collapse with regional implications.
But Austria's healthy banks, such as UniCredit
unit Bank Austria, Erste Group and Raiffeisen Bank
International, have shown little appetite for taking
on Hypo's "bad bank" unless the government provides enticements
such as cutting a bank levy that is now slated to go up by 90
million euros a year.
Spindelegger, whose People's Party was in third place behind
the right-wing Freedom Party and the Social Democrats in a
Gallup poll the paper published, said he would discuss Hypo on
Monday with European Competition Commissioner Joaquin Almunia.
Under a restructuring plan agreed last year with the
Commission, Austria can provide Hypo 5.4 billion euros in
capital from 2013 to 2017.
Partly state-owned Volksbanken has also not ruled
out requiring more aid, but has dismissed as speculation a
report it needed 1 billion euros in 2014.
Spindelegger has taken a hard line on more aid.
Financial experts have expressed scepticism that Austria can
hit its target of eliminating its structural budget by 2016
given increased spending on family benefits agreed last week.
Spindelegger insisted the goal was in reach after a planned
deficit of 1.5 percent of gross domestic product this year.
($1 = 0.7376 euros)
(Reporting by Michael Shields; Editing by Sophie Walker)