VIENNA, Sept 5 Austrian Chancellor Werner
Faymann has played down prospects that a new austerity package
will be needed to help handle a potentially costly wind-down of
ailing nationalised lender Hypo Alpe Adria.
Selling off the bailed-out bank that Vienna took over in
2009 could cost taxpayers up to 5.4 billion euros ($7.1
billion)in fresh capital by 2017 under a plan approved this week
by the European Commission.
"I am not preparing for a new austerity package," Faymann
told the Oberoesterreichische Nachrichten newspaper in an
interview published on Thursday, only weeks away from national
elections on Sept. 29.
Finance Minister Maria Fekter, whose conservatives govern as
junior partner in the coalition with Faymann's Social Democrats,
has also opposed a new round of belt-tightening to ensure
Austria hits its target of balancing the budget by 2016.
But economists say the government has its work cut out to
absorb a big hit from Hypo while continuing on its path of
cutting state debt and deficits.
"A balanced budget in not on the cards without an additional
savings package," the paper quoted Linz University economist
Friedrich Schneider as saying. He addeed that at the very least
no tax cuts can be expected before 2016 or 2017.
Austria is trying to minimise the financial fallout from
Hypo by hiving off toxic assets into a wind-down vehicle
majority-owned by private investors so that its debts stay off
Healthier banks have shown scant interest in the plan,
however, unless they get something in return, perhaps a
reduction in the state tax on big banks' balance sheets.
Faymann has insisted the banking sector - including major
players such as Erste Group Bank, Raiffeisen Bank
International and Bank Austria - should help
to shoulder the burden of Hypo's woes.
He wants to extend the Austrian bank levy indefinitely even
if lenders agree to take part in a "bad bank" for Hypo.
"If that is supposed to be a way to have the bank tax expire
or halve then I am against it," he told the newspaper.
($1 = 0.7577 euros)
(Reporting by Michael Shields; editing by Stephen Nisbet)