* Bank set to post record 1.9 bln euro loss on Wednesday
* Repeated bailouts prompt popular backlash
* Bankers, government become targets of criticism
By Michael Shields
VIENNA, April 16 Hypo Alpe Adria, the state bank
whose woes will swell Austria's debt and deficits this year, is
morphing into a national bogeyman for a country fed up with the
lender's chronic need for support and policymakers' failure to
resolve the issue.
More than four years after the state's emergency takeover,
Hypo has moved beyond being Austria's worst post-war financial
debacle to become a lightning rod for grass-roots criticism of
banks and the government ahead of European elections next month.
Results due on Wednesday will show Hypo lost around 1.9
billion euros ($2.63 billion) in 2013.
Taxpayers have already had to provide 5.5 billion euros in
Hypo aid and the backlash from being told they will foot most,
if not all, the bill for winding down the ailing bank while
bearing the brunt of spending cuts has been swift and broad.
"Our children are atoning for the Hypo bust," bleated a
headline in the Oesterreich tabloid on news that some class
sizes will increase due to education budget cutbacks.
A Facebook campaign by a parents' group against school
spending cuts shows a hippo - the bank's symbol - flattening a
Hypo's costs will push state debt to 80 percent of gross
domestic product this year. Yet the ruling coalition of Social
Democrats and the conservative People's Party, which just
squeaked out a majority in elections last year, is forcing
ministries into a spending corset to ensure the deficit does not
surpass the official EU limit of 3 percent of GDP.
Opposition parties are demanding a parliamentary
investigation of how Austria got into this mess and whether it
really had to take over the bank, which nearly collapsed after
breakneck expansion fuelled by debt guarantees from its home
province of Carinthia.
The unaffordable guarantees granted by late far-right leader
Joerg Haider's regional government forced Austria to buy Hypo
from Germany's BayernLB in 1999 for a symbolic 1 euro, or else
see the province go under a year after Lehman Brothers' demise.
Vienna toyed with letting Hypo go bust as a way
to bail in creditors, then backed down last month amid warnings
the move would ruin Austria's reputation.
Around 140,000 Austrians have signed an online petition
backing a parliamentary probe, while the coalition has
commissioned instead a panel of experts to look into the matter.
Hypo's CEO had to ask motorists in February to shun a "honk
against Hypo" campaign urging drivers to lean on their horn as
they drove by to show their disgust at the bank's mounting
Austrian officials estimate it may cost up to 4 billion
euros to wind down Hypo assets via a "bad bank" to be set up by
September. Some bankers put the bill at at least double that.
Euro zone member Austria has imposed Europe's second-highest
bank levy to help recoup the costs of propping up Hypo and other
lenders during the financial crisis, prompting some banks to
threaten to quit the country.
The debacle has made bankers a target for public scorn. A
Gallup poll this month showed just 1 percent of Austrians
surveyed thought bankers enjoyed special trust, and 81 percent
said the Hypo episode was the reason why.
($1 = 0.7234 euros)
(Editing by Susan Fenton)