VIENNA, March 16 The Austria government wants to
ensure taxpayers do not end up footing the entire bill for
winding down state lender Hypo Alpe Adria and could
use special legislation to go after some creditors, government
ministers said on Sunday.
Austria, which nationalised Hypo in 2009 to avoid a failure
that would have sent shockwaves across the region, finally ruled
out on Friday letting it go bust. Instead it will wind it down
via an expensive "bad bank".
It wants Hypo's home province of Carinthia, subordinated
creditors and former owner BayernLB to share the
costs of the plan, which may push state debt above 80 percent of
GDP and add 4 billion euros ($5.6 billion) to the 2014 budget
Justice Minister Wolfgang Brandstetter told the Kurier
newspaper on Sunday he was confident the government could reach
a reasonable settlement with Bavarian state bank BayernLB.
"A few lawsuits are pending with the Bavarians and in theory
there could be even more. But it cannot be in their interests to
tie up resources for years in court cases," he said.
"We are determined that creditors - via special legislation
if needed - participate in the necessary restructuring of the
He said the Austrian government was also looking to recoup
the 500 million euros that Carinthia earned from selling its
Hypo stake to BayernLB.
Hypo says it has nearly 1.9 billion euros worth of
subordinated debt, including 1 billion euros in bonds guaranteed
by the federal government.
Central bank Governor Ewald Nowotny has said the federal
guarantees will be honoured.
Hypo says another 890 million euros worth of subordinated
bonds and notes is guaranteed by the province of Carinthia.
The bank has received 4.8 billion euros in state aid since
2008 and needs more to be able to meet minimum capital levels
when it finalises its 2013 accounts.
RAISING THE DEFICIT
Finance Minister Michael Spindelegger told Oesterreich
newspaper on Sunday that the cost of winding down Hypo would
boost the budget deficit by 1.2 percent of gross domestic
product (GDP), but called this a one-off effect.
The coalition government that took office in December after
elections last year will unveil its 2014 budget next month.
"My plan is that the Maastricht deficit cannot rise above 3
percent. Savings efforts will be required," he said, referring
to the EU criteria that national budget deficits cannot surpass
3 percent and state debt 60 percent of GDP.
He said it was regrettable the government had to adopt
savings measures as a result of the Hypo "disaster" triggered by
unaffordable debt guarantees granted by Carinthia, under the
former government led by the Freedom Party.
He said Austria could not invest additional resources in
research and infrastructure as a result of the Hypo costs.
In a separate interview with Die Presse, Spindelegger said
he was upset that Hypo management had been unable so far to
present him with exact details of how much more state aid the
bank now needed, and indicated heads could roll.
He said talks with BayernLB would start this month.
The Bavarian state bank has alleged in court it was duped
into buying Hypo and is also trying to get back 2.3 billion
euros in loans to Hypo that have been frozen.
Austria says the money has to be treated as equity for now.
"The Bavarians' 2.3 billion (euros) is lying in the bank and
won't be repaid. So who has the worse negotiating position?,"
($1 = 0.7181 euros)
(Reporting by Michael Shields; Editing by Sophie Hares)