It seems like political fiction but the pleasant and peaceful region of Carinthia, weighed down by the bank failure of Hypo Alpe Adria, has asked Vienna for financial support. The reason for so much alarm? The Landalpino runs the risk of being left without resources by the beginning of June, without providential external help.
The central government, however, took its time and wants to see clearly. Step back. Carinthia provided debt guarantees for years to fuel Hypo Alpe Adria's rapid eastward expansion under former governor Joerg Haider before the bank ride was halted in 2007. But the last guarantees will expire in 2017, it reports. the Reuters. With an annual budget of just 2,2 billion euros, Carinthian officials said the region could not honor the nearly 11 billion euros in Hypo debt relief that creditors, who are facing a debt haircut today , they may require at the set deadlines.
A really complicated situation and right in the heart of the eurozone, not in the so-called periphery. On top of that, rating agency Moody's downgraded Carinthia last month to just above junk bond level, making it even more difficult to borrow money in the markets. In the current financial year, Carinthia needs 340 million euros and relies on the aid of the central government in Vienna which, however, could commission the region by sending a sort of troika.
Carinthian politicians are against the commissioner hypothesis and met with Chancellor Werner Faymann and Finance Minister Hans Joerg Schelling on Thursday 23 April to seek a compromise solution. The spokesman for the region told the local press that Carinthia could run out of liquidity in June without help from the central government. No Austrian Land has ever gone bankrupt so far and there is no specific legislative provision governing such a hypothesis.
As if that weren't enough, last month the Austrian regulatory authorities of the financial markets took control of the "bad bank" Heta, which manages the debts of Hypo Alpe Adria, however imposing a moratorium on debt repayments, a decision that alarmed the international investors, including many German banks.
The ECB has asked the banks it supervises to provide it with exposure to bad bank Heta. And to think that until recently Carinthia was hailed as the nearby El Dorado by many companies in the Triveneto area which threatened to leave the regions of northeastern Italy to migrate to Joerg Haider's "paradise".
