A new chapter has been added to the tormented saga of the liquidation of the Austrian bank Hypo Alpe Adria. The Austrian government has decided to provide tambur battente with 350 million euros in emergency funding to the Carinthia region so that it can pay the salaries of its employees. This was announced by Austrian Finance Minister Joerg Schelling.
“The deal is done. I'm waiting for the green light from Carinthia,” Schelling told the media in Vienna according to the Reuters agency. Carinthia, which borders Friuli Venezia Giulia, is in a deep liquidity crisis in June unless the Viennese federal government provides the state with a financial lifesaver. The southern Austrian region, which is engaged in a cost-cutting and austerity plan, is the guarantor of more than 10 billion euros of debt held by Heta Asset Resolution, the 'bad bank' that inherited the losses of Hypo Alpe bank Adria is now in liquidation. A part of the former branches of Hypo Alpe Adria in the Balkans were acquired at the time by the EBRD, the European Bank for the reconstruction and development of the former communist countries.
The Austrian financial markets agency, FMA, took control of Heta last March and froze debt repayments until May 2016, creating a lot of resentment among international creditors who fear a plan that envisages losses on the nominal capital of the bond in a percentage that has not yet been disclosed.
The governor of Carinthia Peter Kaiser pointed out in Vienna that his small region absolutely cannot take on the responsibility of solving the serious financial crisis on its own but the Austrian government hesitates hoping to use the new European banking rules in advance of the 2016 deadline resolution with the bail-in, i.e. with the participation in the losses of creditors including bondholders and not only with the bail-out, i.e. with the saving of the state and taxpayers' money. The debts left by the former bank of the Carinthian governor Joerg Haider, who died a few years ago in a car accident at night in Klangefurt, the capital of Carinthia, is very costly: in February, debts of 7,6 billion euros which were added to the 5,5 billion already put on the plate by the Austrian government in the rescue of Hypo Alpe Adria.
Then on 10 May a new heavy bill to be paid of 2,6 billion was added, as a result of a sentence issued by the court of Munich, which sentenced Heta Asset Resolution, as successor to Hypo, to pay via supportive. Vienna filed an appeal against the decision contesting that the German judiciary would have actually qualified a shareholding in Bayern Lb, the Bavarian state bank, as credits. But the fear of the Austrian authorities is that the Bavarian sentence is only the beginning and that judicial appeals will fizzle, especially from German investors, causing an avalanche with unpredictable results also on the sovereign rating of the Alpine country.
