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Compromise spares Austrian region bankruptcy

Euro & Finance

Compromise spares Austrian region bankruptcy

The Hypo group, which was active in the Balkans, has been hit by financial turmoil and has threatened the economic stability of many of its stakeholders.

[Martin Belam/Flickr]

A creditor dispute over severance pay, resulting from the Hypo Group Alpe Adria bank going under, has been settled, and the Austrian state of Carinthia has been spared bankruptcy. EurActiv Germany reports.

The megalomania of the late Jörg Haider in creating a banking institute for South-East Europe from the Carinthia-headquartered group is still set to cost the taxpayer around €12.5 billion. But intensive negotiations by Austrian Finance Minister Hans-Jörg Schelling have yielded a viable solution.

In a statement, the minister spoke of putting an end to the “dark Hypo past”. He added that both Vienna and the regional government had managed to close a “seemingly endless chapter of costs, claims and uncertainties”.

The solution that has been reached is important for three reasons: Firstly, it has steadied the ship and Austria can try to regain its image as a financially reliable and stable centre. Secondly, the taxpayers can be spared additional financial burden that would arise from more litigation and court settlements. Thirdly, Carinthia, which would have been extremely liable, has been spared bankruptcy.

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While the southernmost region of Austria must still make a significant financial contribution, it will not have to deal with the risk of further legal uncertainty and its unpredictable impact, Schelling added.

The German state of Bavaria, which owned a controlling stake in the bank between 2007 and 2009, is set to benefit from the compromise, following a dispute with Vienna last year about ownership of Hypo.

Last week, BayernLB, the Bavarian State Bank, was awarded an A- rating by the Fitch rating agency, after the bank came to a settlement.