Austria, Bavaria bury the hatchet over bank dispute

11th November 2015, Comments 0 comments

Austria agreed on Wednesday to pay the German state of Bavaria 1.23 billion euros ($1.07 billion) to end a bitter and long-running dispute over a bank deal that went disastrously sour.

"We are not going to argue any more," Bavarian Finance Minister Markus Soeder said as he and Austrian counterpart Hans Joerg Schelling signed what they both called an "acceptable result".

The spat centred on bank Hypo Group Alpe Adria (HGAA), the state lender in the Austrian state of Carinthia.

Bavaria's state lender BayernLB bought a majority stake in 2007 in HGAA but two years later, as the global financial crisis raged, the bank came close to collapse and Austria nationalised it.

BayernLB received a symbolic three euros for its stake and Bavarian and Austrian taxpayers were saddled with billions in losses in the subsequent winding-down.

Bavaria sued Austria for 2.4 billion euros, and Austria counter-sued Bavaria for 3.5 billion euros for allegedly failing to provide a complete picture of HGAA's dire financial position.

Subsequently Hypo was split up, with the bad debts ring-fenced in a "bad bank" known as Heta Asset Resolution, and is continuing to cause Austria problems with HGAA creditors.

The case is a legacy of late Austrian far-right political Joerg Haider, formerly premier of Carinthia.

Under Haider, who died in 2008, the bank expanded into the Balkans as well as Italy and Germany via acquisitions and risky investments, expanding its balance sheet fourfold to some 40 billion euros.


© 2015 AFP

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