07. 12. 11. - 15:53

BA boss wants clear signal from EU

Bank Austria (BA) chief Willibald Cernko has called on European Union (EU) leaders to unite and send a "clear signal".

The banker said today (Weds): "It is obvious that we need a common fiscal policy, common budget policies and common social policies."

Speaking to Die Presse, Cernko said there needed to be clarity about how the European Central Bank (ECB) positioned itself. Asked for his opinion on the ECB’s decision to buy large amounts of government bonds, the BA boss said he welcomed "flexible actions" by the ECB. However, Cernko also warned that the institution should not give up its basic principles.

The Austrian banker said his bank’s experts were not of the opinion that the ECB’s increased acquisition of government bonds automatically caused higher inflation rates.

Asked what would happen if the Euro collapsed, the BA head said: "I keep asking myself what the alternative (to the Euro) would be. Regardless what this alternative would look like, it would definitely by worse (than the Euro)."

Cernko stressed that his bank was not engaged in internal debates how to react to an end of the currency of 17 European Union (EU) members. He told Die Presse: "I am totally honest with you. We do not think about such situations. I do consider such developments as a horror scenario."

Asked what he expected from state and government leaders at the upcoming EU summit, the former HypoVereinsbank manager said: "Decision-makers must get rid of uncertainties. We have no doubts that politicians will take the right steps. Chances that people start trusting Europe again are high if state leaders set a clear signal at the EU summit. (...) I see chances for a new start."

Cernko explained that BA still held government bonds in its portfolio despite the "huge question marks" which circled around this kind of investment these days due to the debt crisis of a string of EU members.

The head of BA, which is owned by Italian bank UniCredit, also spoke about the financial situation of Austria. He warned that credit rating agencies "will closely investigate" what it meant if a government failed to create a substantial majority about important aspects.

Cernko referred to the doomed attempts by the coalition of Social Democrats (SPÖ) and the Austrian People’s Party (ÖVP) of getting at least one opposition party to support its plans to set up a debt brake. A two-third majority in parliament is needed to create a constitutional debt limit which should force the current and future decision-makers to improve the state budget by 2020.

SPÖ and ÖVP want to create criteria ensuring that the budget deficit drops by 14 per cent to 60 per cent of the gross domestic product (GDP) by that year. The state debt should decline quicker than initially planned as well to avoid a downgrade of Austria’s solvency by rating agencies. Austria currently has the best-possible rating (AAA).

Cernko said today: "If governments across Europe decide to set up debt limits, I do assume that such actions will be taken in Austria as well. We would put ourselves under higher risk. Interest rates (on debts and government bonds) would soar."

The banker vehemently denied that BA was in trouble due to the tough times UniCredit was going through. He said: "We (BA) are comfortably equipped with equity. (...) UniCredit has no problems either in increasing its capital by seven billion Euros because owners are determined to participate."

UniCredit suffered a loss of 10.6 billion Euros in the third quarter of this year. BA manages UniCredit’s operations in the whole of Central and Eastern Europe (CEE) except Poland. The Italian finance institute may lay off 5,000 of its 160,000 employees in the coming years, according to business papers.

Cernko said BA planned to increase its workforce levels in Eastern Europe (EE) by 1,135 in the next four years – despite a decrease of value of UniCredit’s affiliates in Ukraine and Kazakhstan. At the same time, the Vienna-based bank plans to reduce the number of its Austrian staff by 800 to 10,000 until 2015. Cernko said last month BA had no plans to sack any employees. He said some might leave the company for personal reasons and added that BA considered abstaining from replacing retiring employees.