30. 01. 12. - 16:38

Erste Bank boss attacks political leaders

The head of Austria’s biggest bank has once more harshly criticised the country’s political elite.

Andreas Treichl, CEO of Erste Group Bank AG (Erste Bank), told weekly magazine News Austria’s political leaders could have avoided the recent credit downgrade by reacting to the crisis in time. Treichl said the government should have agreed sooner to convincing measures to lower the budget deficit. American rating agency Standard & Poor’s (S&P) lowered Austria’s rating from the best possible grade, AAA, to AA+ earlier this month.

S&P expressed concerns about the country’s soaring debts and warned from negative economic effects if Italy failed to avoid going bankrupt. S&P also said Austria’s budget would not be large enough to cope with the insolvency of one of the country’s banks. Austrian finance institutes are among the main investors in Eastern Europe (EE). S&P announced it was worried about a possible downturn of the Hungarian economy and the impact of such developments on the performance of Erste Bank and other financial firms.

Treichl told News he considered the rating agency’s doubts about his bank’s operations in Hungary as "absurd". The banker said S&P was making mistakes in its estimations every now and then. He said the rating agency may have missed that Erste Bank protected itself from negative effects by ensuring its reserves.

Hungary is the seventh-most important partner of Austria’s export industry. Austrian companies and banks manage around 2,000 branches in the economically challenged country which accessed the European Union (EU) in 2004. Hungarians were recently confronted with an increase of various taxes including a higher value-added tax (VAT).

Foreign enterprises criticised Prime Minister Viktor Orban for introducing a taxation measure colloquially known as crisis tax on them. Speaking to Austria’s Kurier newspaper earlier this month, Hungarian Foreign Minister Janos Martonyi promised that the disputed crisis tax would be abolished again "when the crisis is over". Martonyi underlined that the measure was a temporary one which would depend on how the domestic economy developed.

Josef Cap of the Austrian Social Democrats (SPÖ) hit back at Treichl over his criticism of the government in the current crisis. Cap said he was "bewildered" by Treichl’s statements. The SPÖ whip – whose party forms a coalition with the People’s Party (ÖVP) of Michael Spindelegger – said Treichl apparently forgot about the government’s decision to bolster Austria’s leading banks with billions of Euros since 2008.

SPÖ, ÖVP and the National Bank (OeNB) agreed at that time to provide the country’s biggest finance institutes with participation capital to help them through the crisis. Some of the banks which benefited from the decision have not yet returned substantial amounts of the credits they received in 2008 and 2009 when Austria felt the full impact of the global economic downturn.

Treichl’s latest attack comes around half a year after he claimed during a platform discussion that Austrian lawmakers were "too stupid" to understand economic developments. He harshly criticised the government for failing to block the new Basel III rules on international banking.

Treichl pointed out that the regulations made providing well established small and medium-sized enterprises (SMEs) with credits more difficult. Such deals are essential to Erste Bank’s business activities. Treichl hit out at politicians last year for failing to agree to stricter rules for financial market groups which engaged in high-risk speculations.

He apologised for his choice of words a few days after the statements caused a hurricane in the press and a heated public debate. However, Treichl also underlined that he had not changed his mind about bad decision-making regarding financial sector rules and sanctions.