Austria’s Faymann Sticks to Bank Tax to Pay for Hypo Alpe Rescue

Austrian Chancellor Werner Faymann said he would keep Europe’s second-highest bank levy in place for at least the next five years to help pay for bank rescues that will continue to weigh on government finances.

Faymann, a center-left politician whose coalition with conservative leader Michael Spindelegger faces national elections at the end of this month, said the levy could raise funds to offset the winding down of nationalized lender Hypo Alpe-Adria-Bank International AG, according to an interview with Graz-based Kleine Zeitung newspaper today.

“I hope I can say one day that it was the banking sector, not the citizen, who paid for the predominant part of the Hypo debacle’s costs,” Faymann was quoted as saying in an interview with the newspaper. “What I don’t want is that the banking levy is simply tapering out.”

Austria has nationalized three banks since 2008, with outstanding capital and liquidity measures equivalent to as much as 17 billion euros ($22 billion), or 6.5 percent, of the Alpine country’s economy. Hypo Alpe’s rescue may add as much as 8 billion euros to that in the next few years. To bolster its budget amid those costs, Austria imposed a bank levy in 2010 that is due to raise about 600 million euros this year.

The levy is exacerbated for the country’s biggest banks -- Erste Group Bank AG (EBS), UniCredit Bank Austria AG and Raiffeisen Bank International AG (RBI) -- by banking levies in eastern European countries such as Hungary, Slovakia and Romania. The lenders say it hampers efforts to increase capital ratios demanded by regulators. Erste paid 185 million euros in banking levies in those countries in the first half of the year, or about half its pretax profit, it said July 30.

Faymann’s conservative Finance Minister Maria Fekter has said that she also wants the banking sector to help set up a bad bank for Hypo Alpe’s non-performing assets.

Austria goes to the polls Sept. 29 to decide whether to give Faymann’s Social Democratic and the Austrian People’s Party a new mandate to govern the country of 8.4 million. The Socialists lead the polls with 27 percent while the People’s party is second at 24 percent.

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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