Massive bank scandal: Austrian right-winger Jörg Haider’s legacy
22 December 2009
Austrian far-right politician Jörg Haider, at the time governor of the province of Carinthia, died in October 2008 in an automobile crash—while driving twice the speed limit and with a blood alcohol level three times the legal limit.
His legacy, however, is now costing billions, tearing holes in the budgets of Carinthia and Germany’s Bavaria. The crisis surrounding the Hypo Group Alpe Adria (HGAA) bank, in which Haider played a central role, is a prime example of the coming together of high finance and right-wing politics.
A week ago, the Austrian government took control of ailing HGAA to prevent the immediate collapse of the sixth-largest banking house in the Alpine republic. In the settlement, the previous owners—Bayerische Landesbank (BayernLB), the province of Carinthia, and Austrian mutual insurer Grazer Wechselseitige—each received one euro. They had collectively pumped in several hundred million euros to try and secure the survival of the bank.
The state-owned BayernLB, which became the majority owner two and a half years ago, must now deal with losses of nearly €4 billion. These will largely fall on the Bavarian state treasury and will be recouped through cuts in public spending. A year ago, the state of Bavaria pumped in €10 billion to protect Germany’s second-largest Landesbank (owned 94 percent by the Bavarian government) from bankruptcy.
The fate of HGAA is closely linked with the rise of Haider’s ultra-right Austrian Freedom Party (FPÖ) and its successor, the Alliance for the Future of Austria (BZÖ). Haider, who served 12 years as governor of Carinthia, used the bank to finance his political projects, enrich his friends in the party, and buy votes.
Under Haider’s charge, the financial institution, founded in 1896, rose from being a provincial bank into a market leader in the Balkans. The bank funded Haider’s money-losing prestige projects in Carinthia, such as the luxurious Schlosshotel Velden and the floating stage on the Wörthersee in Klagenfurt, as well as financing the province’s growing debts. Carinthia is now considered the “debt emperor” among Austria’s provinces.
In return, the state government guaranteed the bank’s creditworthiness, underwriting guarantees amounting to €19 billion. That is almost 10 times the state’s annual budget of €2 billion. The bankruptcy of HGAA would inevitably have resulted in Carinthia’s insolvency.
In the manner of an emperor in ancient Rome, Haider used the cash flow from HGAA to win the support of the voters. He introduced various forms of family benefits, payments for commuters, heating and diesel fuel subsidies, and an inflation relief payment. Under Haider’s successors, young people who acquired a driver’s license were given €1,000. These monetary gifts did little to lessen social inequality; with 76,000 people at risk for poverty, Carinthia is the second poorest of Austria’s provinces—but it ensured that the BZÖ won substantial majorities.
In the successor states of Yugoslavia, the HGAA financed a semi-criminal and corrupt elite, which resembled the one surrounding Haider. “In Macedonia, Bosnia or Montenegro, banking geniuses were drawn hypnotically into the wake of Jörg Haider, needy entrepreneurs who could make good use of inexpensive bridge financing for their cash flow,” the Frankfurter Allgemeine commented.
- Austria Spat With Bavaria Intensifies Over Hypo Billions – Bloomberg (bloomberg.com)
- Austria considers legal action to hand back Hypo to Germans (uk.reuters.com)
- Ex-Hypo Alpe Managers Charged With False Accounting, Misuse – Bloomberg (bloomberg.com)
- UPDATE 1-Bavaria to take Hypo/BayernLB spat to EU (uk.reuters.com)