All’s Well That Ends Well or The Art of Talking Much and Saying Little

13 12 2009

A photo essay of a political show.  Photographs: Matthias Wurz

Austria’s Social democratic Chancellor Werner Faymann felt the need to celebrate on Dec 2, 2009 at the imperial Hofburg. Österreich.Gemeinsam (Austria Together) was the title of  Faymann’s speech, the occasion was the first anniversary of the current Austrian government, led by Faymann since December 2008 at the time of economic crisis. The message was simple: all is well at home. Faymann’s skill as public speaker was impressive, evidently inspired by U.S. President Barack Obama in its delivery. But Faymann’s speech – unlike those of the current U.S. President – had only one fault: Staging a political show that demonstrates the art of talking a lot but saying very little.

All’s Well That Ends Well is one of William Shakespeare characteristic plays, first published in 1623; its title refers to a proverb whatever the troubles, as long as the outcome is a good one. It seems that the Austrian Social democrats have adapted the theme of Shakespeare’s comedy, signalling that the international economic and financial crises are well in hand. Business as usual, made in Austria.
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The Rooster in Brussels or Austria’s Twitter ‘Evolution’

31 10 2009

Cremer_Hahn_28102009 Photo: Students protesting in the streets of Vienna, Oct. 29. Photo Credit: Cremer / Der Standard.

“I feel already well-equipped, and speaking English daily will hopefully not cause me to forget German,” Johannes Hahn – the last name Hahn translated into English means rooster or cock – replied confidently in his first public interview with the daily Der Standard of Oct. 28, when asked about his English language knowledge after his surprise nomination as Austria’s EU Commissioner. The current Federal Minister for Science and Research, in office since January 2007, will be Austria’s most influential European politician as part of Emanuel Barroso’s second European Commission.

With the unanimous decision by the Austrian government of Oct. 27 lunchtime, the show-down between the two coalition partners – Werner Faymann’s Social democrats and Josef Pröll’s Conservative ÖVP – eventually found an abupt end. The contest of nomination was mere on the surface, though, as Faymann declared already months ago that his party – though strongest in the Austrian Parliament – would not nominate a commissioner, but played a risky tactical game of which Conservative nominee they would support.
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EP Elections: ‘Where Do You Go?’

7 06 2009

I admit: I have cast my vote in the elections to the European Parliament at about 10.40 am this morning. So, I am one of about 35 to 40 percent of the Austrian electorate – my estimation – that by the end of the day will have cast their vote for the 17 Austrian seats in the European Parliament. In 2004, 42.5% went to the polls.

There were a few novelties for me: For the first time, I made my way to the polling station without any idea who I am going to vote. As resident of Vienna’s most-populated district Favoriten, it is a five-minute walk to the primary school at Keplerplatz, right at the administrative center of Vienna’s 10th district, just off the underground station of the same name and the pedestrian Favoritenstrasse.

While attentatively walking through the streets at a humid but cloudy Sunday morning, I recall No Mercy’s 1996-hit ‘Where Do You Go?’ Indeed, where is Europe heading, I wonder.
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Krugman Comment: Pröll versus Bankruptcy

3 05 2009

Pröll Budgetrede 21. April 2009Photos: Finance Minister Josef Pröll (standing) delivering the budgetary speech, Apr. 21, 2009. Photo Credit: Matthias Wurz

The plenary chamber of the Austrian parliament was packed by 9:00 on Apr. 21, just like the stands for the general public in anticipation of ÖVP Finance Minister Josef Pröll’s 63-minute presentation of the budget.

At 9:05, Pröll rose from his seat to deliver what was expected to be his most important speech of his career so far, presenting the budgets for 2009 and 2010, which was broadcast live by ORF Austrian Television.

Austria, along with much of the world, is in the worst economic crisis in recent memory and the financial outlook is gloomy. The country’s national debt will increase by 3.5% in 2009 and 4.7% in 2010, well above the permitted Maastricht level of 3%. Consequently, the total national debt will reach an alarming 78.5% of Austria’s GDP by 2013, up from 62.5% in 2008. The bank rescue package (Vienna Review reported, April 2009) weighs with EUR 9.3 billion heavily (2009).

Economic Minister Reinhold Mitterlehner added in Der Standard of Apr. 25 that in order to consolidate the budget in the years to come “we also need new sources of income.” In other words, raise more taxes as the estimated tax income for the state drops by EUR 4.5 billion in 2010. Read the rest of this entry »





NATO passé – Austria’s NATO Strategy

3 05 2009

FRANCE-GERMANY-NATO-SUMMIT-DEFENCEPhoto: from left to right, (Former) NATO General Secretary Jaap de Hoop Scheffer, U.S. President Barack Obama, French President Nicholas Sarkozy and Germany’s Chancellor Angela Merkel at the NATO Summit 2009. Photo Credit: Getty Images

The North Atlantic Treaty Organization (NATO), found cause to celebrate this year: On Apr. 4, 1949, the collective defense alliance was founded in Brussels on the eve of the Cold War. Sixty years later and now with 28 member states – Croatia and Albania were formally accepted this year – the organization set out to redefine its role after the collapse of communism 20 years ago.

For the first time, the annual NATO Summit was jointly hosted by two member states, France and Germany, whose “close partnership during the course of NATO’s history symbolizes a vision of a Europe whole and free,” according to the NATO website. Following the Summit, member countries’ leaders called for a new doctrine, as the previous one of 1999 neither reflects the changes in Russia nor takes global terrorism – like the 9/11 – into account.

The 60th anniversary also marked the return of France to the allied command structure – a move hailed by members, though deeply controversial within France. French President Nicholas Sarkozy defended his decision by saying that now was time for change:
“Our strategy cannot remain stuck in the past,” he urged at a talk at France’s Strategic Research Foundation in mid-March, “when the conditions of our security have changed radically.” France, Sarkozy argued, will have more influence in NATO missions while the independence of the nuclear-equipped French military will remain untouched.

But all seems well without NATO for Austria, now surrounded by alliance members, except Liechtenstein and Switzerland. The dramatic NATO membership plea by news magazine profil journalists Gernot Bauer and Georg Hoffmann-Ostenhof in the article ‘Holt uns da rein!’ (‘Get us in there!’ Apr. 6 edition) did not, however, spark any further political debate. All political parties seem happy to remain neutral, including those who once argued for NATO membership. Read the rest of this entry »





Paul Krugman: “Stating the Obvious”

15 04 2009

“Absolutely absurd,“ stated Josef Pröll, Austria’s Finance Minister of the conservative ÖVP on Apr. 15 when confronted with the controversial remark by 2008 Nobel Prize Laureate and Princeton University economics professor Paul Krugman with regards to the possibility of Austria’s bankruptcy.

Krugman’s provocative statement with regards to the impact of the financial crisis on Central and Eastern European countries (CEE) at the Foreign Press Club in New York on Apr. 13 sparked high-profile responses and anger in Austria.

When responding to the question of high exposure of Eastern European debt by Austrian banks, and whether that might lead the country into bankruptcy, Krugman responded directly.

“Now it’s a tiny one, it’s Iceland, but that just shows that it can happen, even to advanced countries. Ireland looks pretty bad because of large financial exposure. And Austria would probably be my third candidate in those leads.”

And the New York Times columnist delights himself in his blog two days later of having created a stir by just stating the obvious.

Evidently, Krugman’s comment has revived a debate of the past month when media reports, such as by the Austrian daily Die Presse (‘When, exactly, will Austria go into bankruptcy?’), circulated, sparked by concerns of high account deficits in the CEE countries.

Austria’s banks (not including Bank Austria and Hypo Alpe Adria as foreign-owned), Pröll clarified, have lending exposures in the CEE area of about EUR 200bn – approx. 70% of Austria’s GDP – but they are apposed to savings deposited of 85% of that amount.

The Finance Minister also dismissed the scenario of a complete deficiency of lending, but rather estimates that 10% might have to be bailed-out. The latter seems inevitable, as the European Bank for Reconstruction and Development (EBRD) estimated already in February 2009, that bad debts are likely to exceed 10% of lending in the CEE countries.

Indeed, the severe financial troubles of Austria’s neighbours highlights the huge investment Austria’s banks did since the 1990s in the CEE countries. They are the exposed of all financial institutions invested in the area, led by Raiffeisen with 54% of its risk-weighted assets, and Erste Bank Group (38%).

Evidently Josef Pröll set off for a ‘face-list’ trip to Bulgaria, Romania, Croatia and the Ukraine in mid-February promoting the Austrian government’s proposal for a financial stability pact for the CEE countries.

However, Pröll’s good-will tour sparked fresh concerns for the Austrian financial sector. The Romanian online business magazine Wall-Street consequently titled on Feb. 17 ‘Romania can drive Austria to meltdown.‘ At the same time, Austria’s daily Der Standard estimated that 10% failure of CEE lending would lead to crash of the Austrian financial sector.

Not surprisingly, the rescue plan failed to convince the other EU members, as it seemed motivated by Austria’s self-interest only.

Krugman’s pointed comment therefore, might be exaggerated as Austria’s bankruptcy seems unlikely at this stage, but has a valuable point: The European governments should not dismiss nor underestimate the effect a widespread financial collapse of financial institutions inevitably has when the CEE countries are not stabilized.

If this part of the financial crisis is mishandled, Daily Telegraph columnist Ambrose Evans-Pritchard predicts a “debacle (that) is big enough to shatter the fragile banking systems of Western Europe and set off round two of our financial Götterdämmerung.”

Austria would then certainly play the leading role.





Business Analysis: Rewarding Dishonesty

31 03 2009

This article is co-written by Ing. Werner Krauss – see information below

Toxic Assets Cartoon

Cartoon: © Dave Granlund, www.davegranlund.com

The Problem of ‘Toxic Assets’

“Our job is to fix the problem in the financial sector at the least risk to the taxpayer,” U.S. Treasury Secretary Timothy Geithner stated the objective on Mar. 23. Supported by President Barack Obama, Geithner unveiled yet another bailout plan for the struggling U.S. financial system.

Rumours had it, that the Obama Administration would revive a plan that the Bush Administration had drafted in September 2008 but put back into the draw: Spending billions of U.S. dollars taxpayers’ money to free the financial system of ‘legacy assets’ – real estate loans as well as securities backed by loan portfolios – colloquially known as ‘toxic assets.’

Those assets cause “uncertainty around the balance sheets of these financial institutions, compromising their ability to raise capital and their willingness to increase lending,” so the Fact Sheet of the Public-Private-Investment Program of the U.S. Treasury, which confirms what has been rumored in early March.

According to the new bailout strategy, the U.S. government will spend yet another staggering U.S. $ 75 – 100 billion in order to help raise $ 1 trillion as to stimulate the economy and ‘flush’ the U.S. financial system of the ‘toxic assets.’

Geithner admitted that this plan fuels public anger as Wall Street seems to benefit at times where average Americans suffer. The financial sector has indeed been a major recipient to previous support: As an example, the Troubled Assets Relief Program (TARP) worth more than U.S. $ 700 billion, included $ 25 billion packages each for Citigroup, J.P. Morgan Chase and Well Fargo, the largest amounts ever given to any bank, among others.

“The (public) anger and outrage is perfectly understandable,” and he firmly added that “we have to make sure our assistance is not going to award failures.”

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