Austria – breaking really bad

The hills are alive with the sound of legal action.

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Too bad – yes, da, we, si, da, ow – well Austria I have commented on few times – being the one country that may create a new crisis in sovereign debt.

Yes it was Austria in the Great Depression – history is a funny thing – a shot of reality amongst garbage espoused by economists.

Please update yourselves on what I have commented on in prior posts on Austria’s Heta Bank – the ‘bad’ Bank. (1) (2)

No really it is – a bad bank – huge debts involving bad multi-currency loans and corruption which were guaranteed by the State of Carinthia – in Austria.

Reuters advise

“From legal action to legal action – the latest dilemma for the Austrian a Government is that a group of creditors representing claims of more than 2.5 billion euros ($2.85 billion) against this Austrian “bad bank” Heta – condemned a planned law on a settlement with the German state of Bavaria and said it would fight Vienna’s plan.”

Not the first time legal action taken mind you – Bondholders were a tad upset at similar legislation limiting liability.

“Austria’s parliament is reviewing a bill to implement a settlement reached with Bavaria, the former owner of Heta’s predecessor Hypo Alpe Adria, by paying 1.23 billion euros, or 45 percent of Bavaria’s claims.”

Legal attempts to solve Hypo Alpe Adria’s failure have run into difficulties.

In July, Austria’s highest court overturned a law that had cancelled almost a billion euros of Hypo debt outstanding to the Bondholders.

“The federal government still proceeds without any involvement of the creditors,” said the group, which includes Germany’s Commerzbank, on Wednesday. “The creditors will fight this plan of action by all available means.”

Okay – so the Austrian Government again is trying to legislate liability and avoid paying this debt with lawyers – representing Kaerntner Landesholding – a holding company of Hypo’s home province of Carinthia – which said last month – plans to set up a special purpose vehicle – with a view to federally financing a settlement with Heta creditors had received “no negative comment” bar one.

Oh boy – the power of one – never discriminate in legal action.

The power of one of the largest creditors can force other creditors to join in on the action – like who would believe politicians?

This is a State Government guarantee.

Carinthia has guaranteed around 11 billion euros ($12.56 billion) in Hypo debt – the equivalent of five times its annual budget.

Sound dodgy?

“Heta creditors rightly state that – “We will oppose all special legislation which devalues the statutory guarantees of Carinthia …. in front of the European Court of Justice, by international investment arbitration or if necessary in front of the European Court of Human Rights,” the creditors said.”

I can only presume the outcome will be the same as the attempted subrogation of Bondholders through the Government Legislative – no chance – nil – nein – nyet – no – nah.

Just a waste of time – deferring the inevitable.

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At least ‘they are’ fighting not to trigger a sovereign debt collapse – that debt would sink them.

And history will repeat.

Carnage coming.

Umm – no date – no beer bets – wait until decision announced.

1. https://millermatters.wordpress.com/2015/07/28/breaking-bad-austria/

2. https://millermatters.wordpress.com/2015/06/01/when-it-blows-it-will-not-be-a-pretty-picture/

3. http://www.reuters.com/article/2015/10/14/austria-heta-asset-creditors-idUSL8N12E0WM20151014

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