Hypo Alpe Adria - 40 Billion Euro Crash

Austrian giant Hypo Alpe Adria was nationalized to the tune of 40 billion Euro. Heavily invested in the Balkans, they are one of many international banks facing steep write offs.

Greece, Spain, Austria, Portugal, Ireland are an absolute disaster, to name a few. The see-saw of dollar/euro will continue to bounce up and down to see who hits rock bottom first.

At Austrian Bank, Settling Haider’s Account

When Hypo Alpe Adria bank, the Austrian arm of the Bavarian bank Bayern LB, was nationalized on Monday for the symbolic price of three euros, it was the logical end of a long, ambiguous relationship the lender had with the government, and with one of Austria’s most flamboyant politicians, the late Jörg Haider.

Mr. Haider, who died last year in a car accident just as he was poised to return to the national stage at the head of a right-wing party, was the governor of Carinthia, the southern Austrian province where Hypo Alpe Adria was based.

Hypo, the sixth-largest bank in Austria, expanded rapidly into the Balkans during Mr. Haider’s return to office in Carinthia, which began in 2000 and ended only with his death. According to the Austrian central bank, Hypo and other Austrian banks can expect at least 10 billion euros in write-downs in the next two years, largely from Eastern Europe, and possibly twice that.

Bayern LB, the regional bank that announced Monday it had come to an agreement to transfer its majority stake to the Austrian state, is taking a 3.75 billion euro write-down on the deal, after buying into Hypo Alpe just two years ago.

Horst Seehofer, the minister president of Bavaria, called the situation a “debacle” that could not be glossed over, and acknowledged that damages were being claimed against former board members of Bayern LB, including erstwhile ministers of his party, the CSU.

But the roots of the debacle are south of Bavaria. State prosecutors in Klagenfurt, Austria, where Hypo Alpe has its headquarters, have been investigating the bank officials for breach of trust and fraud for some time. Finance Minister Josef Pröll of Austria, who led the push to nationalize Hypo Alpe rather than let it go bankrupt, said a special committee would begin an inquiry, and that “every document, every procedure and every liability would be brought to light.”

Under Mr. Haider’s leadership, Carinthia sank ever deeper into debt, with its borrowings expected to hit 2.5 billion euros next year, a record for an Austrian region. It was also under Mr. Haider that Hypo Alpe, then half-owned by a government holding company, embarked on a number of dubious domestic investment projects — a sort of stimulus package without a crisis to justify it, the Austrian version of pork barrel projects. One was Schloss Velden, a huge chateau resort backed by Hypo Alpe, which still loses money.

But even Schloss Velden is fairly innocent compared to the deals that have gone sour in the Balkans. In just one case of supposed shenanigans, Hypo Alpe Real Estate has been accused of financing about 250 million euros in transactions with the ex-Croatian general Vladimir Zagorec, who was extradited from Austria to Croatia in 2005 charged with the embezzlement of 5 million euros in diamonds.

The lender is also accused of having paid a 2004 ransom when Mr. Zagorec’s son was kidnapped, to the tune of several hundred thousand euros.