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Posted on on April 29th, 2014
by Pincas Jawetz (


TRANSPARENCY: In Austria – meetings of the Cabinet with the Chancellor and the Vice Chancellor happen with the Press present in the ante-room and waiting for a Follow-up Sit-down Press-Conference at the End of the Meetings – and immediate information can be forth-coming.

On Wednesday April 23rd I had the honor to witness such an event. It was on the preparation of the budget under directives that in order to hold the increase in the deficit there must be a decrease in expenditures at all ministries. The most publicly controversial Ministry in this is the Ministry of Education (Learning, Art, and Culture). That domain is held now by Ms. Gabriele Heinish-Hosek of  the Social Democratic Party of Austria (OESP) that is the Party of  Chancellor Werner Faymann. She came early and met people of the Media to clarify that she will have to save 117 million Euro.

She was at first the Party Spokesperson for Women and Youth (2001-2009) – then in government  Austrian women’s and civil service minister (2009-2013) – and with the establishment of the newest government in December 2013 she got this new position at Education in clear knowledge she will be on the firing line. 

In Austria, like in the US, Education is an area where conservatives and progressives are bound to clash. Will there be a strong central government position and a National education system, or will anyone with a stake in the formulation of the minds of the young get a piece of the action – and his hand in the pot of money?

Like in the US, the more Conservative Party – the Austrian Peoples Party – is the second largest party but holds State Governorships, and in the Austrian Federal Coalition the Vice-Chancellor position with Finance Minister Michael Spindelegger. They can be counted with being inclined to see a more decentralized education system with more power to State Governments.

On the other side, teachers’ unions will push for jobs – large in numbers and small in working hours with great pay for extra-hours. Much of this is waste and the more Conservative political elements want no part of it. These are universal facts – good in Austria like in the US – only that here they play above the table and not under the table.

After the “entrance of the actors” suite – which included mainly the Education Minister and the Finance Minister, we were left to wait for the end of the meetings that went on with closed doors. Then the Chancellor and the Vice Chancellor  came out and we all sat down for the Press Conference. Next to me was sitting the proud correspondent for the Egyptian Al-Ahram. Not trying to play it up – I will acknowledge it was a learning experience for both of us. (Today I read that in a political trial 683 members of the Muslim Brotherhood Party were condemned to death without any proof that they were involved in a real act of crime. I did not ask my new friend about rights and budgeting in his country – we just watched both of us how this is done in Austria.)

The SPOE Chancellor spoke first and the VOEP Vice Chancellor and Finance Minister spoke after him. When questions were allowed both answered in the same order. The general feeling was one of agreement, but clear difference of nuances were present to please the separate constituencies. At times there were also clearer differences. The subject is not easy – neither were the other topics that were loped at the Head of State by the eager, but well behaved, and friendly, Media. Present was also a group of Students of Journalism sponsored by the Austrian Chamber of Commerce, that came as observers to learn how this is done.

To the point:

The Chancellor said that new full-day schools have to be built but the total budget on education must be reduced. Austria is now the second most expensive country in Europe, and the third most expensive among the OECD countries, when it comes to expenses per student.  Austria does not aim to be the most expensive country in its education system but the one with best education, he said.  He praised the Minister that has proposed she continues to meet with all stakeholders and will come back at next meeting of the cabinet with concrete proposals. The Chancellor promised there will be savings due to improvements in management, but there will be new expenditures where they are needed. He noted that 50 Million Euro were set aside by the government in the previous budget for education, science and research that were not utilized by the State Governments. These will be retracted. The total amount of money that will be spent in the 2015 budget will be equal to the amount spent in 2014 despite the decrease in budgeting. Expanding Full Day Schools to 2018 will continue as planned in the past. He noted that the 2009 – 2013 raise in the budget was 13% and that did not lead to the wished results. The criticism of the system was the undertone.  Also it seems that some of the States just were not interested in executing the Federal Program.

{It seemed to me that this was it where the dog was buried – we will get back to it when I will report further on about a symposium that went on the whole day at the “ArbeitsKammer” or the building where the employees have their seat.}

But now let me continue with the Press Event at the Parliament building, today, Tuesday April 29, 2014 8 am.

This was a Cabinet Meeting before the Chancellor submits the the budget to Parliament. It seems that it was a very short formal meeting because after 10 minutes the Chancellor and the Vice-Chancellor, who happens now to be the Finance Minister, came to meet the Press.

The Chancellor opened by telling us that the “cake of income” became larger so there is a plus in income but that money will be saved rather then turned over to the increased expenses in the budget. He still talks of efficiency in expenses and of investments where it creates jobs.

The Chancellor said that he is thankful to the Vice-Chancellor for having taken over the leadership on the shaping of th budget     (after all – that is his nominal job – isn’t it?) and passed on to a different subject – “The intensity of the discussions on Sanctions in the Ukraine/Russia arena could be used instead in finding a way out as suggested by the Foreign Minister of Germany.” He did not mention his own Foreign Minister Sebastian Kurz who is now in Iran  who has been the first to say that Ukraine can be stabilized peacefully when all sides interests are taken into account – including the Russians – and via elections a federal State created covering these interests. The papers today say that a conference can be called for Vienna where above can be discussed.

We will first react to the Ukraine issue by quoting from Fitch:  “Vienna’s private bankers and real estate agents say they are now on the front line of escalating tension over the future of Ukraine after the European Union imposed sanctions on Russia and threatened to tighten them further.  Austrian Finance Minister Michael Spindelegger said yesterday that the economic effect on his country of new measures “won’t be negligible.”

“It has become a challenge,” said Klaus Requat, who runs investment banking at Meinl Bank AG based in the Austrian capital. “The Ukraine crisis is especially aggravating because it came at a time when investors began to notice positive effects in the region. Now, uncertainty rules again.”

Business with eastern neighbors flourished after the Soviet Union disintegrated in 1991, when Viennese lenders opened up in Moscow and Kiev and wealthy Russians and Ukrainians sought havens in the city’s banks and property market. With 38 billion euros ($52 billion) of “exposure” to Russia, Austrian bankers have the most at stake of any State in Europe, the US or in Asia.”

 Further – looking at Ukraina we found: “the two large Austrian Banks still active in the Ukraine (a third one, Erste Bank, wisely shut up shop in Kiev in late 2012).

The two banks concerned are Raiffeisen International (OTCPK:RAIFY) and Bank Austria, which together have exposure of 8 billion euro (approx. $10.9 bn.) in the Ukraine. This is only a small percentage of their total loan book, but still, it is quite a bit of money for  Austrian Banks. Guess what – 70% of the credit extended to Ukrainian borrowers is denominated in foreign currencies. Right now there is no foreign currency against which the hryvnia is not crashing. Evidently, European banks have learned nothing from foreign currency lending debacles suffered elsewhere, from Hungary (where the government forcibly converted the loans into Forint and saddled the banks with huge losses), to the extremely popular Swiss franc loans they have extended just about everywhere they are doing business.

In the context of the once highly popular CHF loans, the customers the banks favored with these “excellent opportunities to save money” were as a rule not sophisticated financial market wizards, and so were relying on the “expert advice” dispensed along with the banks’ sales pitch. They were told that the Swiss franc would always remain stable against the euro. Since Swiss interest rates were considerably lower than euro interest rates at the time most of these loans were peddled, there was “free money” waiting to be picked up.  And then the crisis hit, and suddenly the Swiss Franc became worth a lot more.  Instead of saving money, borrowers suddenly found themselves in dire straits.”

Now part of the Austrian Budget Problems are actually the Hypobank problem. This is something that the government had some original involvement with but then the main problem came about when the government needed funds to save those banks and money became unavailable to the regular budget needs. This is part of the large chunk of ice that hides under the iceberg-tip we view when listening to the budget debate. Some in the opposition – like the Green Party – want to see the establishment of a function of a Parliamentary Investigative Committee to be operated by the MINORITY PARTIES as part of their democratic obligation to be watchdogs of government.

I just had last night the opportunity to sit in at THE STANDARD newspaper’s organized debate on: “MORE DEMOCRACY VIA INVESTIGATIVE COMMITTEES AND PETITIONS?” (U-Ausschuesse und Petitionen). The very high level of the debaters – the Heads of the Green, Black (OEVP – the Vice-Chancelor’s party), and Red (SPOE – the Chancelor’s party) Parties – Ms. Eva Glawischnig, Mr. Reinhold Lopatka, and Mr. Andreas Schieder – as well as a Member of the Parliament who belongs to the surprisingly ascending new Pink Party (the NEOS) – Ms. Beate Meinl-Reisinger – and Journalist and co-author of the recently published excellent volume – “Supermarkt Europa” (Europe Super Market) – Mr. Robert Misik – made sure there was a highly principled debate in EU context with Germany as a model. This prompted me to speak up and suggest they look at what one Joe McCarthy in the name of a minority did to the US Congress and how he managed to destroy decent lives. Surely the subject deserve much thoughts but it must lead to very well limited rights of digging into a witnesses soul when hoping to unearth unknown but irrelevant facts.  I mention this here in order to say that my initial enthusiasm when starting to write this original article led me to see also that many in Austria believe that my optimism is not well placed.

After this digression – let us get back to Vice-Chancellor Spindelegger’s statement following the Chancellor: “I will today speak of the budget in a larger presentation – so I cannot go into details now – I beg for your understanding. We are having the figures with the Parliament.”

Then he proceeded saying the basic questions are Ukraine/Russia and Ukraine besides Russia to become the reality.

To a softball question he answered that the big reforms are already in the budget as started in 2012 – Management, Pensions, Health Reforms are on the way even if not seen immediately.

This budget is presented today also to the EU that is looking very carefully at it – the deficits – we will zero them by 2016 and will be very well bellow the EU mark of 3% of the GDP for now.

There was no second question – so I decided I will ask one – but the lady that handled the event seemed to be happy to end it there.

What I had prepared was to the point- but not on the list as released to papers ahead of the event. I would have wanted to ask about where in the budget appear investment in the Energy Sector that ought to be intended to free Austria and the EU of the Russian gas umbilical cord. There is nothing hinting to it in the budget lines and I did pick up in rivate with the Finance Minister and former Foreign Minister on this at the April 23rd event. But I guess my question will wait – and I know the Minister knows that the question will come up.


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