VIENNA (AP) — Top Austrian government and financial officials said Monday that the country's banks were strong enough to handle the fallout of Europe's debt crisis, particularly in Italy and Hungary, where the lenders have several subsidiaries.
The comments were a reaction to ratings agency Standard & Poor's, which on Friday downgraded Austria's AAA credit grade due in part to the broad exposure of its banks in Hungary and Italy.
State Secretary Andreas Schieder told reporters that the officials meeting in Vienna agreed to continue programs to ensure banks have enough capital to withstand the economic downturn in neighboring countries. He did not suggest that the capital be increased as a result of the downgrade, however.
Austria has an "immunization package" for Austrian banks that is part of a broader EU plan to have lenders boost their capital holdings as insurance against unexpected losses. "This path is the right path and will be continued," Schieder said.
Beyond that, he said, full confidence in Austria will be only achieved by arriving at a balanced budget by 2016 or 2017, he said.
While "nothing has changed" with the downgrade, "the focus has been increased" on Austria and the potential financial problems it might face, he said.
Austrian banks and insurance companies have outstanding credits worth about euro40 billion ($51 billion) just in Hungary, which is in a clinch with the EU and the IMF over sorely needed financial aid. They are also strongly active in Italy, which became the focal point of the debt crisis late last year after the government struggled to convince investors it can carry its euro1.9 trillion ($2.42 trillion) in public debt.
Italy was one of nine eurozone countries downgraded Friday, along with France, one of Europe's economic powerhouses, and Spain, which like Italy is struggling with state debt and major borrowing requirements.
Ahead of the meeting, Vice Chancellor Michael Spindelegger sought to downplay concerns over the downgrades. He said Austria's goal had to be to regain top marks from all three rating agencies — Fitch and Moody's continue giving Austria AAA status and see its economic outlook as stable.
He, as well as Chancellor Werner Faymann, Finance Minister Maria Fekter and top officials from the Central Bank, declined to speak to reporters as they left the talks.