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Reuters/Vienna
Austria said that it planned stricter controls over regional finances after a Salzburg civil servant gambled hundreds of millions of euros of taxpayers’ money on high-risk derivatives.
Finance Minister Maria Fekter said yesterday that she was preparing new national legislation to impose stricter conditions on how regional administrations could use money borrowed at preferential rates from the Federal Financing Agency (BFA).
Salzburg officials said last week they had sacked a finance director after determining she used doctored documents and false signatures to hide a trail of losses from deals that started more than a decade ago, causing a book loss of 340mn euros ($439mn).
The incident has sparked calls for fresh elections in Salzburg state and for regional financing rules to be reformed. Austrian states have 8.2bn euros of debt, or 8.1% of the country’s public debt.
“It can’t go on that one keeps getting cheap money from the BFA and then starts gambling with it,” Fekter told journalists, adding that the states could save 150mn euros per year by using the BFA for all their financing needs.
Fekter said draft legislation would soon be ready and could be enacted early next year.
The national FMA markets watchdog said it would welcome a more centralised approach to regional financing even though it saw no risk at this stage to overall financial stability.
A document presented to ministers by Fekter yesterday and seen by Reuters proposes anchoring rules that govern the terms of borrowing from the BFA in Austria’s federal financing law, which sets strict conditions for the use of taxpayers’ money.
Foreign currency speculation and trading in derivatives without having underlying assets would be banned, and valuation of assets on the books would have to be updated every year.
Fekter said: “We will make the standards compulsory for everyone. How the states then implement the standards will of course remain a matter of regional autonomy.”
The head of the BFA, Martha Oberndorfer, said she would welcome stricter governance and the BFA would give a more detailed statement later.
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