European Woes

New Austrian Crisis?

Much has been written about the crisis in Greece, there has been problems with the state of the Ukrainian economy and now there has been an Austrian bank collapse. The bank based in Carinthia, Austria needs around 7.6 billion euros. Many will not have heard of Hypo Alpe-Adria-Bank International AG before. In February 2014 the bank collapsed and has had to be helped out by the the tax payer to the tune of around 5 billion euros.

It was wholly owned by the Republic of Austria with a head office in Klagenfurt, Southern Austria. A consortium of bidders has decided to take over the bank including the EBRD, the European Bank of Reconstruction and Development, along with Advent International who will control 80 per-cent of the bank. The bank has had to be bailed out in the past. During 2009 Austria had bought stakes in the bank for a single euro for each stake. It is expected that around 13-19 billion of outstanding loans will never be paid back.

Hypo Alpe-Adria-Bank International has customers in South East Europe and also Ukraine.

Parallels have been made to the 1855 collapse of the bank Creditanstalt that contributed to the Great Depression by causing a chain of bankruptcies in Europe and America. Further details can be found on this news article.

Greek Payback?

Greece is having to repay its soaring debts very soon. The debt situation has meant that Greece is looking to the east to help it out of its economic predicament. In particular it is looking to China and Russia: Prime Minister Alexis Tsipras is to have discussions with President Vladimir Putin at the Kremlin in Moscow. Greece has to pay the International Monetary Fund (IMF) €458m on April 9. Whether it is able to do this and whether it will default remains to be seen. No country has defaulted on its debts yet. There are further payments owed to the IMF: another €200m on May 1 and then €763m on May 12.

2015 may be a critical year for Greece, the euro and international relations and politics if Greece decides to turn its back on the European Union and work with Russia. Details can be found here.


The impact of the unrest in eastern Ukraine has led to many tensions at the local and international scales. There have been significant disruptions in the cities that have been in the middle of the conflict. In addition to the estimated 6000 people killed there are also wider consequences for the region. The Donetsk and Luhansk “People’s Republics” are not performing as well as they could be or indeed were before the conflict started. The ceasefires that have been promised are not holding and have not held for any time leading to great uncertainty and confusion. Russia has, apparently, been backing the rebels and fighting in many areas.

Economically there have been large impacts on the cities and the fall out of the ongoing civil war. The industrial base in the Donetsk and Luhansk regions has been destroyed.

Ukraine itself is still struggling economically and the situation has not improved this year. In February there was a major devaluation of the currency, the hryvnia, as it lost 50% of its value in a month. Russia has helped to ensure that the economic conditions are uncertain: it holds $3 billion in Ukrainian Eurobonds and can demand early repayment if it decides to. It is also demanding payment for oil and gas exports into the disputed eastern areas. See this Bloomberg report for details of the situation.

In Donetsk it is estimated that around half of the 350,000 people employed in 2014 have now lost their jobs and their livelihoods. As a result there is a reduced income tax being paid to the “new state” (Donetsk People’s Republic (DNR)). Other companies are being double taxed by the DNR and Ukraine: this is not sustainable in any way for these companies. The coal industry has lost its trade to Western Europe and Asia: it is left with trading with Russia. It seems that people are not getting their pensions paid, or wages if they are a public sector employee. This further affects the local economies. A further report is found on this link.


The euro could be in for a rough ride this spring. Economic woes in Austria, Greece and Ukraine along with complicated connections between the three (along with Russia’s growing presence and influence in Ukraine) could have a huge impact on the euro and wider Europe. The economy of three areas may ultimately have a wider political impact that could see some fundamental changes to Europe as we know it. Allowing more debts to be put off will not solve some of the underlying structural issues. Hopefully there will not be a repeat of the 1855 Creditanstalt scenario leading to a future great depression.


About mappedit

Geographical practitioner with an interest in climate change, open mapping, sustainability, the transition movement, transport and many other things.
This entry was posted in Economic Crisis, euro, Europe, Greece, Politics, Resources, Trade, Ukraine and tagged , , . Bookmark the permalink.

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