Debunking $1.4 Trillion Europe Debt Myth in Post-Heta Age
Austria is the first country to wind down a bank, Heta Asset Resolution AG, under the European Union’s new Bank Recovery and Resolution Directive after changing laws last year to allow it to write down subordinated debt of its failed predecessor, Hypo Alpe-Adria-Bank International AG.
Photographer: Barbara Gindl/EPAAustria’s decision to burn bondholders of a failed state bank may mean almost 1.3 trillion euros ($1.4 trillion) of euro-area debt once deemed risk-free now comes with a hazard warning.
Austria is the first country to wind down a bank, Heta Asset Resolution AG, under the European Union’s new Bank Recovery and Resolution Directive after changing laws last year to allow it to write down subordinated debt of its failed predecessor, Hypo Alpe-Adria-Bank International AG. The government is also refusing to stand behind guarantees by the province of Carinthia on Heta’s senior debt. The moves are putting bondholders at risk of losses.