Russian sanctions may hit Austrian economy

The Local
The Local - [email protected] • 29 Jul, 2014 Updated Tue 29 Jul 2014 20:05 CEST
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The head of Austria's Chamber of Commerce said Tuesday that proposed sanctions against Russia in the wake of its ongoing support for separatists in Ukraine's civil war would likely be counterproductive, but would be backed by Austrian businesses.

According to Reuters, Christoph Leitl, who as head of the Chamber of Commerce is a committed opponent of tough sanctions against Moscow, could not assess what the economic impact of increased sanctions would be.

"As (sanctions) are now, we expect exports to fall around 20 percent this year versus last year and in tourism the collapse in Russian guests is already very strikingly tangible," he said in a telephone interview with Reuters.

Leitl confirmed that Austrian businesses would support whatever measures are mandated by the UN, EU or its own legislators.  "I am still against sanctions, but if the politicians decide otherwise then of course one is bound to this," he said.

In related news, Bloomberg reported on Tuesday that Russian sanctions would likely have the greatest impact on Austrian banks, which are more exposed than other European banks.  While Sweden, France and Italy also have significant potential losses, Austria's Raiffeisen Bank International AG is one that is particularly vulnerable, according to analysts from Goldman Sachs Group Inc.

The ruble is continuing to weaken and bonds declined as Russia canceled its second debt auction in a row, forcing borrowing costs higher.

The IMF's report suggests that relative to bank asset size, Austrian banks are the most exposed.  Austria's banking sector has already experienced significant losses in recent years, with Erste Bank expecting €1.4 billion losses in 2014, and Unicredit writing off €1.6 billion in losses in 2013.

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