By Michael Shields
VIENNA Tue Feb 25, 2014 7:24am EST
VIENNA Feb 25 (Reuters) - The heads of Austria's two ruling parties on Tuesday backed the idea of letting a commission of experts look into the 2009 emergency nationalisation of lender Hypo Alpe Adria, a step that could head off a parliamentary investigation of the deal.
The takeover of Hypo from Bavarian state bank BayernLB and other owners staved off a collapse that would have sent shock waves across the region a year after Wall Street bank Lehman Brothers went down.
But Hypo's mounting costs have made it a huge headache for the ruling Social Democrats and conservative People's Party. Taxpayers have provided 4.8 billion euros ($6.6 billion) in aid since 2008 and face a bill for up to 4 billion more.
Opposition parties have called for an investigative panel to look into the whole affair, which the coalition partners which have been in power since 2006 want to avoid.
A proposal by central bank Governor Ewald Nowotny for a "council of wise people" now may offer a compromise solution.
Chancellor Werner Faymann told reporters after a cabinet meeting that such an expert panel could shed light on the rescue and put it in an international context.
"This cannot deflect from who caused this - the FPO in Carinthia," he added, referring to the Freedom Party in Hypo's home province led by the far-right firebrand Joerg Haider before he died in a 2008 car crash.
More than 20 billion euros in Hypo debt guarantees provided by Carinthia fuelled the bank's breakneck expansion at home and in the Balkans that pushed it to the edge of bankruptcy.
Realisation that Carinthia could not honour the guarantees - still worth 12.5 billion - should Hypo go bust was a prime reason Austria had to take over the bank.
TOXIC ASSETS
The FPO says other parties also backed the guarantees and that the federal government let Hypo's woes fester too long.
Faymann and conservative leader Michael Spindelegger, the finance minister, said the focus now had to be on how to wind down Hypo in a way that protects taxpayers as much as possible.
The government is looking at creating a "bad bank" that could absorb toxic assets from Hypo, which would ease its chronic need for fresh capital but also push state debt to around 80 percent of gross domestic product.
But despite warnings from Nowotny and the FMA markets watchdog, the government has not ruled out letting Hypo go bust or asking creditors including holders of Carinthia-backed bonds to help share the costs. ($1 = 0.7285 euros) (Reporting by Michael Shields; Editing by Sophie Hares)
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