The days of Vienna as the financial capital of CEE are numbered – or at least that’s how Andreas Treichl, chairman of Erste Bank, sees it.
It’s bad enough for Austria that New Europe is developing at a very fast speed. “The risks of doing business in Central and Eastern Europe have fallen so much that in 10-15 years from now nobody who wants to invest in the Czech Republic will do it via Austria,” the Erste Bank top manager said in the beyondbrics column of FT (actually, we at WAFT thought it’s already this way. Nobody believes in horrors behind the Iron Curtain anymore).
But, adding insult to injury, fiscal constraints imposed by the Austrian government are making the country lose its regional competitive advantage, Treich said. “In this country we pay the highest bank taxes. Higher than in the UK where you have banks who really screwed up, higher than in the US where you have banks who really screwed up and higher than in Germany where you have banks who really screwed up. We as banks have a very strong interest in the country risk of our country. If Slovakia were AAA-rated I would kiss Austria goodbye,” said Treichl.
It seems we won’t have to wait for long for that historic kiss: sovereign ratings of key regional economies, with the exception of the rebellious Hungary, have closely approached the AAA grade. Slovenia is currently rated at Aa2 (Moody’s) and AA (S&P, Fitch), which is on the same level as Japan and Kuwait. Slovakia and the Czech Republic are at A1 (Moody’s), and A+ (Fitch), like Israel or China. Poland stands at the A2 level – not bad, either.
So when are you guys trading Vienna for Bratislava?
UPD: Apparently, Treich is not the only one to have put trust in Bratislava. Today, Slovakia raised EUR1.25 billion in a reopening of its 2016 bond, with total bids reaching EUR1.9 billion. According to Bloomberg, the bond "was priced to yield 80 basis points more than the benchmark mid-swap rate". The higher-rated Italy paid a spread of 89 basis points in a recent offering of its 2015 bond. Experts interviewed by Bloomberg say this demonstrates investors consider the Slovak economy structurally strong.
UPD: Apparently, Treich is not the only one to have put trust in Bratislava. Today, Slovakia raised EUR1.25 billion in a reopening of its 2016 bond, with total bids reaching EUR1.9 billion. According to Bloomberg, the bond "was priced to yield 80 basis points more than the benchmark mid-swap rate". The higher-rated Italy paid a spread of 89 basis points in a recent offering of its 2015 bond. Experts interviewed by Bloomberg say this demonstrates investors consider the Slovak economy structurally strong.
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