When the late Joerg Haider, the hard-right populist governor of the southern Austrian state of Carinthia, sold most of his government's stake in Hypo Group Alpe Adria in 2007, he said, beaming: "Ladies and Gentlemen, Carinthia is rich."

BayernLB, which like many other German landesbanken appears to have never met a toxic asset it didn't like, had just paid 1.65 billion euros for a 50 percent stake in Hypo. Around half of that went into Haider's government's coffers.

True to his pork-barrel politics, Haider used the funds to, among other things, subsidise Carinthian teenagers' driving licence fees, scrap kindergarten fees, and pay out cash to Carinthian families to "offset inflation" in 2008, conveniently timed shortly before an election.

This worked to cement Haider's image as the generous leader looking after the man on the street. But since his death in a car crash last year, it shows that the basis of this policy was not sustainable. Hypo is now in urgent need of another year-end emergency capital injection of more than 1 billion euros, after it went cap in hand to the Austrian government and BayernLB for 1.6 billion euros last year already.

Hypo's breakneck expansion in the former Yugoslavia is the main reason for its continued losses this year. Haider and his confidante, ex-CEO Wolfgang Kulterer, started and presided over this expansion, which let Hypo's balance sheet balloon to more than four times what it was in 2002. (This is the same Kulterer who pleaded guilty last year of false accounting during his time as Hypo CEO.)

But Haider's heirs in Carinthia, which still owns 12 percent of the bank, refuse to tap into the proceeds from the Hypo sale to help BayernLB prop up the bank's balance sheet. They call for the Austrian federal government to step in.

"You can't portray Hypo as the bad guy and pretend all other banks losing money in eastern Europe were just 'unlucky,'" said Gerhard Doerfler, Haider's successor as governor of Carinthia. "Hypo must not be treated worse just because it's not based in Vienna." (The big Austrian players in eastern Europe will all remain profitable this year and either won't come for a second helping from the government's banking package or didn't tap it in the first place.)

Austria's finance ministry is so far holding its course and says recapitalising the bank is first and foremost an issue for the owners. They, including Carinthia, will meet on Dec. 10. Financial watchdog FMA has told the bank they need to approve a capital injection then or face sanctions. Carinthians will know then how much more wealth the government will be able to spread.

Breaking into the summer holiday lull, Austrian politics has gotten into a lather over a far-right populist’s call for a referendum on whether a mainly German-speaking region of northern Italy should rejoin Austria.

No matter how far-fetched, his proposal raised a hue and cry by challenging the taboo of old unreconstructed nationalism in a country restlessly determined to live down its Nazi past.

South Tyrol - Alto Adige in Italian - is an autonomous, Alpine province of Italy bordering Austria. It was annexed by Italy from defeated Austria-Hungary at the end of World War One.

Italy granted increasing self-government to South Tyrol in the decades after World War Two, defusing separatist unrest by Austro-German speakers. It is now among Italy’s richest regions, with an open border to Austria thanks to EU integration.

But Martin Graf, a rightist deputy speaker of Austria’s parliament, declared on Sunday that South Tyrol was actually “part of overall Tyrol”, and only “currently” within Italy.

The universal right of self-determination should apply for all “the German people” in Europe - just as those in old Communist East Germany got their wish to merge into one Germany at the end of the Cold War in 1990. “It’s time to ask the people if there should be one Tyrol,” Graf said.

Graf owes his parliamentary post due to the fact that his far-right Freedom Party replaced the Greens as Austria’s No. 3 party in last year’s parliamentary election.

Some Freedom members have called into question an Austrian law that prohibits neo-Nazi activities. Graf has links to a rightist fraternity, Olympia, that nurses old German nationalist causes and has acted as a platform for Holocaust deniers.

So his South Tyrol remarks were unsettling and drew swift fire from mainstream conservative and centre-left politicians protective of Austria’s delicate democratic reputation.

Some pointed out what they deemed the absurdity and danger of redrawing borders or re-championing national differences in a 21st century European Union that has largely done away with frontier barriers in a spirit of common peace and prosperity.

“(Graf) should avoid such ill-considered and unrealistic statements,” said Guenther Platter, conservative People’s Party governor of Austria’s (North) Tyrol province. “Borders have long since fallen and we live today in the heart of a common Europe. Cooperation between (the two Tyrols) is better than ever.”

Austrian Foreign Minister Michael Spindelegger said Graf’s “radical, unrealistic” comments were at odds with good neighbourly relations with Italy and invited misunderstanding.

Social Democratic party general secretary Laura Rudas accused Graf of “political pyromania”.

A defiant Graf retorted: “None of my attackers are in the position to explain why there should be a self-determination right for Tibetans and Kurds, but it is still being withheld from South Tyroleans after 90 years.”

The solid front of criticism was briefly punctured by a statement of support for Graf from the South Tyrol Freedom faction in the provincial assembly in Bolzano (Bozen in German).

Unconvinced, Austrian media sought out the ethnically German governor of South Tyrol, Luis Durnwalder. He said he was convinced that if a vote were held tomorrow, most South Tyroleans would choose to stay as they are now within Italy.

 ”If parties had six months to campaign on this, you might see a small majority for ‘Anschluss’ with Austria,” he told Austrian state television, using the discredited word for Austria’s enthusiastic accession to Nazi Germany in 1938.

“But it wouldn’t be realistic. Italy would never consent. Violence or terror naturally would be no option. And, given existing treaties, we would never get a majority (for rejoining Austria) in the United Nations.”

Austrian Chancellor Werner Faymann said he would try again to have parliament dismiss the rightist from the speaker job over what he called behaviour damaging to Austrian interests.

But Finance Minister Josef Proell said that while Graf’s remarks were “totally unacceptable and scurrilous”, his conservatives would not contribute votes crucial for a two-thirds majority needed to topple Graf.

He said it would be wrong to turn Graf into “a martyr via parliamentary manoeuvre” and he should resign himself.

Graf ruled that out, saying he could not be punished for exercising his right to free speech.

(Photo: Martin Graf drinks beer during a Fraternity Group meeting in Innsbruck June 20, 2009.  REUTERS/Dominic Ebenbichler)

The Austrian government debt agency’s two-year old foray into subprime investments has turned into a political hot potato and sparked an increasingly heated debate between the Social Democrats and conservatives, caught in an uneasy but coalition government without viable alternative.

Austria’s audit court last week revealed that the agency, which in its staid day job issues government bonds and makes sure state coffers are full when they need to be, started to moonlight on money markets in 2002 to earn a little extra money on the side.

Its cash position ballooned from an average 4.5 billion euros in 2002 to a peak of 26.8 billion euros in October 2007. This level “was not only determined by economic necessities, but was also meant to generate additional revenues,” the audit court said in its report.

Sure enough, as much as 10.8 billion euros went into asset-backed commercial paper (ABCP), a class of structured investments that became disreputable when the subprime crisis broke out in 2007. Luckily, the debt agency got away only slightly bruised, with up to 380 million euros in possible losses from those investments.

Even though the loss looks manageable (it equals 0.13 percent of Austria’s GDP), and no rules seem to have broken, two former and the current finance minister – all conservatives – as well as the agency itself find itself at the centre of a debate seeking someone to blame.

The conservatives were caught slightly wrong-footed. Still basking in election successes based on voters’ perception that they, rather than the Social Democrats, were the safe pair of hands to steer the country through the economic crisis, they suddenly faced charges of gambling away taxpayers’ money.

Karl-Heinz Grasser, under whose reign as finance minister the agency’s side business started, and whose life after politics mainly consisted of modelling and launching an ill-fated joint venture with coffee-roasting heir and banker Julius Meinl, said the losses didn’t happen under him – dodging the question why the side business was started in the first place.

His successor Wilhelm Molterer – one of the possible Austrian candidates for European Commissioner – said he stopped the investment when the losses occurred – leaving unanswered why he presided over the greatest expansion of the play money purse. And incumbent Josef Proell, who took office only in 2008, had no convincing explanation why he didn’t mention the losses when he answered a parliamentary inquiry about the agency’s investment policy earlier this year.

The opportunity to milk the incident has not been lost on Social Democrat Chancellor Werner Faymann. "If more than 300 million euros in tax money are at risk you cannot pretend this is business as usual, everything’s alright. This is an insult for taxpayers,” he told Austrian radio. Faymann has summoned Proell, central bank governor Ewald Nowotny – who had to cut short his holiday – and the audit court head to discuss the case next Friday before the occasion to present himself as the true guardian of taxpayers’ money goes away.

Photos: 1) Chairman of Meinl Power Management Karl-Heinz Grasser listens during a news conference in Vienna July 1, 2008. REUTERS/Heinz-Peter Bader. 2) Austrian Finance Minister Wilhelm Molterer addresses a news conference in Vienna April 12, 2007. "Holen Sie sich Ihr Geld zurueck" reads "Retrieve your money". REUTERS/Heinz-Peter Bader

Senior figures from across Austria’s political spectrum have condemned the head of the far-right Freedom Party, Heinz-Christian Strache, over his party’s European election campaign directed against Israel and Turkey.

In an advertisement in the newspaper Kronen Zeitung, Freedom opposes the accession of Turkey and Israel to the European Union. Although Turkey is in EU accession talks, Israel is not.

Heinz-Christian Strache prepares for a TV discussion in Vienna, Sept. 17, 2008. REUTERS/Heinz-Peter Bader (AUSTRIA)

“What is the most distasteful and despicable is the style,” says Ernst Strasser, the conservatives’ candidate in next month’s elections for the European Parliament, referring to Strache’s campaign. “This style is abusive. He vilifies other religions and ethnicities.”

According to Chancellor Werner Faymann, Strache is “a hate monger, a disgrace”.

“It makes absolutely no sense for Israel to be mentioned. Israel is not a candidate for accession. There isn’t even an accession process. The only reason to mention Israel is to serve anti-Semitic prejudices. It is disgraceful.”

Strache, who denies he is preaching hatred, accuses Faymann of being a “rabble-rouser” and abusing his position as chancellor.

The dispute indicates more than just political opportunism in the run-up to the poll, although that is obviously playing a part.

Freedom, which polled 18 percent in September’s national election, has become a hard-right party since former dental technician Strache took the helm in 2005. It has also focused on religion. A recent rally where Strache waved a crucifix drew condemnation from politicians and religious leaders. Another campaign slogan, “The West in Christian hands”, was not well received, either.

The hard-right rhetoric, an eye-catching campaign aimed at the youth vote and dissatisfaction with the centre parties, appears to have given Freedom a boost. However, Strache’s line has at times been a bonus for the more moderate Alliance for Austria’s Future, the party of late far-right leader Joerg Haider, who used to lead Freedom.

A controversial European Union election campaign poster of Austrian far right Freedom party in Vienna May 11, 2009. Posterreads ” The West in Christian hands - Judgement day”. REUTERS/Dominic Ebenbichler

The parties are often lumped together as “Austria’s far right”, such as when they polled almost a third of the vote last year. Together they could make a serious political force — they outpolled the conservatives and were just behind the Social Democrats in September. the Alliance has tried to use the dispute to portray itself as the more mature. “(Freedom) is using the only way to mobilise votes it has,” Alliance’s EU candidate Ewald Stadler says.

Freedom’s popularity has nevertheless affected mainstream policy, with centre parties loath to open up a flank to the far right. The conservatives and Social Democrats have spoken out against the EU asylum directive and oppose lifting labour market restrictions to the eight ex-communist countries that joined the EU in 2004.

Could an Austrian oil and gas group with more than 41,000 employees, some 25.5 billion euros turnover and a presence in more than 20 countries actually be a secret front for Russian gas giants, extending their tentacles of power into Europe?

It could be if you believe Zsolt Hernadi, the chairman of Hungarian rival MOL, not to mention some scary headlines about Russian gas in the British press.

Earlier this week Austria’s OMV sold a 21 percent stake it held in MOL to Russian oil group Surgutneftegaz for 1.4 billion euros ($1.9 billion), double the amount the stake was worth as stock. The stake was originally bought from … a Russian family Almost half of the stake was originally bought from … a Russian family.

“Suspicion arises … that because the Russian investor bought this stake at exactly the (initial purchase) price, it (OMV) was just a front,” Hernadi told a Hungarian parliament committee.

The sale came just days after OMV’s chief executive said he did not plan to let go of the stake this year, fuelling speculation there was an ulterior motive behind the swift deal, finalised in the middle of the night on Sunday.

“Sometimes the markets offer opportunities you have to take,” OMV’s spokesman said. The sale also came after a miserable takeover attempt by OMV, which was repelled by the Hungarian group at every twist and turn.

The European Commission warned on the deal last year, saying it could create big competition problems and lead to higher prices. OMV eventually withdrew its $23 billion bid. Unofficial talk among EU officials has also highlighted worries about OMV’s Russian connections.

But doesn’t selling the stake just make good business sense? And if OMV is a Russian lapdog, why is it spearheading a consortium for the Nabucco pipeline, a project aimed at diversifying European supplies of gas away from Russia?

Well, Russia’s hold on energy supplies is an ever-sensitive issue. A spat with Ukraine over payments escalated into a two-week supply shutdown earlier this year, hitting parts of Europe and underlining reliance on Russian gas.

So Russia and OMV-bashing gets some sympathetic ears, even if MOL’s Hernadi said in 2007 that his company would be better off in the hands of the Russian firms than OMV.

Russia, for its part, may not have been keen to see a consumer of its oil fall into hostile hands.

Surgut, believed to have around $19 billion sitting on its balance sheet as of September 2008, could probably afford to pay a healthy premium. Investors, who have begged the company for years to put its cash in play, rewarded it with a rise in its stock price.

OMV has been doing business with Russia’s Gazprom since 1968, describing the oil giant as a “reliable partner” even during the last gas row.

It has to toe a fine line. While it relies heavily on Russia for some of its big contracts and for developing a major gas hub, it is also keen to push the Nabucco project, emphasising all the while that the plans are not politicised and certainly not anti-Russian.

Nabucco’s managing director told me late last year that the consortium does not worry about where gas comes from, as long as the sources are diverse - Iran, even Russia, are possibilities, it is about pragmatism, not politics, he said.

Most analysts think of the MOL stake sale as purely pragmatic too, ignoring the politically-charged comments from Budapest. “The price is favourable as OMV has achieved close to a 100 percent premium to MOL’s share price at the close on Friday,” UBS analysts wrote in a research note. “The deal eases liquidity worries at OMV.”

But whether OMV is just pragmatic or secretly a Russian puppet, this is unlikely to be the last time it gets drawn into the politics of energy.

Some 25,000 people attended his funeral, countless books have been written about him, a bridge was named in his honour and now the spectre of Austrian far-right leader Joerg Haider is dominating a regional election in Austria.

“A campaign with the tragically deceased Haider”; “A dead man is spearheading us”; “And above all, the spectre of Joerg Haider” read newspaper headlines.

(Photo: Joerg Haider, May 10, 2005 /Miro Kuzmanovic)

Both of Austria’s far-right parties are staking their claim to Haider’s legacy in an election in the Alpine Province of Carinthia where he was governor for more than a decade.

“Carinthia is going HIS way,” proclaim the posters of Haider’s former Freedom Party. Freedom says Haider achieved his greatest successes when heading the party.

“We will look after your Carinthia,” echo the posters of Alliance for Austria’s Future, the splinter party that Haider set up in 2005 after internal disputes within Freedom.

Both parties, which mopped up a third of the vote between them in Austria’s recent parliamentary election, recognise the mileage still to be had out of Haider’s success.

The populist leader, who led the right into a coalition government from 2000-2006, was one of Austria’s rare internationally recognised public figures.

Austria went into mourning when Haider died four months ago in a high-speed car crash, and leaders of all political colours turned up for his funeral.

(Photo:A photo of Joerg Haider stands in the St. Stephens Cathedral during a memorial service in Vienna, Oct 15, 2008/Leonhard Foeger)

“People have the impression that, through Haider, they became a force to be reckoned with in the world,” Klaus Ottomeyer, professor of psychology at the university of Klagenfurt, told Reuters.

Ottomeyer, who will publish a book in March about the making of the Haider myth, said the Carinthians have glorified their former governor as benevolent father figure, Robin Hood or even a patron saint.

This may baffle outsiders, who are mostly familiar with Haider’s blunt anti-immigrant rhetoric and verbal gaffes. His notoriety peaked in the 1990s when he cited “the proper labour policies” of Adolf Hitler’s Third Reich and referred to concentration camps as “penal camps” in a parliamentary debate.

But for all the far-right’s bickering over the claim to Haider’s legacy, it may be time to move on and find a new hero.

Political researcher Guenther Ogris said the Haider cult was beginning to fade, and Carinthians were turning their focus elsewhere.

“At the end of the day, the economic crisis is now the main thing on people’s minds — that is emotionally more important than the dead governor.”

    It looked like a perfect picture story, with all the right elements — the Nile, a fountain, 2,000 large inflatable bananas heaped in the shape of a pyramid, all set in a framework of Austrian conceptual art theory. The idea was that when the fountain began to shoot water into the air the bundles of bananas piled up from the base would explode and the bananas would disperse, floating gently down the Nile.

    ”The numerous, individual elements of the floating bananas are not only supposed to change the river’s colour but also, while drifting down the river are expected to develop distinctive dynamics, individually and through mutual interplay,” read the blurb from the Austrian Cultural Forum/Cairo (acf/c), which dreamt up and organised the event.

    ”For a few hours ‘Going Bananas’ draws special attention to the daily metamorphosis as the core of our lives, intentionally posing the pivotal questions of life: ‘Why?’ The acf/c’s motto for this year — ‘Everything is in a state of flux’ — thus culminates in its grand conclusion,” the Austrians added.

    The idea, they said, was that boats would follow the bananas down river to the Nile Barrage,  monitoring both their movements and the reactions of the local people. At the barrage they would collect all the bananas, which were about 1.60 metres long, and give them to children’s homes. At the launch ceremony on the terrace of the Grand Hyatt hotel, overlooking the Nile, cultural forum director Clemens Mantl hinted at the bureaucratic hoops he had to jump through to set up the event. The governor of Cairo had agreed to sponsor it and the river police were out on the Nile in force to make sure it all went smoothly. Mantl called the project ‘a masterpiece of bureaucracy’.

    So there we were, sipping our soft drinks in the stiff northerly breeze and awaiting the explosion of bananas. About 10 minutes behind schedule the fountain started up, sending a jet of water maybe 100 feet into the air. But the breeze was so strong that it blew the plume far off to the south and the water fell back into the Nile, leaving the balloons immobile. In the meantime the wind was blowing the odd banana off the basin of the fountain and the police boats were zipping around to pick them up and put them back in the pyramid. But the plume of water stubbornly continued to fall far away from the bananas. Mantl said all should be well when the fountain people turned on spouts around the base of the basin. The spouts did start to spurt water but it was a feeble trickle and the bananas firmly stayed put.

    By this time the spectators had began to drift away, and I went with them. The Austrians said later that they finally dispersed the bananas by hand and boats picked them up well before they reached the barrage. “Obviously it didn’t go as planned, but when all the boats went out to pick them up, the interaction with the people was very nice,” said one of the Austrians.

He may have died in a car crash last month whilst drunk, but Austrian rightist Joerg Haider is not gone.

Haider, who was enmeshed in nearly every part of Austrian political life, is now being hailed for his efforts to help two Austrian hostages being held in the Sahara months before his death.

According to a newly-published e-mail, Haider asked the son of Libyan leader Muammar Gaddafi in March for help in freeing Andrea Kloiber and Wolfgang Ebner, who disappeared in February while on holiday in Tunisia. They are believed to have been held by al Qaeda’s North African wing.

The hostages were released last week, several months after Haider wrote to his close friend Saif al-Islam Gaddafi. The Austrian Foreign Ministry said Libya only helped in initial negotiations but not the eventual release.

Whether Haider’s contribution was decisive or not, the news has only added to his image as a “hero of the people”.

The daily Oesterreich, which printed extracts from the e-mail, has already published a DVD of Haider’s life and romantic images of him dressed in traditional Austrian costume, looking out over the mountains of Carinthia, where he was provincial governor. Some 25,000 people attended his memorial service in Klagenfurt last month.

Many did not seem to think his divisive anti-immigrant rhetoric was much of an issue and were fiercely loyal towards Haider, one of Austria’s few internationally recognised figures.

Even Chancellor Alfred Gusenbauer, a Social Democrat who openly opposed many of Haider’s views, has admitted that his opponent had enormous ability to reach out to people.

 Now that Austrian far-right leader Joerg Haider is dead, the German, British and U.S. press are eagerly spilling the beans on his “secret double life”, saying that he had a male lover.

 Just when you thought his story couldn’t get more dramatic — he died on Oct. 11 in a high-speed car crash while drunk — we now learn that Haider, who was married with two daughters, was not only a populist who polarised the public with remarks about Nazism and immigrants, but might have been gay too.

 But wait a minute. Speculation about Haider’s sexuality is not at all new, at least not in Austria. Here, his death has not really led to breathless speculation about his private life as it has elsewhere.

 Why not?

 Questions about Haider’s sexuality had been asked in Austria since the 1990s, when the charismatic, folksy leader surrounded himself with a group of young and successful male followers, earning his entourage the nickname “The Boys Posse”.

 Far-right parties have never been especially women-friendly anyway.  Haider never said he was gay, nor denied it and Austrians’ reaction to this is interesting. They don’t really care. Whether true or not, this speculation was largely politely ignored or deemed not newsworthy.

 Overall the Austrian press abides by the unwritten rule that private lives should only be written about when made an issue by the politician themselves, or has an effect on public policy.

 ”If Haider was gay or bi or whatever, so what?” writes Marco Schreuder, an openly gay member of the Vienna regional assembly. ”In our society, diverse sexual tendencies should be an accepted as a fact by enlightened, 21st century people…Drinkdriving is life-threatening. But visiting a gay bar doesn’t
threaten your own life or anyone else’s”.

 Haider’s political parties — far-right Freedom before 2005 and later the splinter group Alliance for Austria’s Future, did not pursue anti-gay policies.

 Question marks over Haider’s sexuality were not a political issue and are not new. Should we care nevertheless?