Austria is considering setting up what they call as ‘bad bank’ in order to aid the private sector banks in the country including Hypo Alpe and Kommunalkredit and other nationalized banks.

Hannes Androsch, the former Finance Minister, said that the country needs to set up bad bank to deal with the toxic assets from the private sector banks. His comments have added to the pressure on the present Finance Minister Maria Fekter.

Androsch said that it was important to take a crucial action now. Presently, he is heading an agency in Austria that provides the state aid to banks. The move to create a bad bank that will be owned by a majority of private investors is also backed by the Social Democrat.

Fekter is not in favor of creating a bad bank because according to him it would disturb the plans of generating a budget surplus by 2017. However, Androsch suggests that it will help in raising the Austria’s state debt to GDP ratio by up to 5 percentage points.

“This is an intelligent solution that avoids (boosting state debt) and still provides more time to wind things up with the goal of minimising losses in the interest of taxpayers”, said Androsch. Banks are also exhibiting little interest in setting up of a bad bank.