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ECOFIN: Austria Min: EU Should Extend Tolerance Of Bank Aid

BRUSSELS -(Dow Jones)- The European Union should extend its tolerance of Austria's extraordinary state support for its banking system, Austrian Finance Minister Josef Proell said Monday.

"It's important that these supports don't run out in a centralized timeframe in 2010," Proell told reporters as he arrived for a meeting of EU finance ministers. He added that this would risk ruining the economic recovery in what will be "the most sensitive year".

Austria gave a support package of EUR100 billion to its banks in the wake of the financial crisis, most of it in the form of loan guarantees. The EU allowed a temporary restriction of its rules on state aid running to the end of 2009.

Austrian banks are among the most heavily exposed to central and eastern Europe, a region in which many countries have seen their economies and their financial systems come under particular pressure in the wake of the crisis.

Proell also said he sees growing support for the idea of an internationally levied tax on financial transactions, citing both EU monetary affairs commissioner Joaquin Almunia and U.K. Prime Minister Gordon Brown.

Brown's attempts to raise the idea at a meeting of the Group of 20 industrialized and developing nations at the weekend, however, received a cold reaction from the U.S. government, whose support for such a scheme would be essential to make it feasible.

-By Geoffrey T. Smith, Dow Jones Newswires; +49 160 743 4090; geoffrey.smith@ dowjones.com

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  11-09-091157ET
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