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Document Type

Case Study

Abstract

Following the adoption of a joint framework by euro area countries in response to the intensifying financial crisis in October 2008, Austria enacted a package of measures including the Financial Market Stability Act (Finanzmarktstabilitätsgesetz, or FinStaG). In addition to permitting nationalization under certain circumstances, FinStaG allowed the Austrian government to use six specific measures to recapitalize credit institutions operating in Austria and Austrian insurance companies. According to FinStaG, €15 billion ($22 billion) could be used for this purpose, though this amount was later increased. Eight institutions received support through FinStaG, and the government granted capital and liquidity support totaling €21 billion. It appears that recapitalization measures can still be instituted under FinStaG, but the blanket approval by the European Commission expired on June 30, 2011, at which point any measures would have to be considered on a case-by-case basis.

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