VIENNA, April 30 (Reuters) - Austria has made some progress in talks with the European Commission over state aid to nationalised lender Hypo Alpe Adria, but the bank needs to speed up its privatisation efforts, Finance Minister Maria Fekter said on Tuesday.
European Competition Commissioner Joaquin Almunia warned last month that the bank, rescued by the Austrian state in 2009 after coming close to collapse, now faced closure for failing to make a convincing case for restructuring.
Hypo is selling off units in Austria, Italy and southeastern Europe and has pleaded for more time to divest assets at reasonable prices.
Almunia believes the scale of Hypo Alpe Adria's problems and slow progress with the restructuring so far mean it should face a deeper overhaul or even liquidation.
Fekter told reporters before a cabinet meeting that Vienna was in intensive talks with the Commission.
'We have already had interim successes,' she said without elaborating, saying she wanted to coordinate first with Chancellor Werner Faymann to strike a unified government stance.
'Next week we will determine the government position. I assume we will move ahead in a way that protects taxpayers,' she said, adding that Hypo's efforts to sell banking units 'have to be intensified'.
Faymann said after the cabinet meeting that it would help to get 'a few months' more for Hypo to divest businesses given the difficult market environment.
He said Austria was considering seriously whether to create a 'bad bank' to handle toxic bank assets along the German model, something Fekter had vehemently opposed.
The bank says emergency asset sales could trigger a need for more state aid, and a quick shutdown could saddle taxpayers with losses of 5 to 6 billion euros.
Profil magazine has cited internal documents prepared by the central bank that say a quick shutdown could cost taxpayers up to 16 billion euros ($21 billion) by triggering state guarantees. The government, central bank and Hypo decline comment on this.
Austria had to buy Hypo to avoid a collapse with regional implications, but aid to it and other lenders in full or part state ownership have been a drag on state finances.
Having Hypo run aground would be an unwelcome problem ahead of national elections due by the end of September.
($1 = 0.7634 euros)
(Reporting by Michael Shields; Editing by Tom Pfeiffer) Keywords: AUSTRIA FINANCES/HYPO
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