-7.1 C
Munich
Wednesday, February 8, 2023

The national crisis of 1985/86: When greed and political influence led to disaster

Must read

- Advertisement -

“I was stunned,” said Ferdinand Lacina, looking back on the nationalization crisis that began in 1985 and was to shake nationalized Austrian industry for years to come. At the time, Lacina was finance minister in an SPÖ-led federal government and in November dismissed the entire board of VÖEST Alpine, above all the dazzling general director Heribert Apfalter.

In the 1970s and 1980s, under Federal Chancellor Bruno Kreisky, companies that had been nationalized after the Second World War were not least a means of employment policy. Firms had to support the goal of low unemployment by filling more jobs there than necessary. “Politicians had their fingers in everything. The state as the owner or its proponents believed they could get involved. Every little party secretary from any region cried out when an election was just around the corner,” said spokesman Wilhelm, who has since died Nitterl once about this time. Management positions were distributed according to the government constellation, especially in the old red-black proportional representation system.

problems for industry

- Advertisement -

At a time when the entire raw materials industry in Europe was coming under pressure, these little political games at the expense of business laws were like poison for companies like VÖEST or Amag. The Executive Board had little room for manoeuvre, the works councils were at least as powerful, the VÖEST section was (and still is) a relevant factor in Austrian social democracy. The companies wrote losses that were gigantic by the standards of the time and exceeded the pouvoir of individual banks.

The exits sought by management were either illegal or highly speculative or both. When selling anti-aircraft guns from Maschinenfabrik Noricum in Liezen (Gun Howitzer Noricum), which belongs to VÖEST, in the Middle East, war material law was violated with the backing of the Federal Government (“… do it, but do it under the Tuchent”), the following lawsuits against prominent managers and Politicians were led up until the 1990s.

- Advertisement -

The criminal entanglements were oddly Austrian and in any case without lasting success. At that time no chats were deleted, but important documents were burned on the barbecue grill.

Speculated with oil, part 1

The intertrading scandal that broke in November 1985 was the final straw. After the fall of the Shah of Persia, Intertrading, the trading house of VÖEST, did just as good oil deals with the Khomeini regime as with Nigeria. Management became hungry for more and started risky short sales, selling products in the future that you don’t even have yet. In 1985 there was speculation that oil prices would fall, but in fact the prices rose and brought horrendous losses to Intertrading. The then Federal Chancellor, Fred Sinowatz, initially tried to whitewash the scandal and spoke of a major setback. When it became known that the losses at VÖEST had already amounted to almost six billion schillings (414 million euros), the roof had long been on fire. The now deceased Intertrading boss was sentenced to seven years in prison.

Prior to this, Chemie Linz, the successor to the nitrogen works, had taken a liking to the speculators of Intertrading and had begun to speculate with crude oil.

Speculated with oil, part 2

“Back then, 90 billion schillings were traded. You have to be naïve to believe that the government knew nothing about the huge speculation,” recalled the long-time sales manager and deputy in 2011. Works council chairman Dietger Schön in the OÖ Nachrichten. Merx, the trading subsidiary of Chemie Linz, also fell flat on its face with its speculations. This cost the former Apfalter general secretary Richard Kirchweger, who had been appointed VÖEST boss by finance minister Lacina at the suggestion of works council chief Franz Ruhaltinger, his job back in February 1986.

reason for a turning point

The nationalization crisis clearly showed how political influence on a company on the one hand and uncontrolled speculation on the other can lead an industry to the brink of collapse. But it was also an occasion for a turning point. Political influence was reduced under the Social Democrat Peter Strahammer. VÖEST Alpine became three groups. Böhler and Industrieanlagenbau (VAI) were outsourced and jobs were lost. VAI became part of VA Tech, which in turn was sold to Siemens and split up. The former VAI now operates under Primetals with Japanese owners at the old location next to voestalpine. The stainless steel specialist Böhler-Uddeholm was bought back in 2007 for EUR 1.8 billion and is now a division of voestalpine.

Strahammer began to privatize the Linz steel group, listed it on the stock exchange and made it a little more independent. Full privatization threatened to fail again due to political influence. In 2003, shortly before the state elections, word got out that voestalpine was to be sold to Magna. Finance minister at the time was Karl-Heinz Grasser, a former Magna employee.

The sale of voestalpine was then prevented. An Upper Austria consortium was also formed with the support of the OÖ Nachrichten, which also secured a large number of shares and voting rights for the employees and protected the group from takeovers.

voestalpine left Intertrading long ago. It is now owned by former managers and other investors.

Part 8, January 4th: The dot-com bubble in 2000: A loss for many small investors

Left

Part 1: How tulips became an object of speculation

In the years 1634 to 1638 in Holland, three supposedly harmless tulip bulbs were worth as much as a town house. This was followed by a speculative crisis that was exemplary of the mechanisms at work in numerous economic crises in history.

Part 2: How speculators lost money on the railroad

It is considered the first global economic crisis – and yet it was one whose effects were limited to North America and Great Britain: the crisis of 1857. The ingredients for this were a court decision in the USA and the end of the Crimean War.

Part 3: “Black Friday” on the stock exchange

In the morning hours of May 9, 1873, the dam on the Vienna Stock Exchange broke. The bankruptcy of a broker triggered an unprecedented wave of bankruptcies: 120 banks had to file for bankruptcy – before noon.

Part 4: When a loaf of bread cost more than a thousand kronor

With the end of the First World War, around 1918, a dramatic economic crisis began. Every year the prices doubled, because of “hyperinflation” people lit cigars with worthless banknotes.

Part 5: The Great Depression of the 1930s

In the 1930s, the global economy slipped into a deep crisis, which it only fully recovered from after the Second World War.

Part 6: The oil price shock of 1973

After the Yom Kippur War in October 1973, the price of oil rose massively and plunged western industrialized countries into a deep crisis.

Part 7: The nationalization crisis of 1985/86

When industrial companies had to serve as a means of employment policy and steel traders speculated in oil.

Part 8: Dot-com bubble 2000

Released on January 4th

Part 9: The real estate and financial crisis of 2007-2009

Released on January 5th

Part 10: The Euro Sovereign Debt Crisis 2010-2012

Released on January 7th

Part 11: What have we learned from the crises?

Released on January 9th

more from economy

Four percent unemployed in Upper Austria: Only Salzburg is better

“Turn every stone”: Sports retailer XXL withdraws from Austria

Lowest unemployment rate since 2008

XXXLutz has taken over 92.7 percent of Home24 shares

author
Dietmar Mascher

Deputy Editor-in-Chief, Head of Economics

d.mascher@nachrichten.at

follow author

Dietmar MascherDietmar Mascher

My themes

For your saved topics

found new items.

loads




info By clicking on the icon you add the keyword to your topics.

info
Click on the icon to open your “My Topics” page. They have of 15 tags saved and would have to remove tags.

info By clicking on the icon you remove the keyword from your topics.

Add the theme to your themes.

Source: Nachrichten

- Advertisement -
spot_img

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest article