Austria

Austria's banks exert an outsize influence beyond the country's borders. In the 1990s, after the fall of communism, banks based in Vienna expanded eastward and came to dominate finance in Eastern Europe. Today, however, Hungary, Romania and Ukraine--where Austrian banks nearly cornered the market--have sought emergency aid from the International Monetary Fund. Foreign investors are fleeing Eastern Europe, worried that the problems could spread. Credit-rating agencies have warned that Austrian banks are highly exposed if Eastern European borrowers trigger a wave of defaults.

Russia's gas price dispute with Ukraine escalated Tuesday, disrupting deliveries to the European Union in the midst of a bitter cold spell, with a number of countries reporting that gas supplies had been suspended or reduced, and Germany predicting a possible shortage, the International Herald Tribune reported. Bulgaria, Romania, Croatia, Macedonia, Turkey, Greece, the Czech Republic and Austria reported that gas supplies had been suspended or reduced after Gazprom, the Russian gas monopoly, reduced gas shipments through Ukraine.

Austrian private bank Bank Medici was placed under state supervision on Friday amid bigger exposure to the Bernard Madoff scandal than previously disclosed. A source close to the matter told Reuters on Friday the bank holds over $3 billion in funds exposed to what could be Wall Street's biggest fraud. It is still not clear how much cash has been lost. Austria appointed a supervisor to the bank, financial regulator FMA said, in the first known case where a government has stepped in to run a bank caught in the alleged $50 billion Madoff fraud.

The European Commission plans to propose that “fundamentally sound” banks can repay government aid at rates as low as 7 percent, laying the groundwork for approval of plans by France and Austria to recapitalize lenders, Bloomberg reported. European governments are seeking to shore up the financial system after the credit crisis froze inter-bank lending over the past two months. European Union finance ministers asked European Competition Commissioner Neelie Kroes to impose less stringent repayment conditions on fundamentally sound banks.