When Tempers Flared at Telekom Austria

Austria's debate over how to secure its pension system has opened a wider question: what should the state do with its holding company, Öbag?

Chancellor Christian Stocker has proposed creating a sovereign fund modeled on Scandinavian examples. The plan would invest about half of the profits generated by state-owned companies into pension assets, or roughly €700 million. Stocker presented the idea as a way to prevent the so-called intergenerational contract from meaning that current generations simply live at the expense of future ones.

The proposed sum, however, is small compared with the pension system's needs. Austria is expected to inject €33 billion in tax money into the system this year alone. The proposal therefore offers no quick fix for the funding gap.

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about half of what we earn in profits from our state-owned companies

A different model came from Peter Bosek, chief executive of Erste Group. He proposed a strategic capital increase for Öbag and suggested listing 15% of the company on the Vienna Stock Exchange. Pension and retirement funds could be among the domestic investors buying shares. Bosek's approach would target the second pillar of the pension system, workplace pensions, while requiring Öbag to operate under the same strict rules as a private listed company.

Bosek also gave the proposal a clear industrial-policy dimension. He said Öbag should use the billions raised through the capital increase to regain a majority stake in Telekom Austria, arguing that strategically important infrastructure, including telecommunications networks, belongs in national hands. Mexico's Carlos Slim currently controls about 60% of Telekom Austria through América Móvil. Bosek's idea therefore amounted to a re-nationalization of the company.

The debate comes as Öbag searches for a new chief executive. Edith Hlawati's contract ends on Jan. 31, making the next appointment important not only for personnel reasons but also for the direction of the state holding company. Media coverage focused heavily on the Telekom Austria proposal, although Bosek's broader idea was also intended to strengthen Austria's capital market and reduce pressure on public finances.

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a state fund