The intersection between international politics and international finance was thrown into relief at the beginning of February, as ABN AMRO found itself getting flak for its dealings with Austria's far-right Freedom Party, led by Joerg Haider.

Haider's party has been accused of xenophobia and discriminatory policies, but has nonetheless become part of Austria's new ruling coalition government.

The Dutch bank was forced to freeze plans to structure and underwrite a mortgage-backed securitization

which would have packaged cashflows from social housing owned by the Austrian province of Carinthia, where Haider is governor.

There were suggestions in Austria and the Netherlands that the Freedom Party would use the proceeds of the deal to fund a child benefit scheme that would only be available to Austrian passport holders. Most immigrants to Austria are not issued with Austrian passports and so critics suggested that the scheme would be discriminatory.

"It is our conviction that there is no link between our proposal and the [child benefit] program," said ABN AMRO spokesman Jochem van de Laarschot. "But given the new situation we had to be sure that the additional liquidity will not be used to finance measures of a discriminatory nature."

Van de Laarschot added that the bank's proposals, which were being handled by its Frankfurt office, may still be revived if it could be certain that proceeds would be spent on a more acceptable project.

The deal could still go ahead without the Dutch bank's involvement, as the Carinthian government was deciding between ABN's proposal for securitizing the mortgages and a similar scheme from the local Carinthian mortgage bank.

Because discussions were at a preliminary stage details of the size of any deal or its rating were not available.

Van de Laarschot rejected suggestions that the bank should not have any dealings with the Freedom party, saying that it is not the bank's job to take political positions.

"We have been advising the province of Carinthia since 1996. We're not at the table with Mr. Haider or even the former governor, who was a socialist, we are dealing with the officials of the province."

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