Vienna, Austria

There's nothing more beautiful than Vienna in the summer. There's also nothing better than waking up to Viennese coffee.

The best coffee in the world, in my opinion, is in Vienna. The Austrians borrowed from the Turks during the 17th century amid two Ottoman invasions and walked away with their own version of coffee – now popularly served in Viennese coffee houses worldwide. Basically, the Austrians took Turkish coffee and added sugar and milk to the mix.

And though ardent coffee drinkers like their Joe black, I still prefer the Viennese version.

I usually have one or two cups of coffee per day. But this morning, I had five. The coffee on-board Austrian Airlines from Toronto to Vienna was tops – and coffee on airplanes usually tastes like battery acid. For the record, the food on Austrian Airlines is the closest thing to edible I've found on numerous carriers to Europe.

On Monday, I met with several local banks, including Valartis Bank Austria, formerly Anglo Irish Bank Austria. Valartis, which is a Sovereign Society Convenient Account member, is one of the few banks among the privacy domain still accepting American clients. The Swiss, of course, have largely abandoned U.S. business since UBS opened the bank secrecy window this summer under fierce pressure from the United States.

Still, even the Austrians have recently relented on bank secrecy. It seems the world is heading in this direction as the infamous numbered account eventually goes the way of the dinosaur.

Austria has not been spared from the global financial crisis since 2008. The banking system has indeed survived but with government deposit guarantees – not unlike the rest of the euro-zone countries since the financial system started falling apart last fall.

And, like other countries, including even mighty Germany, Austria has also struggled to raise government debt financing as some auctions have been reduced or cancelled since last fall. Germany, by far one of the most liquid government bond markets in the world, saw four auctions either scrapped or reduced in late 2008.

Smaller Austrian local banks have recovered nicely in 2009 as earnings rebound, including Valartis Bank Austria, but larger banks with loans tied to Eastern and Central Europe are still struggling. These include Bank Austria Creditanstalt AG and Erste Bank AG. Both banks, the largest in the country, have big loans outstanding to their Eastern neighbors; capital markets in nearby Eastern Europe have calmed down since the March lows but a sense of nervousness still plagues the banking sector in this country. Most believe this is a lull and not a market bottom.

Still, despite the regional headwinds facing Austria, I remain bullish. This is a stable democracy, rich in culture and dedicated to market stability. It's still a largely conservative country. At some point in the future I expect leveraged markets in the region to finally bottom and that should set the tone for another round of prosperity for Austrian banks and industrial companies. But in no way have we seen the bottom in late 2009.

I'm off to Zurich this morning. More on Switzerland tomorrow.