Bloomberg News

Fekter ‘Very Confident’ Austria’s AAA Rating Can Be Maintained

December 01, 2011

Dec. 1 (Bloomberg) -- Austria’s Finance Minister Maria Fekter said she is “very confident” that the Alpine republic will maintain its AAA rating.

“I’m very confident because the fundamental data is good in Austria, we have full employment, we have excellent growth, we have a very stable situation in our economy,” Fekter said in a Bloomberg Television interview in Brussels. “We have very low sovereign risk because we are financed very, very conservatively.”

The extra interest Austria must pay investors to hold its bonds instead of German ones has soared this year, even as the country’s debt and deficit is below the European average. Concern the government may have to bail out lenders because of eastern European losses have weighed on the country’s AAA sovereign-credit rating and raised its refinancing costs.

Austrian banks have lent $266 billion to borrowers in the formerly communist parts of Europe, the most of all countries reporting to the Bank for International Settlements and equivalent to about 70 percent of Austria’s gross domestic product.

The extra interest the country has to pay investors to hold its 10-year bonds instead of Germany’s rose to a euro-era high of 191 basis points on Nov. 15 and stood at 122 yesterday.

The counterbalance this trend the government last month announced that it was aiming to introduce a debt brake into the constitution that limits Austria’s structural deficit to 0.35 percent of gross domestic product as of 2017. Additionally, the country’s financial regulators on Nov. 21 announced new rules that will prevent the country’s top three banks from lending significantly more in eastern Europe than they raise in local deposits.

The recent increase in spreads was because of “irritated” markets, Fekter said in the interview yesterday in the Belgium capital. While she doesn’t think about a possible loss of the Austria’s top rating, it would be a “huge problem if our spreads” went up and “if we have to pay more money on the markets for our refinancing,” Fekter said. “I am confident it will not happen.”

--Editor: Zoe Schneeweiss

To contact the reporter on this story: Nejra Cehic in London at ncehic@bloomberg.net

To contact the editor responsible for this story: Anastasia Ellis at aclubb@bloomberg.net


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