Fitch affirms Austria, outlook stable despite Hypo costs

SYDNEY Fri Feb 21, 2014 12:29am EST

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SYDNEY Feb 21 (Reuters) - Fitch Ratings affirmed Austria's credit ratings at AAA with a stable outlook, saying the government's favourable budgetary position meant it could handle the cost of restructuring Hypo Alpe Adria.

The restructuring of Hypo would likely cause gross general government debt (GGGD) to rise more than previously expected, the agency said on Friday.

"While there are still a number of options, the government has yet to disclose its preferred solution, raising concerns about policy coherence and credibility in the near term," Fitch said in a statement.

Fitch said it was making the conservative assumption that the government absorbs HAA's total assets with the effect of raising debt by 18 billion euros in 2014.

"Despite the one-off stock-flow adjustments to GGGD related to financial sector support, Fitch believes that Austria's relatively favourable public debt dynamics, including stronger growth and low fiscal deficits, should remain intact," said Fitch.

(Reporting by Wayne Cole; Editing by Kim Coghill)

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