Moody's raises outlook on Austria's AAA government bonds to stable

Fri Feb 28, 2014 6:09pm EST

Feb 28 (Reuters) - Moody's revised its rating on Austria's AAA-rated government bonds to "stable" from "negative", citing declining risks that the country will need to contribute to further collective support programmes for other Eurozone countries.

The rating agency also said the revised outlook reflected stabilization of the country's economy and reduced risks from a resolution of the issues related to the distressed Hypo Alpe Adria Bank.

The nationalised bank is at the centre of a political storm as Austria decides whether to wind it down through a state-owned "bad bank", bail in creditors including Germany's BayernLB , or let it go insolvent.

Austria last Friday named central bank governor Ewald Nowotny to lead an advisory task force on Hypo after its previous head quit following public splits with the government over how to deal with the bailed-out bank.

"Moody's believes that the resolution of (Hypo) will not lead to an immediate refinancing requirement for the federal government," Moody's said in a statement on Friday.

Moody's also affirmed its AAA rating on Austria's sovereign debt.

The Austrian government welcomed the revision in outlook.

"This shows that our work to clean up the budget is bearing fruit," Finance Minister Michael Spindelegger said in a statement, reaffirming Austria's goal to eliminate its structural budget deficit by 2016 from around 1.5 percent of economic output this year.

"The raising of the outlook is another sign that we are well on the way to mastering the consequences of the financial and debt crisis."

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