OVERVIEW The federal government of Austria has proposed a law to annul the State of Carinthia's deficiency guarantees on bonds issued by Heta Asset Resolution AG (HETA), the "wind-down entity" of failed bank Hypo Alpe-Adria AG. In our view, the proposed law will not erode creditors' rights because the government's resolution efforts are not indicative of a general weakening of the protection of creditor rights in Austria. We expect that Austria's institutional effectiveness and predictability will remain high. We are therefore affirming our 'AA+/A-1+' long- and short-term ratings on Austria. The stable outlook reflects our expectation that a pickup in economic growth from 2016 should help to improve public accounts, limiting tax shortfalls from the tax reform. RATING ACTION On
