Austria Weighs Contagion Risk as Hypo Alpe Bonds Plummet

Austria will risk contagion should it allow Hypo Alpe-Adria-Bank International AG to fail or force bondholders to take losses, the central bank said, as the nationalized lender’s debt slid for a second day.

Hypo Alpe has 14 billion euros ($19 billion) of debt outstanding which is guaranteed by the southern province of Carinthia. A haircut could impact the borrowing of all of Austria’s provinces, central bank governor Ewald Nowotny said.