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UPDATE 1-Austria and its banks creditworthy -c.bank head

Published 03/06/2009, 09:56 AM

* Austrian c.bank head says banks and country creditworthy

* Says three quarters of banks' exposure is to EU countries

(adds details, background, quote)

VIENNA, March 6 (Reuters) - The creditworthiness of Austria and its banks is beyond doubt, Austrian central bank Governor Ewald Nowotny said in a statement on Friday.

Austrian bond and credit default spreads rose to record highs this month after a Moody's report said emerging Europe posed a threat to western banks' ratings. [ID:nLH423223]

"Three quarters of Austrian banks' exposure is to European Union countries. There is therefore no risk that current (state) measures will not work," said Nowotny, who has repeatedly called for a distinction to be made between EU and non-EU states in crisis-hit emerging Europe.

Austrian banks are among the biggest lenders to central and eastern Europe and have lent the equivalent of 75 percent of its gross domestic product to clients in the region.

The government has earmarked 15 billion euros ($18.96 billion) for potential capital injections, to protect its banks against the fallout from the financial crisis.

"The creditworthiness of the country and Austrian banks is beyond doubt," Nowotny said.

In the past few weeks, media reports questioning the creditworthiness of Austria and its banks have prompted the central bank to issue statements.

Nowotny said Austria's debt stood at around 60 percent of gross domestic product, on par with the average for other European states and below the debt levels of Italy and Germany.

(Reporting by Sylvia Westall and Sarah Marsh; editing by David Stamp)

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