Austrian president Heinz Fischer will conduct a thorough legal review before deciding whether to approve legislation that would impose losses on some creditors of nationalised lender Hypo Alpe Adria, he said yesterday.

The law aims to wipe out holders of €890 million worth of subordinated Hypo debt despite guarantees from its home province of Carinthia, an unprecedented step in Europe that's drawn international scrutiny.

The International Monetary Fund last week advised Austria to reconsider the plan, saying it could undermine other public-sector guarantees.

“I will certainly not just simply sign this,” Mr Fischer said on Austrian television, adding he would have to discuss the legislation in depth first with legal experts.

But Mr Fischer also made clear that Austria had to draw a line under the country’s worst post-War financial debacle and that he saw the Hypo law as a “middle path” between the unacceptable option of letting the bank go bust or having taxpayers shoulder the entire burden.

Austrians are furious that they have had to provide €5.5 billion in aid to Hypo since 2008.

The government considered bankruptcy for the lender it had to nationalise in 2009, but decided instead in March to set up a “bad bank”for around €18 billion of assets to be wound down over time. – (Reuters)