Austria Facing Debt Crises?

Jeremy Warner writes at The Telegraph about some consequences of the failure of the Hypo Alpe-Adria Bank International. He reports:

In a nutshell, the Austrian government has had enough of funding the bank’s losses, and announced plans to “bail-in” external creditors to the tune of €7.6bn instead. 

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Only in this case, the bonds are notionally guaranteed by the Austrian state of Carinthia, which now theoretically becomes liable for the bail-in. It’s an echo of the mess Ireland got itself into at the height of the banking crisis, when it foolishly attempted to stem the panic by underwriting all Irish banking liabilities; the move very nearly ended up bankrupting the entire country. Hypo will bankrupt Carinthia. 

Essentially, what the Austrian government is doing is cutting loose an entire region, rather in the way the federal authorities in the US allowed Detroit to go bust a number of years ago.

Not knowing anything about Austrian banking or bankruptcy laws (and with nothing supplied by Warner's article), it is hard to predict what the fallout will be. However, I would note that the Detroit bankruptcy, while newsworthy because of the size of the default, did not collapse states or the nation.