The law is designed to force some holders of Carinthia-guaranteed Hypo Alpe Adria debt to help pay for winding down the stricken nationalised bank.
Creditors that hold bonds with Hypo are expected to contribute €900 million.
However, the rating agency Standard & Poor's has now put seven Austrian banks on CreditWatch negative over concerns about the government's plan – this affects Erste Group Bank, Raiffeisen Bank International and its unlisted parent Raiffeisen Zentralbank, UniCredit Bank Austria, state-owned KA Finanz, Hypo NOe Gruppe Bank and Oberoesterreichische Landesbank.
It would be the first time that the public sector in a Eurozone country, aside from Greece and Cyprus, has failed to meet its payment obligations in the wake of the financial crisis.
Finance Minister Michael Spindelegger has said the law must be legally watertight – and that taxpayers should not end up having to bear the costs of the Hypo disaster.
However, the Kurier paper writes that if Spindelegger’s plan ends up triggering a round of rating downgrades then the damage could be greater than the benefits.