The four provinces lost their previous "AA+" rating and have been downgraded to "AA" with a negative outlook. The provinces of Tyrol and Upper Austria kept their "AA+" rating with a stable outlook. The provinces of Carinthia, Salzburg and Vorarlberg had not been rated by S&P.

The rating agency said the downgrade was due to the fact that it was still uncertain whether the federal government would pass a law that included modifications of the fiscal equalisation scheme between the federal state and the provinces.

In July S&P had complained that the government's support of banks was not good enough. This was when the government announced that it wanted to wipe out Hypo Alpe Adria creditors.

S&P warned already in June that Austrian government plans, which would cause major international investors in the ailing nationalised Hypo Alpe Austria bank substantial losses, would harm the country's "good reputation."

S&P said this special law was unique and never before seen in Europe. Thomas Fischinger of S&P Frankfurt complained on Austrian national radio Ö1 that the cabinet regulation was a sign that there was too little support for the banks from the Austrian government.

S&P raised the possibility of lowering its credit-worthiness ratings of several Austrian institutions. Fischinger had said a decision would be taken in July, after the parliament decided on the Hypo regulation.