LONDON (Reuters) – Austria can sort out problems at nationalised lender Hypo Alpe Adria without having to get the European Central Bank involved, Austrian National Bank Governor Ewald Nowotny told Reuters.

The government plans to create a state “bad bank” that may absorb up to 19 billion euros ($26 billion)in assets from Hypo Alpe Adria Bank International AG, a step that would relieve its chronic need for capital but could boost state debt to around 80 percent of economic output.

Former Hypo owner BayernLB , the German landesbank owned by Bavaria, has to approve the plan.

The ECB intervened in talks between Austria and Bavaria in late 2009 on nationalising the bank to avoid a collapse with regional fallout, but Nowotny said that was no longer needed.

“I do not see a perspective of getting the ECB involved. This bank has no liquidity problems, it has only a very small amount of ECB refinancing, and it is a rather small bank and not of European importance,” he told Reuters in an interview on Tuesday.

The government has not ruled out letting Hypo go bust after healthier commercial banks this month rejected appeals to support a bad bank majority-controlled by the private sector so that its debts could stay off state books.

“I want to make it clear that the finance minister did not talk about sending it into bankruptcy but there is a discussion on a number of strategies,” Nowotny said. “There needs to be an agreement with Bayerisches Landesbank (BayernLB).”

($1 = 0.7298 euros)

(Reporting by Marc Jones. Writing by Michael Shields. Editing by Mike Peacock)