A newspaper cartoon depicting the cash-strapped province of Carinthia as ‘Greece without the ocean’ captures the public mood as Austria weighs what to do with a region facing ruin over unaffordable bank debt guarantees.

The southern province, once the heartland of support for late right-wing leader Joerg Haider, says it will run out of money in June unless the federal government throws it a financial lifeline.

Powerful provincial governors have in the past bossed around ministers in Vienna, but Finance Minister Hans Joerg Schelling is demanding tough reforms in return for renewed access to borrowing via the federal treasury. That effectively gives eurozone member Austria its own local version of the problems besetting Greece.

Talks on a loan deal between civil servants and provincial officials resumed yesterday. A government source said Vienna was ready in principle to help finance Carinthia as long as it fulfils certain conditions.

Governor Peter Kaiser, the Social Democrat leader of Carinthia’s governing coalition, meanwhile made the case for aid in an interview with ORF radio.

“All the provinces are financed via the Austrian federal treasury. Carinthia has done this before and always repaid everything on time,” he said. “There is no reason in my view not to grant Carinthia this financing.”

With its stunning landscape of mountains and lakes, Carinthia is Austria’s version of California. Nearly 560,000 people – 6.5 per cent of Austria’s population – live there.

But debt guarantees it granted lender Hypo Alpe Adria during a decade of breakneck expansion that ended with Austria’s nationalising the bank in 2009 have left its finances in a mess.

At one stage, the guarantees were worth 10 times the state budget of around €2 billion. Carinthia still backs more than €10 billion of debt held by ‘bad bank’ Heta Asset Resolution, which is winding down the now-defunct Hypo.

The guarantees are in focus after Austria’s FMA financial watchdog took control of Heta in March and froze its debt repayments until May 2016 while it works out a plan to share the pain among creditors.

The extent of ‘haircuts’ is still unclear but Kaiser has acknowledged his state cannot shoulder the burden alone.

Last month, ratings agency Moody’s downgraded Carinthia to one notch above junk grade, making it more difficult for the province to borrow in the open markets.