Austrian Finance Minister Maria Fekter backed French counterpart Christine Lagarde for the top job at the International Monetary Fund and threw her weight behind Austrian banks in the debate over new capital rules.

There is great interest in this tradition that a European leads the IMF and the Europeans are fighting for this now, Fekter told Austrian radio an interview aired on Saturday.

She called Lagarde a very competent person. I know her and I could well imagine that Austria would join in here.

The IMF need a new head after Dominique Strauss-Kahn resigned to devote his time and energy to defending himself against U.S. charges he tried to rape a chambermaid.

Wading into a national debate about whether politicians were doing enough to defend the country's economic interests, Fekter said she would lobby the European Union to ensure new capital rules for banks did not put Austrian lenders at a disadvantage.

Erste Group Bank Chief Executive Andreas Treichl launched the debate by calling politicians too stupid and cowardly to fight proposed Basel III capital rules, a comment for which he has since apologized.

He still argues the rules may trigger a credit crunch by making banks back loans to healthy companies with 10 times as much capital as for debt of struggling countries like Greece.

It is positive that we have a broad discussion over Basel III and that it is widely recognized that under some circumstances a negative effect for small Austrian borrowers could emerge, Fekter said when asked about the dispute.

I think it is a legitimate approach to differentiate between (rules covering) investment banks and commercial banks and we will make efforts in Brussels to get exactly this differentiating treatment into the rules, she said.

Her comments come amid a potential EU rift over how to implement bank capital rules.

Treichl said this week that Erste had asked to pay back by the end of next month 1.2 billion euros ($1.72 billion) in state capital it got at the height of the financial crisis, but Fekter said regulatory approvals still needed to be sorted out.

To make a repayment the bank needs to show national bank supervisors and the National Bank that its capital coverage is sufficient, she said.

We don't have yet an official repayment application because first the procedure has to be settled with the National Bank before they can apply.

Asked if that would mean Erste could then repay the money, she said: At any time.

(Reporting by Michael Shields)

International Monetary Fund