You'll need to mark it as a unicode string unless you're working with plain ASCII;
> print(u"ÄÖÜAOU".lower())
äöüaou
It works the same when working with variables, it all depends on the type assigned to the variable to begin with.
> olle = "ÅÄÖABC"
> print(olle.lower())
ÅÄÖabc
> olle = u"ÅÄÖABC"
> print(olle.lower())
åäöabc