Budget: Fiscal Council Expects Austria to Exceed Maastricht Limit in 2029

The fiscal council sees "a great additional need for consolidation" in the budget in a report presented on Monday. After a deficit of 4.7 percent of GDP in 2024, a minus of 4.3 percent is expected this year, with the debt watchdogs predicting only a decrease to 4.2 percent by 2029. This would clearly breach the Maastricht limit of three percent of GDP. Accordingly, the debt ratio would rise from 84.6 percent of GDP this year to 91.1 percent (2029).

Forecast above Ministry Figures

The forecast is thus significantly above the figures of the Ministry of Finance in the medium term, which plans for 4.5 percent of GDP this year and 4.2 percent of GDP in 2026, and already foresees a drop below the Maastricht limit by 2028. The reason for this is that the fiscal council in its "Report on Compliance with Fiscal Rules" only considers those consolidation measures that have already been legally decided or at least sufficiently specified. Therefore, measures such as the anti-fraud package and savings that still need to be worked out in negotiations or newly established task forces - for example, with states, municipalities, and social insurance carriers or in subsidies - were not included.

But even if all the measures planned by the government in the budget planning were taken into account, the fiscal council still arrives at a deficit of 3.2 percent in 2029. To achieve the deficit of 2.8 percent planned by the Ministry of Finance in that year, an additional 2.2 billion euros would need to be consolidated by 2029.

Marterbauer Feels Reinforced

Finance Minister Markus Marterbauer (SPÖ) felt reinforced by the assessments and recommendations of the fiscal council in his statements to the APA. For example, the council's deficit forecast for 2025 and 2026 would be below the figures of the Ministry of Finance. The debt watchdogs were also right in noting that measures of the established task forces, such as for fraud prevention, subsidies, and territorial authorities, have not yet been specified. "We need to implement them into concrete measures. The publicly presented advice of the fiscal council helps me and strengthens my position in the government."

In combating tax fraud, a first legislative package is needed by autumn, which will take effect in 2026. A second one is to be decided next year. In contrast, measures for subsidies will only be implemented in the medium term from 2027. "I want to take my time with that." Changes at the state and municipal levels also need time. First, the stability pact must be agreed with them, then the bodies must also implement measures independently. If the task forces deliver the corresponding results, Austria would already be below three percent of GDP in terms of budget deficit by 2028.

Overall, the path to consolidation has already been embarked upon, said fiscal council office manager Bernhard Grossmann at a press conference. "But this is not a walk in the park, it's a rocky long-distance trail that should be traversed without a break." Overall, it has been possible to slow down the dynamics of the growing budget deficit - but with the measures taken so far, it cannot be sustainably reduced. And even if it is possible to return to the three percent deficit ratio by 2028 as targeted, it is not over, Grossmann said. Due to the requirements for reducing the national debt ratio, Austria would then be allowed to incur a maximum of two percent of GDP in debt to be able to reduce its debt.

"Easily Formulated, but Hard to Implement"

The council has divided its recommendations into three phases: In the short term, the planned budget for 2025/26 must be consistently implemented. "This is not a given," said Fiscal Council President Christoph Badelt. "The recommendations are easy to formulate, but difficult to implement." A strict budget execution also means that states and municipalities must consolidate - this will be difficult enough if you look at the vague figures for Vienna alone. Furthermore, negotiations on structural reforms must begin now.

In the medium term - that is, by the end of the legislative period - the council finds the assumptions of the Ministry of Finance "too optimistic." On one hand, some measures like the halt in the valorization of family benefits are expiring and need to be extended or replaced by new steps. On the other hand, additional growth-promoting and climate-friendly measures are necessary, which in turn cost money and must be counter-financed by other consolidation measures.

Marterbauer assesses the situation differently. "I see more sunlight now at the beginning of summer," he told the APA. He believes that the turning point has already been initiated given the good cooperation in the government so far. Measures like the expiration of the valorization stop are priced in, and he sees no need for action here.

For structural measures to begin to take effect, they must also be quickly decided, urged the Fiscal Council again. Almost all of them require the involvement of states and municipalities, according to Badelt. This concerns reforms in health and care as well as more efficient fiscal federalism. "We also need a rethink from all territorial authorities. From the municipalities, it cannot be said: 'We need more money because we are in trouble.'" The federal government would also like to say that.

Council Advocates for Increasing Effective Retirement Age

Only changes in pensions can be implemented by the federal government alone. The council advocates for an increase in the effective retirement age, and Badelt himself is also in favor of raising the statutory retirement age.

Even in 2029, the Fiscal Council's consolidation efforts are not over. Subsequently, growth-promoting measures must be continued and refined. The same applies to structural reforms. Furthermore, a budgetary leeway must be created again.

Marterbauer also believes that further efforts are needed and receives support from the coalition partner. "We are only at the beginning of a long reform agenda," said NEOS budget spokesperson Karin Doppelbauer in a statement. The budget is a turning point, but the hard work is just beginning.

(APA/Red)

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