Start of EU Deficit Procedure Against Austria

In addition to the official decision of an EU deficit procedure against Austria, the final approval of the national fiscal structure plan was also decided. This plan outlines the measures and reforms to reduce the budget deficit back below the permissible limit of three percent.

EU Deficit Procedure Against Austria: Remedial Measures Already Passed in the National Council

Austria's Finance Minister Markus Marterbauer (SPÖ) emphasized before the council on Tuesday that all further actions in the deficit procedure are clear: "We are being asked by the European Commission to present measures on how the excessive deficit, which is a legacy of the last government, can be reduced in the medium term. We have already made the corresponding decisions in the National Council with the double budget." Austria is "on a very good path to reducing the deficit as planned."

The finance minister stressed that the budget's remediation is not primarily necessary because of European rules, but "because we cannot afford high deficits economically. We prefer to spend the money on kindergartens and health and care rather than on high interest payments." And even in a deficit procedure, "all decisions affecting the budget will be made in Austria and not in Brussels," said Marterbauer. He also reiterated that he sees no negative effects on the financial markets and no damage to Austria's image.

The citizens would notice the austerity measures, but that is the "necessary remediation." The deficit procedure will not require additional measures; it accompanies the remediation. The federal government's plan is to come below the three percent threshold by 2028. "Under the current conditions, I also believe that we will achieve this," said the finance minister. The slightly better economic forecasts would help with this.

Deadline Until October 15 for Further Measures

According to the Council recommendation proposed by the Commission, Austria is given a deadline until October 15, 2025, to take action and present the necessary measures. "After that, Austria should report on the progress in implementing this recommendation at least every six months, in the spring as part of its annual progress report and in the fall in the draft budget plan, until the excessive deficit has been corrected," it continues. And: "Austria should therefore eliminate the excessive deficit by 2028."

According to plans, the budget deficit is expected to decrease to 4.5 percent of GDP this year and to be 4.2 percent next year, with the government aiming to exit the EU deficit procedure by 2028. The consolidation amount is expected to be 6.4 billion this year and 8.7 billion next year. Marterbauer emphasized on Monday that he has "no reason to doubt the achievement of the budget targets." He also sees no "damage to Austria's image" and no problems in the financial markets. Austria is "one of the strongest economies in Europe."

Austria with Deficit Far Above Allowed Three Percent

"The initiation of the procedure is not surprising. After a deficit of 4.7 percent of GDP last year and an expected 4.5 percent in 2025, this procedure was foreseeable and unavoidable. With the decision of the double budget for 2025 and 2026, Austria has already taken important steps towards budget consolidation. To achieve the required undershooting of the 3 percent threshold by 2028 as planned, we must now adhere to the agreed measures in execution," said Finance Minister Marterbauer following today's decision.

The FPÖ sees the responsibility for the deficit procedure primarily with the ÖVP, accusing them once again on Tuesday of "voter deception" regarding the deficit development before the national election. With the deficit procedure, the three-party coalition has broken the first central election promise, said FPÖ Secretary General Christian Hafecker on Tuesday during a press conference. "Of course, this is a process that naturally also partially disempowers Austria, at least concerning financial conduct," countered Hafenecker to contrary assurances from the Finance Minister.

For the Federation of Austrian Industries, the deficit procedure should not serve as an excuse to further postpone pressing structural reforms: "Rather, the government must use the period of the deficit procedure to tackle these structural reforms in administration, education, pensions, and health. At the same time, efficient and well-considered economic stimulus measures are needed. We must use this time window wisely, not only to quickly bring the state budget into balance but also to stimulate the economy through structural measures and finally make the state future-proof. Otherwise, Austria risks descending into the regional league and a longer-term stagnation phase," it states in a statement.

(APA/Red)

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