EU expects austerity plan

Budget hole: the game starts all over again

Around six billion a year needs to be saved.

(Bild: thinkstockphotos.de, krone.at-Grafik)

With the imminent start of new government negotiations between the FPÖ and ÖVP, the game of budget restructuring is starting all over again. Austria must submit a restructuring plan to Brussels by January 21, otherwise it faces the threat of an excessive deficit procedure. The fact that the EU will be involved in budget decisions in the coming years will not be in the interests of the FPÖ.

The FPÖ and ÖVP will have to prioritize budget restructuring above all else and try to draw up a rough plan by the deadline, which will be sent to Brussels. The Eurogroup will meet there on January 20 and the EU finance ministers on January 21. A decision will then be made on whether to open an excessive deficit procedure against Austria.

(Bild: Krone KREATIV)

The consolidation requirement for the coming federal government is between 18 and 24 billion euros, depending on the scenario. For the four-year reference path without the EU excessive deficit procedure, there is a total consolidation requirement of 24.1 billion euros, whereby around six billion euros would have to be saved each year. For the seven-year reference path without the procedure, the consolidation requirement by the end of the term is EUR 18.1 billion, with the procedure it is EUR 18.4 billion (see chart).

Deficit far above the Maastricht limit of three percent
The economic researchers at WIFO and IHS forecast a budget deficit of 4.2% and 3.8% of economic output respectively for 2025. According to WIFO, a reduction from 4.2 to 3 percent of gross domestic product (GDP) would correspond to a consolidation requirement of "around 6 billion euros". The debt mountain of around 420 billion euros already amounts to over 80 percent of GDP. According to the experts, the increase in the deficit is due to the indexation of social benefits, a sharp increase in the number of pensioners and rising expenditure by the federal states and municipalities in the areas of the environment, housing, education, health and care.

Finance Minister sees great potential in subsidies
Interim Finance Minister Gunter Mayr is against a procedure because Austria would then have less leeway and Brussels would have a seat at the table for all decisions. Mayr sees a lot of potential for savings in subsidies. Here, Austria is three billion above the EU average. "There really is a lot of potential here on the expenditure side," Mayr analyzes.

Budget restructuring remains the most pressing issue
After a long back and forth, the negotiators of the three-party coalition decided on a seven-year consolidation path without a deficit procedure. The FPÖ and ÖVP will also have to decide quickly. "Budget consolidation remains the most pressing issue," WIFO budget expert Margit Schratzenstaller emphasizes to the "Krone" newspaper. The EU Commission announced on Tuesday that it is waiting for proposals for measures to reduce the budget deficit. "If these measures are submitted in time, we can evaluate them and then recommend to the Council that the procedure should perhaps not be initiated," said a spokesperson.