Defense against EU diktats – Finance Minister Mayr on a sensitive mission in Brussels

There is a simple reason why Brussels has a say in the national budget: unwanted developments in economic policy can have consequences for all member states, especially those with the single currency. In order to identify and counter unwanted developments in a timely manner, the EU countries keep an eye on each other. They have all committed to meeting certain criteria to ensure stability and growth.

If a procedure takes place, the European Commission will provide budget offenders with a route on how they can reduce their debts in the coming years. This reference trajectory covers a period of four years, which can be extended to a maximum of seven years at the request of a state if there are appropriate reform and investment projects.

6.4 billion this year is very ambitious
The FPÖ and ÖVP want to avoid such a “dictate” from Brussels and have agreed on a seven-year restructuring plan. According to this report, approximately 6.4 billion euros should be saved this year. Many budget experts are skeptical about whether this will work, because the year is already running. So it has to happen very quickly.

Austria has a spending problem
The business-oriented think tank Agenda Austria, on the other hand, believes this is feasible, and only on the expenditure side. She has drawn up a list of possible savings of up to eleven billion. The overfinancing of the climate bonus alone therefore costs 800 million euros. Abolishing the entire climate bonus would yield 2.3 billion. The abolition of educational leave will yield 730 million euros, and ending subsidies for the green transformation will yield another 500 million euros. There is also a lot to be gained in the social sector: compensating for the over-adjustment of pensions since 2009 suddenly yields 720 million. The diesel privilege costs 500 million per year, the VAT exemption for sustainable energy costs 200 million and the increase in the travel deduction since 2013 costs another 200 million.

Wifo boss Gabriel Felbermayr and IHS director Holger Bonin have spoken out in favor of an EU deficit procedure against Austria instead of radical austerity measures, so that the economy is not suppressed. According to the current Wifo forecast, a sudden reduction in the budget deficit to the Maastricht maximum of 3 percent would dampen growth by 0.5 to 1 percentage point.

Excessive deficit procedures would provide more flexibility
An excessive deficit procedure usually offers more flexibility in the short term when exceptional economic or financial crises occur (for example a recession, natural disasters or unexpected geopolitical tensions). In such cases, the EU allows a country to temporarily exceed the deficit in order to stabilize the economy and take the necessary stimulus measures. A strict cap would impose additional burdens at such times, as the country could be forced to cut or increase taxes during a crisis, which could delay the recovery.

The EU can also impose sanctions on shortage violators
As part of an excessive deficit procedure, sanctions may be imposed on a deficit offender if he or she does not comply with the requirements for correcting an excessive deficit. Failure to comply can result in fines of up to billions of dollars – although this has never happened before.

Is Austria the only violator of the EU deficit?
No, just the opposite. The European Commission launched an EU deficit procedure against seven countries in June 2024. This included France and Italy – after all, the second and third largest economies in the European Union. In addition to France and Italy, there are also Belgium, Hungary, Malta, Poland and Slovakia. There is also ongoing proceedings against Romania.

The final deadline is January 30
The timetable: As a next step, the Commission will make a recommendation to the Council of Ministers. It is then up to the Council to decide whether or not to open an excessive deficit procedure. The full European Commission meets every Wednesday in Brussels. So a decision on the recommendation can be made tomorrow. According to the Commission spokesperson, the final deadline for Austria is January 30. Of course, these issues would normally be decided at the Council of Ministers of Economic Affairs and Finance, which will then meet in Brussels on 21 January.