Bad news comes from the budget front almost every day. The future government must now decide whether to balance the budget using the EU deficit procedure or without it. Up to 22 billion euros will probably have to be saved in the coming years.
According to the latest figures from the National Bank, the deficit in 2025 will be minus 4.1 percent of GDP. This would entail a consolidation need of 7.1 billion euros in 2025 to achieve the Maastricht target of 3.0 percent. Previously it was assumed that this would amount to around four billion.
According to calculations by Parliament’s budget service, savings of between 15 and 22 billion euros will be needed over the next four to seven years, depending on the scenario.
Austria can submit its own package of measures to the European Commission in mid-January. This evaluates it and advises the Economic and Finance Council whether it should initiate an ÜD procedure (excessive deficit procedure) against Austria – or not. If Austria does not submit anything, the ÜD procedure will follow automatically. Depending on the duration of the restructuring process (four or seven years), it will then be determined to what extent Austria must tighten its belt. The Budget Council wants to present new, concrete figures on Monday.
The ‘Candy’ negotiators disagree
The advantage of a procedure would be that the government would have more room to maneuver. This is especially important to prevent the economic situation from deteriorating further. If the next government wants to restructure the budget sustainably and buy time for this, this would be easier with an ÜD procedure. The SPÖ is in favor of this path, the ÖVP and NEOS are sceptical.
Finance Minister Gunther Mayr also prefers restructuring without procedures. The ministry points out the risk of a devaluation of Austria’s creditworthiness in the event of a deficit procedure. That would significantly increase our interest rates. Moreover, Austria would have limited budgetary freedom.
Experts urge quick action
Birgit Niessner, director of the economics department of the Austrian National Bank, does not make recommendations to politicians. But the basic rule is that if the government wants a consolidation effect in the challenging year of 2025, there must be “a small number of easy-to-implement measures soon” and “immediately implemented.” In addition to the short-term measures, structural work must also be done on ‘budget health’ in the longer term.
It is uncertain how big a consolidation package will be, but “what is certain is that it will have negative growth effects,” said Gerhard Fenz, head of the economic cycle department at OeNB. With an “exemplary” fiscal consolidation of 0.9 percent of GDP in 2025 and 0.5 percent in the following two years, Austrian economic growth would decline by 0.3 to 0.4 percentage points annually.
The debt ratio is rising rapidly
The deficit, which is significantly higher than previous expectations, would also cause the debt ratio to rise “rapidly,” Niessner said. From 78.6 percent in the previous year to 81.8 percent this year and 82.6 percent in 2025 to a maximum of 84.2 percent in 2027. “High primary deficits, but also rising interest costs, are driving the debt ratio up sharply.”
Source: Krone
I am Ida Scott, a journalist and content author with a passion for uncovering the truth. I have been writing professionally for Today Times Live since 2020 and specialize in political news. My career began when I was just 17; I had already developed a knack for research and an eye for detail which made me stand out from my peers.
