Austria before the financial crisis: rising rising budget deficit!

Austria before the financial crisis: rising rising budget deficit!

Österreich - The Austrian National Bank (OENB) reports an expected budget deficit of 3.8 percent of gross domestic product (GDP) for the current year. The reason for this is a weakening economy that leads to lower tax revenue, as well as increased expenses in the labor market budget. The OENB estimates that the consolidation volume of the planned savings package for 2025 will be around 4 billion euros, while the government had originally planned with over 6 billion euros to avoid a deviation of the Maastricht limit, which indicates an alarming deficit of 3.5 to 4 percent if no effective measures are taken. https://www.kleinezeitung.at/service/newsticker/innenspolitik/19509310/oenb-fuer-heuer-mudgetdefizit-von-3-8-percent

The situation is perceived as worrying, since the fiscal council boss Christoph Badelt notes that the need for consolidation has now increased dramatically. Originally, 6.3 billion euros were planned, but this almost doubled due to the current economic forecasts. Badelt estimates that the further need for consolidation could be between 4 and 5 billion euros. Finance Minister Markus Marterbauer (SPÖ) also speaks of up to 6 additional billions of euros that are considered necessary.

consequences of a possible deficit procedure

The impending development causes concern with regard to a possible EU deficit procedure, which could have negative consequences for Austria's credit rating. FPÖ General Secretary Christian Hafenecker criticizes the ÖVP for dealing with the earlier statements about the budget deficit. Control of the budget process by Brussels is not excluded, which means that in the event of a deficit procedure, the need for savings in the first year could be less dramatic, but could be complicated by external editions. https://www.kleinezeitung.at/service/newsticker/innenspolitik/19509310/oenb-fuer-heuer-mudgetdefizit-von-3-8-percent

In addition, it should be noted that the recommendations of the fiscal council to the government are regularly submitted not only for budget and economic development, but also contain suggestions to improve the financial framework. The practices for consolidating budget expenses must be pursued without taboos to restore long-term debt relief and to strengthen trust in financial policy.

outlook on future measures

In order to counter the tense financial situation, the prevention measures must be intensified and structural reforms have been promoted. It is important that savings are in a balanced relationship to investments in future areas. At the same time, an adaptation of the social transfers to secure purchasing power is stimulated in order to help the citizens even in economically difficult times. § The current development shows that the Austrian government will be under great pressure in the coming years to meet the need for consolidation and to meet the expectations of the EU.