Austria on the edge of the EU deficit procedure: Financial crisis threatens!

Austria on the edge of the EU deficit procedure: Financial crisis threatens!

Austria faces serious financial challenges after the rating agency Fitch has reduced its view for the country to negative. This decision is based on an unexpectedly high budget deficit for 2024, a deterioration in macroeconomic conditions and the impending EU deficit procedure. Fitch emphasizes that political fragmentation and the failed coalition negotiations between the parties such as ÖVP, SPÖ and NEOS make it considerably more difficult to implement the necessary budget cuts. The new discussions between the FPÖ and ÖVP also bring little clarity into financial prospects. According to Fitch, the budget deficit could increase to 4 percent of GDP without the government initiating immediate austerity measures, which could also increase the debt of up to 85 percent of GDP by 2028, reported The Wiener Zeitung .

EU Commission gives slightly more optimistic forecast

In contrast, the EU Commission shows a slightly optimistic view of the Austrian budget as a national business institute. You can expect a deficit of 3.6 percent of GDP for 2024, while the WIFO and the fiscal council present more pessimistic forecasts of 4 percent or 4.1 percent for the same year. Nevertheless, the EU Commission also believes that Austria will significantly exceed the Maastricht criteria. The fiscal council estimates that from 2025 savings of at least 4.4 billion euros per year are necessary to control the debts and to avoid an impending EU criminal proceedings. Due to the repeated exceeding of the EU limit values, a deficit procedure is becoming increasingly more likely, such as

The problems are not only in the financial field, but also in economic development, since Austria's economy remains under pressure despite a slight recovery in 2025. The EU Commission predicts that the Austrian economy continues to struggle with challenges, such as the effects of inflation and falling real wages on private consumption. If you believe the current analyzes, the way to stabilize the budget could be rocky - not only in Austria, but in the entire euro area, which is also faced with uncertainties.