EU Likely to Recommend Deficit Procedure Against Austria

Since November, it has been anticipated, and this Wednesday the European Commission is likely to actually recommend the initiation of an EU deficit procedure against Austria. If it does so, the Council of Economic and Finance Ministers must then approve it. Their next meetings are on June 20 in Luxembourg and on July 8 in Brussels. Finance Minister Markus Marterbauer (SPÖ) stated in the Federal Council last week that he has "absolutely no fear" of the deficit procedure.

Final Decision with Economic and Finance Ministers

The reason for the expected deficit procedure is that Austria, with its budget deficit of 4.7 percent of GDP last year and the planned 4.5 percent this year, is clearly above the allowed limit of three percent of economic output according to the so-called Maastricht criteria of the EU. The EU Commission will present its spring package for the so-called European Semester on Wednesday. This includes, in addition to economic policy and reform recommendations to EU countries, reports on budgetary surveillance that scrutinize the compliance with the deficit and debt criteria for vulnerable countries.

The basis for this is the requirements of the Stability and Growth Pact. According to the Commission, this is intended to "ensure the maintenance of sound public finances of the EU countries." In particular, member states must comply with the deficit and debt criteria: the annual government deficit should not exceed 3 percent, and government debt should not exceed 60 percent of GDP. If either of these two criteria is not met, the Commission checks whether the deficit exceeds public investment expenditures as well as the general medium-term economic and budgetary situation. Based on this review, the Brussels authority decides whether to recommend the initiation of a procedure to the EU Economic and Finance Ministers. The final decision then lies with them.

EU Deficit Procedure Against Multiple Countries

Already as part of the autumn package in November, the Commission considered opening a procedure against Austria as well: Since the domestic budget deficit does not meet Brussels' requirements, the Commission "could" recommend to the Council (of member states) to "determine an excessive deficit," it was said at the time. The measures sent to Brussels by the FPÖ-ÖVP coalition negotiators in January were able to avert the procedure at the beginning of the year. The then Finance Minister Gunter Mayr still feared the various disadvantages of a deficit procedure.

However, as the budget forecasts became gloomier from month to month, it became clear that the procedure could not be avoided. In the EU economic forecast published by the Commission in mid-May, Austria is the only country for which the EU predicts an economic downturn this year. However, it is not the only country affected by a deficit procedure: These are currently ongoing against Belgium, France, Hungary, Italy, Malta, Poland, Slovakia, and Romania.

Politicians and the Commission have since downplayed the consequences of a deficit procedure: In addition to Marterbauer, Federal President Alexander Van der Bellen recently emphasized that he sees "no reason to panic." The federal government aims to exit the EU deficit procedure by 2028. The EU Commission representative in Austria, Patrick Lobis, told the magazine "Cercle Diplomatique" that the measures taken in the procedure "are decided by the respective government. The country is therefore not placed under guardianship."

Austria has already had EU deficit procedures

If a deficit procedure is initiated, Brussels and Vienna jointly create a plan to reduce the debt. There are guidelines on the level to which the deficit must be reduced in the current and following year. The Commission does not force Austria to take specific measures; the country proposes these itself. The procedure usually lasts four years. If the savings plans are not achieved, it can lead to fines in the worst case, although this has never happened before. For Austria, it would be the second EU deficit procedure: The first was opened after the financial and economic crisis in 2008.

(APA/Red)

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