Postponement of New Stability Pact to 2026

Following the political agreement on a new Stability Pact, the focus now shifts to implementation. On Monday, the 15a agreement was presented, defining the borrowing possibilities for the federal government, states, and municipalities. A decision - as actually required by the EU - will not be possible this year. The National Council will approve the proposal at the beginning of the year, and decisions are still needed in the nine states. Brussels is likely to accept the timeline.

Stability Pact Will Be Adopted Only in 2026

The agreement stipulates that in the coming four years, the federal government and social security will each receive around 76 percent of the borrowing possibilities, with the remainder allocated to states and municipalities. From 2030 onwards, the percentage will be applied indefinitely at exactly 76:24. For the coming year, this means, for example: With an overall targeted deficit of 4.2 percent of GDP, the federal government may achieve 3.07 percent, and states and municipalities 1.13 percent. The states will allocate 20 percent of the share of the Maastricht deficit attributable to each state to the municipalities.

The borrowing possibilities between the states will be distributed according to population. Thus, Vienna will receive about 22 percent and Lower Austria 18.8 percent. At the other end of the scale are Vorarlberg with 4.5 and Burgenland with 3.3 percent. In absolute numbers, the federal capital is expected to incur a debt of 1.3 billion in 2026. Reportedly, this is as unattainable as the target for 2027. Therefore, other states are likely to step in, which is also permissible according to the 15a agreement. Such a balance is also possible between federal states and their municipalities.

Polluter-Pays Principle for Penalties

It is also stipulated how to proceed should the EU impose financial sanctions on Austria due to the violation of European fiscal rules. In this case, the penalties would be borne in proportion to the causation. The year 2025 would also be included, where state deficits are likely to be significantly higher than agreed.

Domestically, better coordination of the figures is targeted. Political coordination committees will be established to implement the obligations, where decisions are to be made unanimously. There is essentially a federal committee in the finance department that coordinates between the federal government, states, and municipalities. State committees (except in Vienna) will also be formed, with representatives from the respective federal state, municipalities, and cities. It should also be ensured that the federal government receives the state figures in a timely manner in the future, so that unpleasant surprises like this year are no longer possible. A separate regulation for this "financial statistics" is being developed.

States Could Receive More Borrowing Leeway

While better transparency was primarily a concern for the federal government, a request from the states is also included in the 15a agreement. This involves complaints that they do not receive a share of certain taxes, such as the digital tax or the CO2 levy. It is now stipulated that in the case of tax reforms (but also in the case of shifts in competencies between the territorial authorities), the federal government, states, and municipalities must negotiate the reduction or increase of budgetary targets at the request of a contracting partner. An adjustment can then be made for years in which the revenue shortfalls of the states and municipalities due to federal tax measures exceed 0.3 percent of GDP.

(APA/Red)

This article has been automatically translated, read the original article here.