Stability Pact: Federal Government, States, and Municipalities Agree

At the same time, better information obligations for the states were agreed upon to avoid unpleasant budget surprises like this year. The budget course is to be maintained. By 2028, they aim to exit the EU deficit procedure.

The Stability Pact is in Place

As Finance Minister Markus Marterbauer (SPÖ) announced following around five hours of negotiations on Friday evening, a deficit of 4.2 percent of GDP will continue to be targeted next year - 3.07 percent can be claimed by the federal government and social security, 1.13 percent by states and municipalities. For the latter, this means a slight improvement compared to previous regulations. Previously, states and municipalities were only allowed to cause 22.2 percent of the debt, in the coming years it will be an average of 24.25 percent. In advance, the federal states had pushed for a share of at least 25 percent.

Path Agreed Until 2029

A path was agreed upon, according to which states and municipalities will have a slightly higher share of 26.9 percent next year, which will decrease to around 23 percent in the following two years. The Stability Pact is also to apply beyond the adjustment period until 2029, said the Finance Minister, with a ratio of 24-76 percent for states and municipalities on one side, and the federal government and social security on the other.

Marterbauer emphasized that the information obligations will become significantly stricter. In the future, reports of cash budget data from each federal state will be made on a monthly basis. Previously, the Ministry of Finance only learned of them cumulatively, which resulted in an additional two billion in deficit being suddenly revealed a few weeks ago. This is to be anchored with a financial regulation that will apply from next year. Additionally, the federal government and states are to regularly exchange information in a committee at the Ministry of Finance, especially before notifications are sent to Brussels.

Finance State Secretary Barbara Eibinger-Miedl (ÖVP) spoke of a "great milestone." The federal government and states have shown that they can take responsibility together. State Secretary Josef Schellhorn (NEOS) described the Stability Pact as the "first stage," after which reforms must continue. However, it is important that a clear signal has been set, "that it can also be done together."

Wallner Praises "Fair Balance"

With the new regulation, they want to ensure stability and clarity, said the chairman of the financial state councilors, Willibald Ehrenhöfer (ÖVP). After tough negotiations, a "fair balance" was found, said the governor of Vorarlberg, Markus Wallner (ÖVP), expressing confidence that this would also improve the mood. The intense debates of the last few months were important because there is now more understanding of the performance of the municipalities and states, said Vienna's finance councilor Barbara Novak.

Municipal Association President Johannes Pressl (ÖVP) also noted a lot of understanding for the concerns of the municipalities. They too would have to incur more new debt on the way to more financial stability, but the goal is a net-zero new debt by 2030. City Association President Mayor Michael Ludwig (SPÖ) also spoke in a statement of "a good, sustainable compromise" that recognizes the growing services and tasks of the cities and municipalities. Talks on municipal financing would also take place at the highest government level.

Stocker Thanked Negotiators

Federal Chancellor Christian Stocker (ÖVP), who had pushed for an agreement in advance, thanked all the negotiators. With the new stability pact, "we are finally creating clear rules and more transparency to make a precise and forward-looking budget policy better possible," he emphasized in a statement. In addition, a clear signal is being sent to Brussels that Austria wants to exit the EU deficit procedure as quickly as possible.

The other representatives of the federal states also expressed satisfaction. Tyrol's governor Anton Mattle (ÖVP) called the conclusion "long overdue." "For anything else, the public would have lacked understanding and the federal states would have lacked patience," said the state leader of a "successful compromise." There had been more discussions in recent weeks and months than he would have liked, the agreement is a strong sign that cooperation on equal terms is working, said Upper Austria's governor Thomas Stelzer (ÖVP). Lower Austria's finance state councilor Anton Kasser (ÖVP) spoke of a "first important step on our common consolidation path."

No New Details on Deficit

There were no new details for this year's budget deficit. The final figures will only be available in the spring of the coming year, said Marterbauer. Just a few weeks ago, it became known out of nowhere that the states would perform significantly worse budget-wise this year than expected.

The negotiations on the stability pact had already begun at the end of April. An agreement has now been reached under increasing time pressure, as the new pact, which regulates the borrowing capacity of the public authorities, must be submitted to the EU by the end of the year.

(APA/Red)

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