Impact statement from Minister Marterbauer: All individuals to face consequences
Austria is facing an excessive deficit procedure (EDP) by the European Union, following the country's fiscal deficit exceeding the EU's 3% of GDP limit. This formal warning is a result of Austria's breach of the Maastricht Treaty’s budget rules, which aim to maintain economic stability across the bloc.
Finance Minister Markus Marterbauer has acknowledged the difficult fiscal situation, stating that bringing the deficit under 3% "is not possible at short notice without causing significant damage to the economy and employment." This cautious approach reflects the government's concern for the potential impact of immediate fiscal austerity measures on Austria’s economic growth and job market.
The EDP process and implications for Austria include:
- EU Commission's assessment: The European Commission is monitoring Austria's budgetary plans and economic performance. With Austria's deficit surpassing the threshold, the Commission has recommended opening the EDP.
- Formal warning and reporting: Austria must submit plans to reduce its deficit within a set timeframe and provide updates on progress. The Commission and EU finance ministers will assess these plans during the procedure.
- Potential consequences: If Austria fails to take adequate corrective action, further EU steps may follow, such as recommendations for fiscal adjustments, and potentially financial sanctions or penalties, although the EU often first seeks compliance through dialogue.
- Economic trade-offs: Austria faces the challenge of balancing fiscal consolidation with sustaining economic growth and employment, especially after weaker-than-expected economic performance has reduced tax revenues.
In an interview with oe24.TV, Marterbauer discussed consolidation plans, the EU deficit procedure, and his budget speech. He revealed that they have discovered many unforeseen issues with the budget, and the budget situation has worsened significantly in the six weeks he has been in office.
Marterbauer is implementing six billion euros to address the budget deficit, but it will not lead to reaching the three percent target this year. In addition to the 6 billion euros from state spending and 8 billion from taxes, Austria will receive 350 million from banks and 200 million from energy companies. However, Marterbauer is unable to save more than 6 billion euros in state spending and increase taxes by more than 8 billion in the coming year without affecting all population groups.
Marterbauer has stated that he will not sugarcoat the budget situation in his speech, and he finds it peculiar that money seemed to have been abolished during the Covid and inflation crises. Despite the challenges, Marterbauer's approach to his job involves appearing as an expert based on facts and stating his political opinion.
The specifics of the EU deficit procedure were not detailed in the interview. However, it is confirmed that the deficit procedure for Austria will be decided on a European level in July. Marterbauer believes that the previous government was irresponsible for not considering the budget consequences during the Covid and inflation crises.
In sum, the excessive deficit procedure is a formal EU mechanism triggered by Austria’s significant fiscal deficit, signaling pressure to align with EU fiscal rules but also highlighting concerns from Austria’s Finance Minister about the economic risks of abrupt fiscal tightening. Austria must now work with the European Commission to adjust its fiscal trajectory while managing potential growth impacts.
- The excessive deficit procedure (EDP) for Austria is being decided on a European level in July and will involve the European Commission monitoring Austria's budgetary plans and economic performance, as well as the country submitting plans to reduce its deficit.
- Finance Minister Markus Marterbauer has acknowledged the challenge of balancing fiscal consolidation with sustaining economic growth and employment in Austria, stating that immediate fiscal austerity measures could cause significant damage to the economy and job market.
