impactful statement from Minister Marterbauer: 'Nobody is exempt'
In an unprecedented move, Austria is set to undergo an Excessive Deficit Procedure (EDP) initiated by the European Union, following a budget deficit that exceeds the EU limit of 3% of GDP. This formal process is triggered when a member state's budget deficit surpasses the EU limit or its government debt exceeds 60% of GDP without sufficient progress in reduction.
The EDP process involves several stages. First, the excessive deficit is identified through budget and debt indicators relative to the Maastricht criteria. Next, the EU Commission issues a recommendation, and the Council approves the opening of the EDP. Austria must then present a corrective action plan with specific fiscal consolidation measures. Regular monitoring and reporting by the Commission on Austria’s progress follow, and if insufficient action is taken, the procedure can escalate to sanctions, including fines or market penalties.
If Austria's budget deficit breaches the thresholds in 2023, as it did in several other EU cases, the country would need to adopt fiscal consolidation measures, possibly including spending cuts or revenue increases. This could affect public investment, social spending, and introduce austerity measures, with a focus on medium-term adjustment paths rather than immediate drastic cuts.
Finance Minister Markus Marterbauer (SPÖ) is tasked with repairing the ailing budget in Austria. In an interview with oe24.TV, Marterbauer explained his budget repair plans, stating that the current budget deficit is larger than what was experienced after the banking crisis in 2009. He has implemented 6 billion euros in budget cuts and secured an additional 550 million from banks and energy companies. Marterbauer mentioned that an additional 350 million euros will be received from banks and an additional 200 million from energy companies.
However, Marterbauer did not provide specific details about what an EU deficit procedure would mean for Austria. He clarified that Brussels will not be making budget policy in Austria during the deficit procedure. The minister attributed the irresponsible accumulation of debt during the Covid and inflation crises to a lack of consideration for budget consequences.
Marterbauer has faced praise from NEOS and ÖVP after initially having reservations about him. He attributed the praise to his approach of appearing as an expert based on facts and stating his political opinion. Marterbauer stated that there will be no sugarcoating in his budget speech regarding the current economic situation, and he found it peculiar to be driven around in a Mercedes during his transition from expert to minister. The total amount of taxes that will be raised in the coming year is more than 8 billion euros.
The broader EU context is moving towards more flexible but still rigorous fiscal rules from 2025 onwards, allowing longer adjustment periods—potentially up to seven years—as observed in other countries under the EDP. Therefore, Austria might benefit from this transitional flexibility but still face obligations to reduce its deficit systematically.
In conclusion, the Excessive Deficit Procedure for Austria is a formal process aimed at addressing a high budget deficit. If Austria's deficit exceeds the limit, the country would need to implement fiscal consolidation measures and undergo regular monitoring by the EU Commission. The exact implications for Austria's 2023 budget are yet to be determined, but the EU framework and comparable country cases provide a clear indication of the process and potential implications.
Economic and social policy in Austria is under scrutiny as the country is set to undergo an Excessive Deficit Procedure (EDP) due to a budget deficit exceeding the EU limit. This process, initiated by the EU, may require Austria to adopt fiscal consolidation measures such as spending cuts or revenue increases, which could impact business and have political repercussions in the general-news sphere.
Finance Minister Markus Marterbauer is tasked with repairing the ailing budget in Austria, implementing budget cuts and securing additional funds from banks and energy companies. However, the specific implications of an EU deficit procedure for Austria's 2023 budget remain undetermined, as the country navigates this formal process aimed at addressing high budget deficits.
