Austria’s next government will need to address a budget consolidation target of up to €24 billion to bring the country’s budget deficit under control, according to figures released by the European Commission on Sunday.
Finance Minister Gunter Mayr has suggested potential measures to reduce spending, including abolishing the climate bonus (a scheme designed to offset environmental damage by providing every adult in Austria with yearly payments), and ending education leave.
According to the ministry, doing away with the climate bonus could save €2 billion annually, while ending education leave might reduce costs by €650 million. Adjusting Austria’s subsidy rate to align with the EU average could save a further €3 billion.
Four or Seven Years to Save
A four-year consolidation plan, without triggering an EU excessive deficit procedure, would require savings of €24.1 billion, or about €6 billion annually. Choosing a seven-year timeframe would reduce the total savings needed to €18.1 billion.
If the excessive deficit procedure is triggered, the four-year plan would require €14.8 billion in cuts by 2028, compared to €24.1 billion without the procedure. The seven-year plan, in this case, would require slightly higher savings (€18.4 billion by 2031) than the equivalent plan without the procedure (€18.1 billion).
Coalition Talks
Budget consolidation is a key issue in the ongoing coalition negotiations between the People’s Party (ÖVP), the Social Democrats (SPÖ) and NEOS.
While the SPÖ has proposed accepting an EU deficit procedure to allow for more lenient cuts, Minister Mayr is against this. He argues that spreading the consolidation over seven years would provide greater flexibility for measures aimed at stimulating economic growth, rather than focusing solely on budget cuts.
Next Steps
Government negotiators aim to present a detailed savings plan to the European Commission by mid-January. The proposal will outline measures to reduce Austria’s budget deficit to below 3% by 2025. If the plan is deemed credible, the EU may decide against initiating an excessive deficit procedure.
