EU Drops Action Against Austria After FPÖ-ÖVP Austerity Plan

EU Drops Action Against Austria After FPÖ-ÖVP Austerity Plan

Image: APA/THEMENBILD/HELMUT FOHRINGER

 

The European Union has decided not to initiate a deficit procedure against Austria after the far-right Freedom Party (FPÖ) and the People’s Party (ÖVP) unveiled their €6.4 billion cost-cutting budget consolidation plan, as the two parties work to form the country’s next government.

The proposed measures include the abolition of the climate bonus (a scheme designed to offset environmental damage by providing every adult in Austria with yearly payments) and education leave, alongside higher fees for services such as driving licences and passports, and an increase in the retirement age.

What is a Deficit Procedure?

EU Commissioner Valdis Dombrovskis informed Austria’s Finance Minister, Gunter Mayr, of the decision not to initiate the Excessive Deficit Procedure (EDP) in a letter sent on Thursday evening. The letter suggests that the proposed measures are likely to be sufficient to reduce the country’s budget deficit to within the EU’s 3% limit of national output (GDP).

Under the rules of the EDP, member states that breach the 3% deficit target may face potential penalties, including a fine of 0.2% of GDP and a suspension of EU development fund payments.

Finance Minister Mayr expressed his satisfaction with the decision, saying, “That we have managed to convince the Commission is very pleasing and shows that our efforts have paid off.” The European Commission is set to reassess Austria’s budget situation in the spring.

Criticism of the Austerity Measures

The austerity measures proposed by the FPÖ-ÖVP coalition negotiators have sparked strong criticism from opposition parties, NGOs and environmental groups.

The WWF condemned the planned cuts to climate protection initiatives, calling them “negligent and counterproductive.” Greenpeace warned that Austria could face substantial penalties for failing to meet climate targets, while Global 2000 branded the proposals a “completely ill-considered slash-and-burn approach.”

Leonore Gewessler, the Climate Protection Minister in the outgoing ÖVP-Green Party government, also voiced her disapproval, describing the austerity measures as “ideologically driven and dangerous.” She added, “Everything that protects the climate and secures our future is to become more expensive, according to the FPÖ and ÖVP.” Gewessler also criticised the government’s weakening of public transport, noting that the climate ticket (KlimaTicket), the annual pass for all public transport across the country, was now being “deliberately weakened.”

SPÖ budget spokesman Jan Krainer condemned the removal of the climate bonus. “The biggest crisis profiteers, such as the banks, would contribute nothing,” he said. “The main burden of the consolidation will be placed by Kickl and Stocker on the shoulders of the working population.”

The NEOS party also criticised the lack of long-term strategy. Budget spokeswoman Karin Doppelbauer remarked, “A one-off blanket cut does not put the state budget back on healthy feet. And cutting alone is not a reform.” However, she welcomed the negotiators’ ambition to prevent the EDP.

The trade union movement, including the ÖGB, Austria’s largest trade union, has also been vocal in its opposition. The union described the removal of the climate bonus as an effective tax increase. “There is nothing here that secures jobs,” said ÖGB Secretary-General Helene Schuberth.

In contrast, the business community responded more positively to the proposals. Gabriel Felbermayr, the head of the Austrian Institute of Economic Research (Wifo), praised the proposals as “cutting-edge.”

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