By Francois Murphy
VIENNA (Reuters) – Austria’s new coalition government pledged on Monday to show a “steady hand” in trimming the budget deficit by sticking to existing savings plans, although 2024’s deficit was bigger than expected and well beyond the European Union limit.
The coalition of conservatives, Social Democrats and liberals took office this month, promising savings of more than 6 billion euros ($6.5 billion) this year to avert a so-called excessive deficit procedure by Brussels for running a deficit greater than 3% of gross domestic product.
Since then, however, economic developments have gone from bad to worse, with forecasters now predicting the economy will shrink for the third year in a row. The national statistics office reported on Monday the budget deficit in 2024 was 4.7% of GDP, far above the roughly 4% widely forecast.
“The situation here at the outset is extremely serious, which is why we will do everything we can, step by step, to reduce the overall budget deficit,” Finance Minister Markus Marterbauer of the Social Democrats said in a statement after the deficit figures were published.
“One restructures a budget on the basis of facts, data, scientific analysis and a steady hand, all aimed at clear targets,” he added.
The decision not to immediately seek extra savings suggests the government is now prepared to undergo an excessive deficit procedure, which involves EU institutions charting a corrective course. Failure to follow that can in principle eventually lead to a fine.
Austria is far from alone in breaching the 27-nation EU’s deficit ceiling. France recently announced a budget deficit of 5.8%, and Italy’s came in at 3.4%.
“It is important not to further burden the economy and employment, such as through new taxes,” Marterbauer said.
($1 = 0.9235 euros)
(Editing by Mark Heinrich)
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