Economic news

Austrian far right and conservatives outline a budget deal

2025.01.13 07:38

By Francois Murphy

VIENNA (Reuters) – Austria’s far-right Freedom Party and the conservative People’s Party said on Monday that after three days of coalition talks they had reached a deal on bringing the budget deficit back within the European Union’s limit.

They gave few details.

The eurosceptic, Russia-friendly Freedom Party (FPO) came first in a parliamentary election in September with about 29% of the vote but was not tasked with forming a government until a centrist attempt to do so without the FPO collapsed a week ago.

The first order of business in its coalition talks with the People’s Party (OVP) was how to bring the budget deficit back within the EU limit of 3% of economic output to avert a so-called excessive deficit procedure by Brussels.

“We have taken a fundamental decision and developed a joint roadmap to avert an EU excessive deficit procedure against Austria,” FPO leader Herbert Kickl said in a statement after a press conference with OVP leader Christian Stocker.

Weak growth in the economies of important trading partners including neighbouring Germany and consumers holding back on spending helped push Austria into a second year of recession last year, denting the country’s tax take.

The budget deficit is expected to come in at 3.7% of gross domestic product in 2024 and 4.2% this year if no corrective action is taken, according to economic think-tank Wifo which provides forecasts the government relies on.

Kickl and Stocker said they had agreed on mainly spending-related measures to save about 6.3 billion euros ($6.4 billion) this year, or about 1.7% of the GDP currently forecast by Wifo.

“What I can rule out is an increase in taxes for the masses, so no increase in value-added tax … no increase in the fuel tax, nothing being taken back, so to speak, in the area of corporations tax,” Kickl said, adding that tax privileges and loopholes would also be addressed.

A table issued by the OVP showed the biggest item was a 3.2-billion-euro reduction in subsidies, followed by a 1.1 billion euro “contribution to stability by ministries” and 950 million euros in “other measures”. It did not elaborate. “Adjustments to the tax system” amounted to 920 million euros.

© Reuters. Head of Austria's Freedom Party (FPOe) Herbert Kickl and the head of People's Party (OeVP) Christian Stocker address the media in Vienna, Austria, January 13, 2025. REUTERS/Elisabeth Mandl

Both parties said they would hammer out the figures in greater detail and present them to the public at a later date but caretaker Finance Minister Gunter Mayer would now inform the European Commission of the agreement.

($1 = 0.9804 euros)



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