EU Commission starts deficit procedure: Austria in the crisis!

EU Commission starts deficit procedure: Austria in the crisis!

Österreich, Land - The European Commission has decided to initiate criminal proceedings against Austria for excessive new debt. The decision is based on the country's alarming deficits, which last year recorded a deficit of 4.7 percent of GDP, which significantly exceeds the European upper limit of 3 percent. This is reported by the Badische Latest news .

Austria is currently faced with an economic crisis that is characterized by high inflation, weak consumption demand and a persistent recession. According to EU forecasts, it will be the only EU member whose economy will shrink this year. In addition, the fiscal council forecast a new debt of 4.4 percent for 2025, while the Ministry of Finance assumes 4.5 percent. These values ​​are also above the specified border line.

connection with EU policy

The EU Commission plans to present the EU financial ministers to officially initiate the EU Finance Ministers on June 20. This event is the second time since 2009 that such a procedure is recommended. The decision results from the persistently high new debt for the years 2023 and 2024, which is forecast at 4.4 percent for 2023 and 4.2 percent for 2024. The press indicates that there is currently no sign of a decline in new debt.

The Austrian federal government has so far not taken a position on the possibly asserted alternative clause, which helped other countries such as Finland and Latvia to comply with debt rules, although the high deficit counts Austria as a "outlier" in the EU. This illustrates how decisive compliance with the fiscal rules for the member states.

follow and measures

The next step in the procedure against Austria requires statements by the Economic and Finance Committee for suitable measures to reduce the deficit. The Austrian government has already prepared that measures to reduce new debt must be taken if sanctions are actually imposed. Kontrast reports that the rules for public debt and deficits in 2024 were reformed, but there is still a debt limit of 60 percent of GDP. The Commission's proposals to the EU Finance Minister should specify the direction of how Austria can improve its financial situation.

With the initiation of a deficit procedure, Austria will have to report regularly to the EU Commission in order to document the progress in budget consolidation. The aim remains the stability of the euro zone, whereby theoretically punishments are possible in billions in the case of persistent violations, but such sanctions have rarely been imposed in the past.

The last deficit procedure that was opened in 2012 successfully ended without sanctions when the deficit was reduced to 1.5 percent in 2013, which initially complied with the framework of EU requirements. It remains to be seen how Austria's financial course will develop and whether the country will be able to take the necessary measures.