Fekter set to clash with provinces

People’s Party (ÖVP) Finance Minister Maria Fekter is braced for controversial arguments with the financial councillors of Austria’s nine provinces after David Brenner expressed concerns about the government’s debt limit.

Brenner – who heads the council of provincial financial councillors – said today (Tues) the federal coalition of Social Democrats (SPÖ) and ÖVP must abstain from taking the provinces’ autonomy as far as their financial decision-making was regarded. Brenner said it had to be ensured that provinces decided themselves if they spent more than planned due to unforeseeable circumstances such as destruction of infrastructure by floods and thunderstorms.

Brenner – the vice governor of Salzburg – also made clear it had to be avoided that provinces which stick to debt brake regulations got ordered to come up for losses of other regions. The SPÖ-ÖVP coalition reportedly plans to consider the provinces’ budget as a whole. Brenner wants the government to budge in this concern and ensure individual financial strategies of the country’s nine provinces.

Fekter criticised yesterday that provincial leaders failed to “rethink” on financial issues. Statistics disclose that the provinces’ overall per capita debts rose from 2,360 Euros in 2009 to 2,735 Euros in 2010. Lower Austria had the highest per capita debt rate in both years (2009: 4,309 Euros; 2010: 4,806 Euros). The country’s communities are in immense financial difficulties as well. Their debts shot up from 12 billion Euros in 2001 to 14.8 billion Euros in 2010.

Provinces and communities have been engaged in a war of words with federal lawmakers about increasing investments into public service institutions, schools and kindergartens. The government is under fire by regional decision-makers for planning new day care centres and ordering the renovation of roads and schools the provinces had to pay for in the end. A growing number of communities are failing to make ends meet with the sums they take in from charging for the possession of land, tap water provision and waste disposal services.

The coalition plans to lower the federal budget deficit to 0.35 per cent of the gross domestic product (GDP) in 2017. Provinces should have erased their budget deficits completely by that year in the opinion of Fekter, SPÖ Chancellor Werner Faymann and ÖVP Vice Chancellor Michael Spindelegger. Brenner said this was “one of the points which are not acceptable.” The head of the association of provincial councillors for finance said provinces should be granted a possible budget deficit of 0.35 per cent of the GDP in 2017 as well.

Helmut Mödlhammer of the ÖVP, who heads the Austrian Association of Communities, criticised the government in a radio interview yesterday for “announcing many things without carrying them out.”

Bernhard Felderer, an economist and head of the State Debt Council, said Austria might be spared a downgrading of its top credit rating (AAA) if “credible” austerity measures came into effect in the coming years.

Speaking to magazine profil, the head of the Viennese Institute for Advanced Studies (IHS), warned that negative effects on Austria’s reputation among analysts were possible if politicians kept arguing about which reforms should be carried out. “Investors will put trust into Austria’s capability to meet its own cost reduction regulations if a debt limit becomes constitutional,” Felderer explained. A two-third majority in parliament is needed to add such a tool to the constitution. A delegation of the ÖVP met representatives of the Green Party yesterday to check if they could imagine approving a debt brake draft bill.

Josef Bucher, who heads the Alliance for the Future of Austria (BZÖ), had already met with Social Democrats last week. Bucher said the government must say no to all kinds of higher taxes. Bucher also wants the coalition to lower the maximum tax rate to 42 per cent. However, SPÖ State Secretary Andreas Schieder announced today he wanted to increase the rate by five per cent to 55 per cent to rake in more money which could be used to pay back some of the state’s debts or invested into science and research projects.