Finance minister determined about sanctions

Federal and provincial financial issues decision-makers have postponed their negotiations about the budget of the coming years.

People’s Party (ÖVP) Finance Minister Maria Fekter said talks with the provincial governments’ finance councillors would continue next week. Fekter angered the politically muscular provincial parliaments by revealing plans to sanction provinces which breached the stricter new budget rules.

The national government coalition of Social Democrats (SPÖ) and ÖVP plans to erase the structural budget deficit until 2017. Austria managed to lower its budget deficit from 4.5 per cent of the gross domestic product (GDP) in 2010 to just 2.6 per cent in 2011. The finance ministry feared that last year’s budget deficit make 3.9 per cent.

Fekter stressed yesterday (Thurs) she was still determined about issuing sanctions on provincial governments which left the agreed path of austerity. The federal government agreed with the leaders of the nine provincial governments a few weeks ago that the regions must contribute 5.2 billion Euros in additional spending reductions and increases of charges to the Austrian 26.5-billion-Euro budget consolidation package in the coming five years.

The finance minister made aware of stringent budget rules 25 of the 27 European Union (EU) members agreed upon while Upper Austrian ÖVP Governor called on Fekter to show more interest in a mutual agreement with the provinces. Fekter explained provinces which failed to keep their budgets in order could be issued a charge of 15 per cent of their deficits.

SPÖ General Secretary Günther Kräuter suggested that the provinces should be allowed to invest more than initially agreed in certain situations such as serious economic downturns. Kräuter said the growth of the Austrian economy must not be negatively affected by the general agreement to cut investments and act more efficiently.

Statistics reveal that the provinces’ average per capita debt soared 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) while capital Vienna did best in 2009 with 1,103 Euros. The western province of Tyrol had the lowest per capita debt rate in 2010 (1,465 Euros), according to Bernhard Felderer’s National Debt Committee.

Austria’s public debts were as high as 72.2 per cent of its GDP in 2011. The EU average was 82.5 per cent while the 17 EU countries which are part of the Eurozone reported a debt rate of 87.2 per cent, up from 85.3 per cent in 2010.

Rating agency Standard & Poor’s (S&P) downgraded Austria from AAA to AA+ due to its high debts in January. S&P’s competitor Moody’s confirmed Austria’s AAA but expressed concerns about the further development of the country’s economy. Fitch, the third-biggest rating agency in the world after S&P and Moody’s, reaffirmed Austria’s AAA last week.