The European Commission has decided not to formally reprimand Austria for breaching the EU’s budget rules, in a major victory for Herbert Kickl’s Freedom Party (FPÖ) which is poised to lead Vienna’s first far-right government since World War II.
Friday’s decision not to launch an excessive deficit procedure (EDP) comes after the FPÖ and its prospective coalition partner, the conservative People’s Party (ÖVP), submitted a deficit-slashing budget to Brussels earlier this week that aimed to bring Austria’s deficit below the EU’s limit of 3% of annual GDP.
The plan, discussed by senior EU and Austrian government officials in Brussels on Tuesday, proposes €6.4 billion in budget savings – equivalent to 1.7% of Austria’s annual GDP. It includes steep cuts to households’ compensation for a carbon tax and a reduction in tax breaks for purchases of electric vehicles and solar panels.
“The Commission considers the measures concerned to be a sufficient basis in order to bring the Austrian budget deficit down below 3% by the end of this year,” said European Commission spokesperson Balazs Ujvari.
But Ujvari added that Brussels would be “keeping an eye” on Vienna’s budget situation over the coming months – especially in April when new data about Austria’s fiscal situation at the end of 2024 is expected to be released.
The Commission’s announcement follows the collapse of ÖVP-led centrist coalition talks earlier this year, leading conservative Karl Nehammer to resign as chancellor and the anti-migrant, pro-Russian Kickl being tasked by Austria’s president with forming a new government.
Friday’s decision was not anticipated by many analysts. Fitch, a ratings agency, said last week that Austria’s “weak” economic prospects and “deteriorating fiscal outlook” meant that it was “unlikely” to avoid an EDP.
Eight member states, including Italy and France, are currently subject to an EDP. Many European capitals have consistently struggled to comply with the bloc’s fiscal rules, which came back into force last year after being suspended during the COVID-19 pandemic and the energy crisis triggered by Russia’s invasion of Ukraine in 2022.
The Commission’s decision will be formally approved by EU finance ministers at a meeting in Brussels next Tuesday.
[Edited by MM]
Source: Euractiv.com
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