Brussels/Vienna – Since November, a potential EU deficit procedure against Austria has been in consideration, and last Wednesday the European Commission took initial steps toward this action. After identifying an excessive deficit, the Commission announced its recommendation for a deficit procedure, which is expected to be formally addressed by the Council of Economic and Finance Ministers at their meeting on July 8 in Brussels.
The EU Commission unveiled its spring economic package in Brussels, presenting not only reform recommendations for EU countries but also budget monitoring reports that assess compliance with deficit and debt criteria for nations at risk. The Commission determined that Austria has an excessive deficit, alongside Finland, Latvia, and Spain, which were also closely examined due to their deficits.
Dombrovskis: Clear case for procedure
The rationale for the procedure is Austria’s budget deficit, which stood at 4.7 percent of GDP last year and is projected to be 4.5 percent this year, exceeding the EU’s Maastricht criteria limit of three percent. EU Commissioner Valdis Dombrovskis cited this as a “clear case for the opening of a deficit procedure” during a press conference, noting that the deficit criteria have not been met.
The report indicates that public deficits in Austria and Finland in 2024 are significantly above the reference value, while Spain is close to it. Latvia’s excessive deficit in 2025 is linked entirely to increased defense spending. The Commission’s spring forecast suggests that public deficits in Austria and Finland will remain above three percent of GDP in the coming years, indicating that these deficits are not temporary, with Finland’s situation also tied to rising defense expenditures.
Clause for defense spending not requested
Austria has not yet invoked the national escape clause, which allows certain higher defense spending to be excluded from deficit calculations. Sixteen EU countries have made such requests. The Commission has recommended activating the national escape clause for these nations.
Besides the three percent limit, the medium-term economic and budgetary situation of the member state is also considered. The Commission’s analysis shows “medium-term high risks” for Austria, with debt projected to rise from 81.8 percent of GDP in 2024 to 85.8 percent by the end of 2026.
“The next step is for the Economic and Financial Committee to formulate an opinion, which will guide the Commission’s proposal to the Council to initiate a deficit procedure for Austria,” said Dombrovskis. The EU Commission is currently evaluating Austria’s medium-term fiscal-structural plan submitted in May, emphasizing the necessity of addressing the impending deficit procedure in the plan to receive a positive assessment.
Austria must implement the plan
Following the Commission’s evaluation, it will be Austria’s responsibility to implement the proposed plan. By October 15, Austria is required to submit its next general budget plan, which should include further deficit reduction measures. The federal government aims to exit the EU deficit procedure by 2028. Finance Minister Markus Marterbauer (SPÖ) expressed confidence about the deficit procedure while speaking to the Federal Council last week.
SPÖ EU Member of Parliament Evelyn Regner reiterated the finance minister’s views, stating that a deficit procedure is not catastrophic and primarily involves coordination rather than control, presenting opportunities for sustainable investment in the new budget plan. She advocated for more flexible EU rules on debt reduction to allow for greater investment space to enhance Austria’s economic position.
Brunner: Framework conditions are challenging
Former Finance Minister and current EU Commissioner Magnus Brunner (ÖVP) acknowledged the challenging framework conditions. He noted the difficult economic landscape in Europe, with average growth at 1.1 percent, alongside global trade uncertainties. “The Austrian federal government has decided to pursue this path, and that must be accepted,” he remarked, opting not to comment further on the forthcoming procedure.
Foreign Minister Beate Meinl-Reisinger (NEOS) described the government’s budget plan as “very ambitious” and expressed a preference to avoid a deficit procedure, emphasizing the need for collective effort in budget consolidation as she anticipates the upcoming conference of state governors.
Former EU Budget Commissioner Johannes Hahn (ÖVP) expressed optimism, stating that resolving these issues involves not just budget consolidation but also fostering sustainable investments to enhance competitiveness in a globalized economy.
Criticism arose from the FPÖ, with Secretary General Michael Schnedlitz accusing the government of leading the country into the oversight of EU centralists, warning of potential social cuts and mass protests reminiscent of unrest in countries like France, Spain, Portugal, or Greece. (04.06.2025)
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