The European Union punishes Austria for its debts, what will happen now?
On Tuesday, the finance and economy ministers of the European Union officially approved the opening of an excessive deficit procedure (ÜD-Verfahren) against Austria. This decision comes in response to a recommendation from the European Commission after Austria exceeded the allowed limit of financial deficit according to Union standards.
The excessive deficit procedure is applied when the deficit ratio in the general budget of a member state exceeds 3% of GDP, known as the "Maastricht Treaty limits". Last year, Austria recorded a deficit of 4.7%, exceeding the European legal limit.
The aim of this measure is to compel Austria to return to the legal limit of 3% by no later than 2028. To achieve this, the Austrian government must submit an effective financial reform plan to the European Commission by October 15. This plan must include a mix of reducing expenditures and increasing revenues, injecting 6.4 billion euros into the 2025 budget and 8.7 billion euros in 2026.
The European Commission will assess these measures by mid-November, and will regularly monitor progress through semi-annual reports, in the spring as part of the annual progress report, and in the fall through the draft budget. Austrian citizens will be indirectly affected by these measures, as the government has already begun implementing some steps such as raising the health insurance contribution for retirees to 6%, and eliminating some forms of support. Additional measures are expected to be implemented later.
Despite this move, Austrian Finance Minister Markus Marterbauer (SPÖ) confirms that this measure does not pose a threat to the country's economy, explaining that Austria remains one of the strongest economies in Europe, and there are no risks to its creditworthiness. It is worth noting that this is not the first measure of its kind against Austria, as a similar investigation was opened between 2009 and 2013, during which the government managed to bring the financial situation back on track. In addition to Austria, seven other European countries are subject to excessive deficit procedures, namely France, Italy, Belgium, Malta, Poland, Slovakia, and Hungary.