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Briefing

Austrian Fiscal Policy

Appears in: Europe, Macroeconomy, Eurozone, Fiscal Policy

Critical Issues

Background:

Austria’s fiscal policy has been largely determined by the country’s European Monetary Union (EMU) membership in the past decade. In an effort to foster economic convergence, EMU members agreed to adhere to the Maastricht criteria as laid out in the Stability and Growth Pact which require a budget deficit below 3% of GDP and government debt of less than 60% of GDP. Austria incorporated these goals successfully into its fiscal policy approach and committed itself to pursuing a sustainable budgetary and financial position.  Fiscal consolidation helped Austria to decrease its government debt-to-GDP ratio from 66.0% in 2001 to 59.4% in 2007. Due to a severe slowdown of Austria’s economy which started in 2008, the budget deficit as well as the amount of public debt are set to skyrocket. Decreasing tax revenues, fiscal stimulus measures, financial support for the banking sector as well as ballooning social security spending will lead to a severe deterioration of Austria’s financial and budgetary position.

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