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Wednesday, Mar 12, 2025

EU Pressures Austria's New Government with Deadline for Spending Reductions

EU Pressures Austria's New Government with Deadline for Spending Reductions

As Austria's far-right coalition gets ready to assume control, the European Commission cautions that its economic plan might not meet EU fiscal goals, potentially leading to a confrontation.
The European Commission is poised to deliver a crucial judgment on Austria's economic path as it evaluates the country's proposed fiscal strategies.

Central to the issue is Austria's increasing deficit, projected to surpass the EU's 3% GDP threshold from 2024 to 2026. The Commission needs to determine if the country's spending reductions are substantial enough to prevent the initiation of an excessive deficit procedure (EDP), which could enforce stricter budgetary regulations.

Austrian's new coalition government, likely to be headed by Herbert Kickl from the far-right Freedom Party (FPÖ), has reached an agreement with the center-right People’s Party (ÖVP) on a plan to cut the deficit by as much as €6.3 billion.

The goal is to lower the national deficit beneath the EU target by 2025, a move essential to avoid tougher financial penalties from Brussels.

However, the European Commission has already expressed doubts regarding the adequacy of these reductions.

The country received a temporary reprieve in November, as the Commission allowed more time to present a feasible plan.

Yet, if the new coalition's proposals prove insufficient, Austria might face the risk of being categorized with heavily indebted countries like Italy and France, complicating its already difficult economic situation.

Austria's financial prospects are under scrutiny not only for its deficit but also due to the political implications of a far-right government, which some regard as a potential threat to the EU's stability.

FPÖ's leader Kickl has previously been linked with anti-migrant rhetoric and pro-Russian views, concerns that are causing unease in Brussels.

With coalition discussions ongoing, Austria's future fiscal strategy depends on the EU's forthcoming response.

The European Commission will convene this Wednesday to review the country’s economic plans, with a vote by EU finance ministers scheduled for the following week.

As the EU's fiscal watchdog, the Commission’s ruling could significantly impact Austria’s capacity to manage both domestic and European economic challenges.
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