4.8.2007   

EN

Official Journal of the European Union

C 182/1

(1)

On 10 July 2007 the Council examined the updated stability programme of Austria, which covers the period 2006 to 2010. Following the general elections in October 2006, a new government was formed in January 2007, which presented the twin budget for 2007/2008 to Parliament on 29 March 2007. On the same day, the updated stability programme was submitted, two and a half months after the 15 December deadline for Austria in the code of conduct.

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The main goal of the budgetary strategy is to reach a balanced budget over the cycle, reaping the benefits of administrative reform while reinforcing expenditure in several categories. In comparison with the previous update, the latter is reflected in the postponement of the budgetary consolidation to the outer years of the programme period. The update projects the general government position to improve from a deficit of 1,1 % of GDP in 2006 to a surplus of 0,4 % in 2010. The consolidation, which is back-loaded to the last two years of the programme period, is planned to be expenditure-based, with restraint in social spending and the gradual phasing-out of some specific expenditure being the main factors. Compared with the previous programme, the new update backloads further the planned adjustment against a broadly more favourable macroeconomic scenario.

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The risks to the budgetary projections in the programme appear broadly balanced for 2007 and 2008, but for 2009 and 2010, the budgetary outcomes could be worse than projected, despite plausible macroeconomic assumptions. Indeed, the expenditure-to-GDP ratio is foreseen to fall significantly in the two final years. The phasing out of specific expenditures, in particular on military equipment, and the expenditure savings on unemployment benefits and on pensions, as a result of the 2004 pension reform, should contribute to the decline in the expenditure ratio in the outer years. On the other hand, additional spending would be made on education, R&D and infrastructure over the programme period, while the expected efficiency gains in public administration remain uncertain. Finally, the programme hints at the possibility of further tax cuts financed by the planned expenditure savings.

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In view of this risk assessment, the budgetary stance in the programme may not be sufficient to ensure that the MTO is achieved by 2010, as envisaged in the programme. The Commission services' spring forecast estimates the structural deficit to widen in 2007 and 2008. However, a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations is maintained throughout the programme period. The pace of the adjustment towards the MTO implied by the programme is insufficient and should be strengthened, especially in 2007 and 2008, to be in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times. In particular, only a limited improvement in the structural balance is planned between 2007 and 2009, when Austria is expected to experience good times. This conclusion is confirmed even if one considers the purchase of military equipment to constitute a deficit-increasing one-off measure, as the programme does.

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Government gross debt is estimated to have declined to 62,2 % of GDP in 2006, still being above the 60 % of GDP Treaty reference value. The programme projects the debt ratio to fall below the reference value by 2008 and to decline further to 56,8 % of GDP by the final year of the programme period. In view of the risk assessment, the debt ratio seems to be sufficiently diminishing towards the reference value in the early part of the programme period and is planned to approach it by 2007.

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The long-term budgetary impact of ageing in Austria is well below the EU average, with pension expenditure projected to decrease as a share of GDP over the long term, as a consequence of the significant expenditure containment expected from the 2004 pension reform. The initial budgetary position, with a structural primary surplus, contributes to easing the long-term budgetary impact of ageing. Increasing primary surpluses over the medium term, as announced in the programme, as well as an increase in the employment rate of older workers would contribute towards containing risks to the sustainability of public finances. Overall, Austria appears to be at low risk with regard to the sustainability of public finances.

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The stability programme contains a qualitative assessment of the overall impact of the September 2006 implementation report of the National Reform Programme within the medium-term fiscal strategy. In addition, it provides some information on the direct budgetary costs or savings of the main reforms envisaged in the National Reform Programme and the public finance implications of the actions outlined in the National Reform Programme are broadly consistent with its budgetary projections. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the National Reform Programme. In particular, expected savings from administrative reform and the reinforcement of spending on R&D are put forward in both programmes.

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The budgetary strategy in the programme is partly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

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As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data (2).