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After peaking at 4,5 % of GDP in 2010, Austria's general government deficit fell to 2,5 % and thus below the 3 % of GDP Treaty reference value already in 2011. This improvement, compared to the initially planned fiscal outcome, was partly related to the recognition of government expenditure measures for the recapitalisation of the ‘bad bank’ KA Finanz (about 0,4 % of GDP) in the 2012 government accounts, when the resultant impacts were confirmed based on the bank's financial statements. To a smaller extent, the fall in deficit stemmed from lower than planned expenditure at all levels of government and more favourable economic conditions, resulting in higher than projected revenue growth. In 2012, in contrast with both national and Commission forecasts the general government deficit, at 2,6 % of GDP, continued to remain below 3 % of GDP. However, due to looming risks related to possible further financial sector repair operations, which could have resulted in a deficit above 3 % of GDP in following years, the Commission did not recommend early abrogation of the EDP. Those risks have, however, only partly materialised and for 2013, Austria has notified a deficit of 1,5 % of GDP. This further fall in the deficit was largely due to the unexpected size of the one-off measures, involving the sale of the mobile phone spectrum, which accounted for almost 0,6 % of GDP.

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The Stability Programme for 2014-18, adopted by the Austrian government on 29 April 2014, plans an increase of the general government deficit to 2,7 % of GDP in 2014 and then a decrease to 1,4 % of GDP in 2015. The Commission services 2014 spring forecast projects a deficit of 2,8 % of GDP in 2014 and 1,5 % of GDP in 2015. Thus, the deficit is set to remain below the 3 % of GDP Treaty reference value over the forecast horizon. Moreover, in the framework of Regulation (EU) No 473/2013, the Government announced, and confirmed in a letter to the Commission, a set of additional savings and higher revenues which the Commission has assessed to amount to 0,2 % of GDP in order to avoid a planned significant deviation from the required adjustment path towards the medium-term budgetary objective (MTO).

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The increase in the general government deficit in 2014 is caused by the establishment of a defeasance structure (Liquidation Entity, Abbaueinheit) to wind down the impaired assets of Hypo Alpe Adria. The impact of the establishment of the Liquidation Entity for Hypo Alpe Adria is estimated by an external expert group of advisors, appointed by the Government, to amount to up to EUR 4 billion (1,2 % of GDP) including the effect of a capital injection of EUR 750 million already undertaken in 2014. The final recording of the deficit-increasing impact will depend on an independent asset quality review of Hypo Alpe Adria's assets, which will be undertaken later this year in order to allow Eurostat to evaluate the statistical effect of this operation. The current evaluation made by the expert group seems to be characterised by a reasonable degree of caution and therefore can be regarded as plausible. However; a larger deficit impact stemming from this operation cannot be excluded. This represents the main downside risk to the 2014 deficit projection. At the same time, also taking into account the additional discretionary measures announced by the Government after the publication of the Commission services 2014 spring forecast, which should lead to a further reduction of the headline deficit, risks to the 2014 deficit appear overall balanced.

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The structural balance, that is the general government balance adjusted for the economic cycle and net of one-off and other temporary measures, has improved on average by almost 0,7 % of GDP each year between 2011 and 2013, in line with Council recommendations. According to the Commission services 2014 spring forecast, its assessment of the updated draft budget plan submitted on 29 April 2014 and of the additional measures announced by the Government on 12 May 2014, the structural balance is projected to improve slightly in 2014. In that context, it appears that there is currently an emerging gap of 0,5 % of GDP relative to the required adjustment of the structural balance towards the MTO in 2014, suggesting that there is a need to reinforce the budgetary measures in order to ensure full compliance with the preventive arm of the Stability and Growth Pact in view of the emerging risk of a significant deviation from the required adjustment path.

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The debt-to-GDP ratio rose from 69,2 % to 74,5 % between 2009 and 2013. The gross government debt is forecast to increase to around 80 % of GDP in 2014 mainly due to the inclusion in the general government debt of liabilities incurred in connection with the transfer of the impaired assets of Hypo Alpe Adria to the Liquidation Entity.