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09. 03. 10. - 15:15

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09. 03. 10. - 15:15

Government reveals harsh 2011 budget cut plans

The coalition government has announced drastic plans for higher taxes next year in its bid to reduce the Austrian budget deficit.

Social Democratic (SPÖ) Chancellor Werner Faymann and People’s Party (ÖVP) Finance Minister Josef Pröll said today (Tues) the coalition planned to spend 1.7 billion Euros less next year. They added that the plan was to take an additional 1.7 billion Euros in taxes at the same time.

Faymann and Pröll remained tight-lipped about tax increases or the introduction of new taxes. The government recently agreed on a so-called bank solidarity tax which it hoped would bring around 500 million Euros per year.

The finance minister today promised the cuts would happen "in an economically reasonable and socially bearable" way next year.

The chancellor meanwhile claimed the SPÖ-ÖVP coalition had no plans to increase so-called "mass taxes" such as the value-added tax (VAT) since such a move would badly affect a large part of the population. "The crisis of the speculators will not be shifted upon the people," he promised.

Pröll has always said the plan was to reduce Austria’s budget deficit to 2.7 per cent of the gross domestic product (GDP) until 2013 by cutting down on spending and subsidy activities instead of introducing new taxes to match the European Union’s Eurozone Maastricht criteria of three per cent.

Austria’s 2009 budget deficit reached 3.5 per cent after just 0.4 per cent in 2008 and 0.6 per cent in 2007. A main aspect of extra expenses the coalition agreed to carry out last year was paying around six billion Euros to banking houses hit by the credit crunch.

Christoph Leitl, head of the Austrian Economic Chamber (WKO), appealed to the government not to raise any taxes. "I think this would be the wrong move," he said, adding that it was important that the economy continued to recover from the effects of the global economic crisis.

Pröll meanwhile did not rule out that family benefits would be cut, while Faymann said he saw the potential to save money where "duplication of work" took place in matters being handled by the state, the provinces and the communities.

This announcement is expected to spark criticism by the opposition since the government’s so-called constitutional reform – which was started years ago to work more economically over issues the State and Austria’s nine provinces deal with together – was on hold for some time.

Audit Office (RH) head Josef Moser recently claimed restarting attempts to successfully continue the constitutional reform had to become a top priority for the government in its bid to reduce the budget deficit.

Austrian Trade Union Federation (ÖGB) chief Erich Foglar meanwhile called for a tax on financial transactions and the reintroduction of the inheritance tax. He added the government would have his support for its bank solidarity tax plans.

Speaking about cuts the ministries would have to make, Pröll today stressed planned measures were "singular disciplinary measures" in a bid to get back on track. He appealed to provincial political leaders not to "chuck money".

Vorarlberg’s ÖVP Governor Herbert Sausgruber already announced he would agree with the federal government’s plans.

Styrian ÖVP Financial Issues Councillor Christian Buchmann however warned the provinces’ financial framework was "already fully stretched".

Pröll meanwhile announced the government would spend 32.64 billion Euros on labour market initiatives and health issues next year – 2.6 per cent less than it was initially planned. This decision could cause public outcry since almost 400,000 people living in Austria had no job last month, around ten per cent more than in February 2009.

Austrian Times

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