Updated stability programme of Austria, 2007-2010 - Main contents

EN

Official Journal of the European Union

C 74/1

On 4 March 2008, the Council examined the updated stability programme of Austria, which covers the period 2007 to 2010.

Over the last few years, Austria has experienced robust economic growth, surpassing that of other euro area countries on average. With private consumption being sluggish, the main contributions to growth came from net exports and investment. Continued wage moderation helped to maintain price stability while boosting external competitiveness.

The Austrian labour market has been performing well, with the unemployment rate being one of the lowest in the EU and the overall employment rate higher than the 70 % targeted by the Lisbon strategy. However, the employment rate of older workers remains well below the EU average. With public debt in excess of 60 % of GDP, the general government deficit has been declining since 2005, but the achievement of a balanced budget has been repeatedly postponed. Lasting consolidation of public finances will hinge also on an overhaul of fiscal relations between different government levels as the present ones are overly complicated and lack transparency.

The macroeconomic scenario underlying the programme envisages that real GDP growth will decelerate from 3,4 % in 2007 to 2,5 % on average over the rest of the programme period. Assessed against currently available information (2), this scenario appears to be based on plausible growth assumptions. Given the latest developments in food and oil prices, inflation could turn out somewhat higher than projected in the programme, but the continued wage moderation should contribute towards maintaining high degree of competitiveness.

For 2007, the general government deficit is estimated at 0,7 % of GDP in the most recent update of the stability programme, against a target of 0,9 % of GDP set in the previous update. This improvement over the target results mainly from the better-than-expected cyclical developments, with revenue exceeding the budgetary plans and offsetting slightly higher-than-planned expenditure growth. In particular, proceeds from wage and corporate tax as well as capital yields taxes gave rise to the higher-than-planned revenue. The Council notes that, overall, budgetary implementation in 2007 could be considered broadly consistent also with the April 2007 Eurogroup orientations for budgetary policies.

The main goal of the medium-term budgetary strategy is to reach the medium-term objective (MTO) — a balanced position in structural terms (i.e. in cyclically-adjusted terms net of one-off and other temporary measures) — by 2010. The headline general government balance is planned to swing from a deficit of 0,7 % of GDP in 2007 to a 0,4 % of GDP surplus in 2010, with a back-loaded adjustment. The primary surplus is expected to improve somewhat less — by 0,9 percentage points of GDP — during the period. The structural deficit, calculated according to the commonly agreed methodology, will narrow by about 1 percentage point of GDP between 2007 and 2010 (3). The consolidation relies largely on expenditure cuts, with restraint in social spending and gains from administrative reforms being the main factors. Compared with the...