Updated stability programme presented by Vienna leads to very critical comments from Commission

Brussels, 26/04/2000 (Agence Europe) - On the initiative of Pedro Solbes, the European Commission decided on Wednesday to address a fairly critical recommendation to the EcoFin Council - which will debate it at its meeting on 8 May - regarding the updated stability programme presented - for 2000-2003, by Austria under the Stability and Growth Pact. For the Commission, Vienna's medium-term budgetary goals "lack ambition" as the "the minimum budgetary position (…) required to comply with the demands of the Stability and Growth Pact will only be met in 2003, the last year of the period covered by the programme". In addition, "achieving this target relies heavily on one-off measures, in particular the sale of real estate property". According to the Commission, it would have been desirable to provide for a more rapid reduction of the public deficit to attain the required safety margin to secure the balance of public finances", as the Council recommended in its opinion on the initial Austrian programme.

In its recommendations, the Commission makes the following observations:

• The macroeconomic scenario underlying the programme - average annual growth rate of 2.5 - seems plausible;
• The deficit targets for 1998 and 1999 were met, but almost no progress was recorded in budgetary consolidation between 1997 and 1999. In addition, the debt ration went from 63.5% to 64.9% of GDP between 1998 and 1999, which "is in conflict with Treaty obligations";
• The annual deficit ratio of public administrations would go from 2% in 1999 to 1.3% in 2003, whereas that of the debt would fall, over the same period, from 64.9% to 61.2%;
• The budgetary goals could only be met by heavy use of "one-off measures, in particuylar the sale of real estate property";
• The Laender and social insurance institutions "are required to attain the general government deficit targets", which "appears highly uncertain" (notably due to recent estimates on increasing deficits in the health care sector);
• The programme comprises major structural reforms, in particular regarding pensions, health care and public administration. It is "essential" that the Austrian Government should implement these "rigorously" and with "the utmost determination".

Concluding, the Commission considers that "the Austrian Government must do all it can to set more ambitious deficit targets". It then stipulates: "A faster decline in the deficit ratio would be necessary to attain the required safety margin for the government balance (…). In addition, it is essential that the government replace the planned one-off measures by structural reforms taking effect in 2001 at the latest.