10 April 2012 Stability pact for a sustainable budget policy Finance-Ministry draft agreement provides for implementation of new EU rules in Austria

In the first half of 2012, government leaders and regional governors aim to achieve adoption of the new stability pact, governing the participation of Austria's regional states and local authorities in the reform package. The Finance Ministry's draft of an agreement on the stability pact thereby provides for implementation of the new EU obligations concerning Austria's budget policy by the federal government, the regional states and local authorities.

The plans go beyond implementation of the reform package and the debt brake and implement the new EU rules on sustainability of budget policy within Austria. Thus, not only is an expenditure brake for all regional authorities planned, aimed at ensuring that government expenditure is not allowed to grow more rapidly than medium-term economic growth, but also a reduction in the respective debt ratio. The possible sanctions are to be redefined too; while penalty payments previously had to be imposed by collective agreement, in the case of future violations, they are to fall due automatically unless prevented through a consensual order. The amount of the penalty payment is set at 15% of the amount exceeded. The respective deficit offender will then have one year in which to remedy the stability-pact breach, otherwise the money will be forfeited in favour of those regional authorities which have observed the rules.

The new stability pact is to be effective from 2012 and, unlike previous agreements, has no time limit. The reason for this is that the debt brake agreed at EU level is also to run indefinitely.