Updated stability programme of Austria, 2006-2010 - Main contents

EN

Official Journal of the European Union

C 182/1

On 10 July 2007 the Council examined the updated stability programme of Austria, which covers the period 2006 to 2010. Following the general elections in October 2006, a new government was formed in January 2007, which presented the twin budget for 2007/2008 to Parliament on 29 March 2007. On the same day, the updated stability programme was submitted, two and a half months after the 15 December deadline for Austria in the code of conduct.

The macroeconomic scenario underlying the programme envisages that real GDP growth will decelerate from a cyclical peak of 3,1 % in 2006 to 2

% on average over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on somewhat cautious growth assumptions until 2008, as recent data point to more robust growth. For the outer years of the programme period, the projection seems plausible, even if the growth rates are slightly higher than the average potential growth rate calculated by the Commission services. The programme's projections for inflation appear realistic.

For 2006, the general government deficit amounted to 1,1 % of GDP, against a target of 1,7 % of GDP set in the previous update of the stability programme. This improvement over the target results from the better-than-expected cyclical developments. Although the revenue-to-GDP ratio fell slightly compared with the previous year, it turned out higher by more than one percentage point over the target. Higher-than-expected GDP growth contributed to the decline in the expenditure ratio compared with the previous year. However, the expenditure ratio increased by more than

percentage point over the target, indicating that budgetary execution was not as tight as planned.

The main goal of the budgetary strategy is to reach a balanced budget over the cycle, reaping the benefits of administrative reform while reinforcing expenditure in several categories. In comparison with the previous update, the latter is reflected in the postponement of the budgetary consolidation to the outer years of the programme period. The update projects the general government position to improve from a deficit of 1,1 % of GDP in 2006 to a surplus of 0,4 % in 2010. The consolidation, which is back-loaded to the last two years of the programme period, is planned to be expenditure-based, with restraint in social spending and the gradual phasing-out of some specific expenditure being the main factors. Compared with the previous programme, the new update backloads further the planned adjustment against a broadly more favourable macroeconomic scenario.

The postponement of the budgetary adjustment is reflected also in the structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology, which improves only very gradually from a deficit of around 1 % of GDP in 2006 and swings to a slight surplus only by the end of the programme period. According to the programme, the profile of the adjustment is affected by the purchase of military equipment between 2007 and 2009, which, unlike the Commission services'...