Options for the Consolidation of Government Budget in Austria. Executive Summary

Fiscal policy in Austria has dampened to an important extent the deep recession triggered by the financial and economic crisis of 2008-09 by deliberately accepting a further deterioration in the public debt position. At present, domestic and international projections suggest that the downturn has passed its trough and that demand and output are recovering gradually. Therefore, a consolidation of government budgets over the medium term has from now to be put on the policy agenda. In its updated Stability Programme submitted in late January 2010, the Austrian government has outlined a consolidation path defining the scope and pace of the planned improvement in the general government balance: the deficit is to be reduced from 4.7 percent of GDP in the current year to 4 percent in 2011, 3.3 percent in 2012 and 2.7 percent in 2013. This path is ambitious, but realistic. It should be implemented in a way that does not put at risk the achievement of other economic policy objectives, but support them to the extent possible. The shape of the consolidation process depends on strategic policy decisions, such as on the allocation of the burden among the different government levels, the relative weight of adjustment via the expenditure versus the revenue side, or the potential contribution from privatisation of public assets. This study sets out to present considerations and suggestions in this regard. These are intended to define the range of policy options for consolidation without leading to explicit recommendations, even if advantages and drawbacks are set against each other on the basis of the empirical record.