Options for Fiscal Consolidation in Austria. Initial Situation and Conditions for Success

The programmes for financial market stabilisation and economic stimulus, which were implemented to cushion the effects of the financial and economic crisis, as well as additional government expenditures in the wake of the crisis, have entailed substantial costs for government budgets. Furthermore, Austria had a structural (i.e., non-cyclical) deficit already before the crisis. With increasing signs of an economic recovery the medium-term consolidation of government budgets is now on the agenda. The Austrian federal government aims at reducing the Maastricht deficit to 2.7 percent of GDP by 2013. In the medium term fiscal consolidation is necessary to regain room for manoeuvre for fiscal and economic policy and to avoid undesired possible distribution effects of government debt. In the short term the consolidation effects can be expected to have some effect on the labour market. In the medium term the advantages of the regained economic policy scope will have a positive impact on the labour market.