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Triple-A-rated
Austria Wednesday passed legislation obliging the country to cut its
national debt and move towards a near-balanced budget, a key element in
eurozone plans to tighten fiscal policy.
The move is line with a
eurozone leaders' pledge in October to write rules on balanced budgets
into national legislation, something achieved by very few members so
far.
Chancellor Werner Faymann's coalition failed however to get
the required support of two-thirds of MPs to have the so-called "golden
rule" on balanced budgets enshrined in the wealthy Alpine country's
constitution.
Instead MPs passed a normal law which can be
overturned by a simple majority in parliament. It obliges the government
to limit the "structural" or non-cyclical federal deficit to 0.35
percent of output from 2017.
Austria's deficit is expected to fall
to 3.9 percent of gross domestic product (GDP) this year and 3.2
percent next year, while debt is set to inch up from 73.6 percent of GDP
this year to 74.6 percent in 2012.
So far among major eurozone
members, only Germany and Spain have passed similar legislation. In
France, the opposition Socialists have said they will vote against a
proposed budget limit that needs 60-percent support to pass.
Excessive
debts, built up after decades of countries living beyond their means,
are one of the main factors behind the eurozone crisis, with investors
unwilling to buy bonds issued by countries already deep in the red.
Faymann
has said Austria, one of the few eurozone countries to have maintained
its top-notch triple-A credit rating, would have to achieve around two
billion euros ($2.7 billion) in savings every year.
To this end,
MPs also overwhelmingly voted in favour Wednesday of receiving no pay
rise this year. Lawmakers in Austria, which has the lowest unemployment
rate in the EU, have received no salary increase since mid-2008.
With the "grand coalition" government unable to agree on much, it is unclear where else the axe will fall, however.
Rating
agency Moody's last month welcomed Austria's moves towards adopting the
"golden rule", saying it "indicates a strong political commitment to
sound public finances."
It noted however that a "significant" acceleration in deficit reduction was needed to meet the target.
Standard
& Poor's warned Monday that it could downgrade Austria and the five
other eurozone countries that still have triple-A ratings -- including
Germany and France -- if leaders failed to get to grips with the crisis.
A
cut of one notch, from AAA to AA+, would increase Austria's interest
payments on its debt by three billion euros ($4.0 billion) each year,
the government has said.
S&P said it would complete a review
of 15 countries' ratings "as soon as possible" following a EU summit
starting in Brussels late Thursday billed as the last chance to save the
beleaguered single currency.
Enlarge PhotoPedestrians walk past the entrance of a Vienna shop in July. Triple-A-rated Austria …
Triple-A-rated
Austria Wednesday passed legislation obliging the country to cut its
national debt and move towards a near-balanced budget, a key element in
eurozone plans to tighten fiscal policy.
The move is line with a
eurozone leaders' pledge in October to write rules on balanced budgets
into national legislation, something achieved by very few members so
far.
Chancellor Werner Faymann's coalition failed however to get
the required support of two-thirds of MPs to have the so-called "golden
rule" on balanced budgets enshrined in the wealthy Alpine country's
constitution.
Instead MPs passed a normal law which can be
overturned by a simple majority in parliament. It obliges the government
to limit the "structural" or non-cyclical federal deficit to 0.35
percent of output from 2017.
Austria's deficit is expected to fall
to 3.9 percent of gross domestic product (GDP) this year and 3.2
percent next year, while debt is set to inch up from 73.6 percent of GDP
this year to 74.6 percent in 2012.
So far among major eurozone
members, only Germany and Spain have passed similar legislation. In
France, the opposition Socialists have said they will vote against a
proposed budget limit that needs 60-percent support to pass.
Excessive
debts, built up after decades of countries living beyond their means,
are one of the main factors behind the eurozone crisis, with investors
unwilling to buy bonds issued by countries already deep in the red.
Faymann
has said Austria, one of the few eurozone countries to have maintained
its top-notch triple-A credit rating, would have to achieve around two
billion euros ($2.7 billion) in savings every year.
To this end,
MPs also overwhelmingly voted in favour Wednesday of receiving no pay
rise this year. Lawmakers in Austria, which has the lowest unemployment
rate in the EU, have received no salary increase since mid-2008.
With the "grand coalition" government unable to agree on much, it is unclear where else the axe will fall, however.
Rating
agency Moody's last month welcomed Austria's moves towards adopting the
"golden rule", saying it "indicates a strong political commitment to
sound public finances."
It noted however that a "significant" acceleration in deficit reduction was needed to meet the target.
Standard
& Poor's warned Monday that it could downgrade Austria and the five
other eurozone countries that still have triple-A ratings -- including
Germany and France -- if leaders failed to get to grips with the crisis.
A
cut of one notch, from AAA to AA+, would increase Austria's interest
payments on its debt by three billion euros ($4.0 billion) each year,
the government has said.
S&P said it would complete a review
of 15 countries' ratings "as soon as possible" following a EU summit
starting in Brussels late Thursday billed as the last chance to save the
beleaguered single currency.