With Vienna set for a pro-Putin chancellor, the country’s failure to stick to European spending rules could land it in hot water.
BRUSSELS — As Austria teeters on the brink of forming its first far-right-led government since World War II, the most immediate clash between Vienna and Brussels won’t center on Russian sympathies or anti-migrant rhetoric.
Instead, it’s shaping up to be a battle over public spending.
Once lauded for its fiscal discipline, the Alpine nation risks being punished by the European Commission over excessive public spending from 2024 to 2026.
To avoid being placed under the European Union’s special regime for over-spenders, Vienna must now present a credible plan to cut spending to the Commission by Jan. 21.
Its chances of meeting the deadline will depend on whether talks between the far-right Freedom Party (FPÖ), whose leader Herbert Kickl is the favorite to become chancellor, and the conservative People’s Party (ÖVP) deliver a rapid agreement.
A further collapse in the talks would see Austria miss a crucial EU deadline to submit the spending reduction plan — and, embarrassingly, end up in the same basket as highly indebted Italy and France.
While the size of Austria’s budget deficit would normally warrant the punishment the EU metes out to overspending countries, the Commission delayed the process in November to give Vienna extra time to get its house in order.
As part of the deal, Austria is expected to present a raft of measures showing it can slash its public spending deficit to below 3 percent of GDP over the coming years by the next EU finance ministers’ meeting, known as ECOFIN, on Jan. 21.
But time is running short. A Commission spokesperson told POLITICO that to meet the requirements, the package “should be credibly announced and sufficiently specified well ahead of the January ECOFIN.”
The EU is legally bound to decide whether to open a so-called excessive deficit procedure on Austria by the end of January, the spokesperson added.
Faced with the prospect of missing the deadline, the FPÖ and ÖVP are racing to agree to an economic plan by early next week, according to an official with knowledge of proceedings.
While the far-right FPÖ supported major tax cuts in their election manifesto, the party came out in support of tidying up the budget in a press conference on Tuesday.
Kickl called for a “massive political fire brigade operation” to bring the current “debt conflagration that threatens to consume everything under control.”
Previous coalition talks between the Social Democrats and the ÖVP collapsed over sharp disagreements on how to balance the budget.
A push for higher taxes by the Social Democrats led Austria’s business associations to support a coalition between the ÖVP and the far right.
