# Council Decision of 20 June 2014 abrogating Decision 2010/282/EU on the existence of an excessive deficit in Austria (2014/404/EU)

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U.K.

# Council Decision

# of 20 June 2014

# abrogating Decision 2010/282/EU on the existence of an excessive deficit in Austria

# (2014/404/EU)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 126(12) thereof,

Having regard to the recommendation from the European Commission,

Whereas:

(1)On 2 December 2009, following a recommendation from the Commission, the Council decided, in Decision 2010/282/EU(1), that an excessive deficit existed in Austria. The Council noted that the general government deficit planned for 2009 was                              3,9 % of GDP, thus above the 3 % of GDP Treaty reference value, while the general government gross debt was planned to reach                              68,2 % of GDP in 2009, thus above the 60 % of GDP Treaty reference value. The general government deficit and debt for 2009                              were subsequently revised to 5,5 % and 116,4 % of GDP, respectively.

(2)On 2 December 2009, in accordance with Article 126(7) of the Treaty and Article 3(4) of Council Regulation (EC) No 1467/97(2), the Council, based on a recommendation from the Commission, addressed a Recommendation to Austria with a view to bringing                              the excessive deficit situation to an end by 2013 at the latest. That Council Recommendation was made public.

(3)In accordance with Article 4 of the Protocol on the excessive deficit procedure annexed to the Treaties, the Commission provides                              the data for the implementation of the procedure. As part of the application of that Protocol, Member States are to notify                              data on government deficits and debt and other associated variables twice a year, namely before 1 April and before 1 October,                              in accordance with Article 3 of Council Regulation (EC) No 479/2009(3).

(4)When considering whether a decision on the existence of an excessive deficit ought to be abrogated, the Council is to take                              a decision on the basis of notified data. Moreover, a decision on the existence of an excessive deficit should be abrogated                              only if the Commission forecasts indicate that the deficit will not exceed the 3 % of GDP Treaty reference value over the                              forecast horizon(4).

(5)Based on data provided by the Commission (Eurostat) in accordance with Article 14 of Regulation (EC) No 479/2009, following                              the April 2014 notification by Austria, the Stability Programme for 2014-18 and the Commission services 2014 spring forecast,                              the following conclusions are justified:-  After peaking at 4,5 % of GDP in 2010, Austria's general government deficit fell to 2,5 % and thus below the 3 % of GDP Treaty                                    reference value already in 2011. This improvement, compared to the initially planned fiscal outcome, was partly related to                                    the recognition of government expenditure measures for the recapitalisation of the ‘bad bank’ KA Finanz (about 0,4 % of GDP)                                    in the 2012 government accounts, when the resultant impacts were confirmed based on the bank's financial statements. To a                                    smaller extent, the fall in deficit stemmed from lower than planned expenditure at all levels of government and more favourable                                    economic conditions, resulting in higher than projected revenue growth. In 2012, in contrast with both national and Commission                                    forecasts the general government deficit, at 2,6 % of GDP, continued to remain below 3 % of GDP. However, due to looming risks                                    related to possible further financial sector repair operations, which could have resulted in a deficit above 3 % of GDP in                                    following years, the Commission did not recommend early abrogation of the EDP. Those risks have, however, only partly materialised                                    and for 2013, Austria has notified a deficit of 1,5 % of GDP. This further fall in the deficit was largely due to the unexpected                                    size of the one-off measures, involving the sale of the mobile phone spectrum, which accounted for almost 0,6 % of GDP.                                  
-  The Stability Programme for 2014-18, adopted by the Austrian government on 29 April 2014, plans an increase of the general                                    government deficit to 2,7 % of GDP in 2014 and then a decrease to 1,4 % of GDP in 2015. The Commission services 2014 spring                                    forecast projects a deficit of 2,8 % of GDP in 2014 and 1,5 % of GDP in 2015. Thus, the deficit is set to remain below the                                    3 % of GDP Treaty reference value over the forecast horizon. Moreover, in the framework of Regulation (EU) No 473/2013, the                                    Government announced, and confirmed in a letter to the Commission, a set of additional savings and higher revenues which the                                    Commission has assessed to amount to 0,2 % of GDP in order to avoid a planned significant deviation from the required adjustment                                    path towards the medium-term budgetary objective (MTO).                                  
-  The increase in the general government deficit in 2014 is caused by the establishment of a defeasance structure (Liquidation                                    Entity, *Abbaueinheit*) to wind down the impaired assets of Hypo Alpe Adria. The impact of the establishment of the Liquidation Entity for Hypo                                    Alpe Adria is estimated by an external expert group of advisors, appointed by the Government, to amount to up to EUR 4 billion                                    (1,2 % of GDP) including the effect of a capital injection of EUR 750 million already undertaken in 2014. The final recording                                    of the deficit-increasing impact will depend on an independent asset quality review of Hypo Alpe Adria's assets, which will                                    be undertaken later this year in order to allow Eurostat to evaluate the statistical effect of this operation. The current                                    evaluation made by the expert group seems to be characterised by a reasonable degree of caution and therefore can be regarded                                    as plausible. However; a larger deficit impact stemming from this operation cannot be excluded. This represents the main downside                                    risk to the 2014 deficit projection. At the same time, also taking into account the additional discretionary measures announced                                    by the Government after the publication of the Commission services 2014 spring forecast, which should lead to a further reduction                                    of the headline deficit, risks to the 2014 deficit appear overall balanced.                                  
-  The structural balance, that is the general government balance adjusted for the economic cycle and net of one-off and other                                    temporary measures, has improved on average by almost 0,7 % of GDP each year between 2011 and 2013, in line with Council recommendations.                                    According to the Commission services 2014 spring forecast, its assessment of the updated draft budget plan submitted on 29                                    April 2014 and of the additional measures announced by the Government on 12 May 2014, the structural balance is projected                                    to improve slightly in 2014. In that context, it appears that there is currently an emerging gap of 0,5 % of GDP relative                                    to the required adjustment of the structural balance towards the MTO in 2014, suggesting that there is a need to reinforce                                    the budgetary measures in order to ensure full compliance with the preventive arm of the Stability and Growth Pact in view                                    of the emerging risk of a significant deviation from the required adjustment path.                                  
-  The debt-to-GDP ratio rose from 69,2 % to 74,5 % between 2009 and 2013. The gross government debt is forecast to increase                                    to around 80 % of GDP in 2014 mainly due to the inclusion in the general government debt of liabilities incurred in connection                                    with the transfer of the impaired assets of Hypo Alpe Adria to the Liquidation Entity.                                  

(6)Starting from 2014, which is the year following the correction of the excessive deficit, Austria is subject to the preventive                              arm of the Stability and Growth Pact and should progress towards its MTO at an appropriate pace, including respecting the                              expenditure benchmark, and make sufficient progress towards compliance with the debt criterion in accordance with Article                              2(1a) of Regulation (EC) No 1467/97.

(7)In accordance with Article 126(12) of the Treaty, a Council Decision on the existence of an excessive deficit is to be abrogated                              when the excessive deficit in the Member State concerned has, in the view of the Council, been corrected.

(8)In the view of the Council, the excessive deficit in Austria has been corrected and Decision 2010/282/EU should therefore                              be abrogated,

HAS ADOPTED THIS DECISION:

# Article 1U.K.

From an overall assessment it follows that the excessive deficit situation in Austria has been corrected.

# Article 2U.K.

Decision 2010/282/EU is hereby abrogated.

# Article 3U.K.

This Decision is addressed to the Republic of Austria.

Done at Luxembourg, 20 June 2014.

*For the Council*                            

*The President*                            

G. A. Hardouvelis                            

1

Council Decision 2010/282/EU of 2 December 2009 on the existence of an excessive deficit in Austria (OJ L 125, 21.5.2010, p. 32).                           

2

Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit                              procedure (OJ L 209, 2.8.1997, p. 6).                           

3

Council Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the excessive deficit procedure annexed                              to the Treaty establishing the European Community (OJ L 145, 10.6.2009, p. 1).                           

4

In line with the ‘Specifications on the implementation of the Stability and Growth Pact and Guidelines on the format and content                              of Stability and Convergence Programmes’ of 3 September 2012. See: http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/coc/code_of_conduct_en.pdf