WRITTEN QUESTION E-2121/01

by Johannes Voggenhuber (Verts/ALE) to the Commission

(13 July 2001)

Subject: The influence of certain consolidation measures by the Republic of Austria on the financial balance of the State sector in accordance with the European System of Integrated Economic Accounts (ESA) 95

As part of measures to consolidate the budget in order to achieve a balanced State budget in Austria, some Länder are planning to alter the financing of clinics, set up property companies to deal in land, and sell off loans which have been granted to encourage the building of housing. Hitherto the Länder were required to finance their clinics' losses by means of grants. However, in Carinthia, for example, it is intended that as from 2001 the Clinics Operating Company, which has been a market enterprise since 1997, should take out a loan to meet all losses. At the same time the Land of Carinthia will grant it an interest-free loan equivalent to the annual loss and will subsequently assume the resulting annuity service and ancillary expenses. In the context of achieving the joint consolidation objective, the Federal Ministry of Finance is explicitly in favour of this change in the method of financing clinics because the clinics are market enterprises and the loans which they take out are not attributed to the Land. How should the interest-free loans from the Länder to the clinics actually be treated under ESA 95?

By means of an amendment to the Federal Real Estate Act, the Federal Government has transferred property valued at ATS 33 billion to the Federal Real Estate Company (BIG). The BIG is wholly owned by the Federation. The purpose of setting up the BIG is to bring into line with private-sector conditions the management of buildings and land belonging to the Federation and the use and realisation of property transferred or acquired by the Federation. How does this revenue from the transfer of property affect the Federation's financial balance (pursuant to ESA 95)? Many Länder, including Carinthia, are planning to set up property companies of their own to deal in land in a similar way, which would be wholly owned by the Land. Property belonging to the Land would be sold to these companies. How will this revenue affect the financial balances of the respective Länder (pursuant to ESA 95)?

Answer given by Mr Solbes Mira on behalf of the Commission

(18 September 2001)

The issues raised should be examined in the light of the European System of Integrated Economic accounts (ESA 95).

Austria notifies the Commission of its deficit and debt data twice a year. In this context, regular follow-up missions to Member States are organised by Eurostat. The Austrian authorities will most likely inform Eurostat about the issues raised in the course of the next mission, which is supposed to take place before the end of the year. A detailed discussion between Eurostat and the Austrian Central Statistical Office will then take place.

As regards the arrangements relating to public clinics and the arrangements relating to the Federal Real Estate Company (BIG), the ESA 95 principles should be recalled.

In ESA 95, public clinics are classified in the non-financial corporations sector (outside the general government) only if they are institutional units and if they are providing market services.

To provide market services, they must be mainly financed by households and/or private insurance companies, or mainly financed by general government if they provide services for the general government at economically significant prices.

It they are non-market, on the contrary, they must be classified in the general government sector.

As regards the interest-free loans from the Länder to the clinics, if Austrian public clinics are institutional units providing market services, this should be treated as follows:

- If the provision of funds is an unrequited transaction, that is if loans are made with no likelihood of repayment, it should be treated as a capital transfer;

- If the provision of funds implies a repayment to the government under contractual conditions (the date of repayment is explicit) and there is a clear likelihood of repayment, it should be treated as a loan. However, the potential interest on the loan which is being waived might be considered a subsidy to the provision of services.

Concerning the transfer of property to the Federal Real Estate Company (BIG) it should be recalled that according to the ESA 95 principles:

- If most BIG activity is devoted to providing services to general government units, then it should be classified in the general government sector;

- If BIG is renting/leasing mostly outside general government, it should be treated as a non-financial corporation.

A final decision on BIG classification, however, will be taken by Eurostat following the forthcoming visit to the Austrian Central Statistical Office.