REPORT FROM THE COMMISSION Austria Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union
Date: 2020-05-20
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Austria, budget deficit, budget policy, budgetary control, epidemic, gross domestic product, infectious disease, macroeconomics, public debt, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 20.5.2020  COM(2020) 533 final  REPORT FROM THE COMMISSION Austria  Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union  
 
 
REPORT FROM THE COMMISSION 

Austria 

Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of 
the European Union 

1. 

INTRODUCTION  

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of  the 
general  escape  clause  of  the  Stability  and  Growth  Pact.    The  clause,  as  set  out  in  Articles 
5(1),  6(3),  9(1)  and  10(3)  of  Regulation  (EC)  1466/97  and  Articles  3(5)  and  5(2)  of 
Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in times of severe 
economic downturn. In its Communication, the Commission shared with the Council its view 
that, given the expected severe economic downturn resulting from the COVID-19 outbreak, 
the current conditions permit the activation of the clause. On 23 March 2020, the Ministers of 
Finance of the Member States agreed with the assessment of the Commission. The activation 
of  the  general  escape  clause  allows  for  a  temporary  departure  from  the  adjustment  path 
towards  the  medium-term  budgetary  objective,  provided  that  this  does  not  endanger  fiscal 
sustainability in the medium term. For the corrective arm, the Council may also decide, on a 
recommendation  from  the  Commission,  to  adopt  a  revised  fiscal  trajectory.  The  general 
escape  clause  does  not  suspend  the  procedures  of  the  Stability  and  Growth  Pact.  It  allows 
Member States to depart from the budgetary requirements that would normally apply while 
enabling  the  Commission  and  the  Council  to  undertake  the  necessary  policy  coordination 
measures within the framework of the Pact. 

Data  notified  by  the  Austrian  authorities  on  31  March  2020  and  subsequently  validated  by 
Eurostat1 show that the general government balance in Austria reached 0.7% of GDP in 2019, 
while  general  government  gross  debt  stood  at  70.4%  of  GDP.  According  to  the  Stability 
Programme, Austria plans a deficit of 8.0% of GDP in 2020, while debt is planned at 81.4% 
of GDP.2 

The planned deficit for 2020 provides prima facie evidence of the existence of an excessive 
deficit as defined by the Stability and Growth Pact. 

Against this background, the Commission has therefore prepared this report, which analyses 
Austria’s compliance with the deficit and debt criteria of the Treaty. It takes into account all 

1  

2  

https://ec.europa.eu/eurostat/documents/2995521/10294648/2-22042020-AP-EN.pdf/6c8f0ef4-6221-
1094-fef7-a07764b0369f  
On  30  April,  the  Austrian  authorities  submitted  to  the  Commission  a  technical  update  to  the  Stability 
Programme  for  the  years  2019  to  2021.  With  that  update,  the  Austrian  authorities  respond  to  the 
Commission’s  request  as  formulated  in  the  Commission  Opinion  on  the  updated  Draft  Budgetary  Plan 
for 2020.     

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relevant  factors  and  gives  due  consideration  to  the  major  economic  shock  linked  to  the 
COVID-19 pandemic.  

Table 1. General government deficit and debt (% of GDP)  

Deficit 
criterion 

Debt 
criterion 

General 
government 
balance 
General 
government 
gross debt 

2016 

2017 

2018 

2019 

2020 
COM 

2021 
COM 

-1.5 

-0.8 

0.2 

0.7 

-6.1 

-1.9 

82.9 

78.3 

74.0 

70.4 

78.8 

75.8 

Source: Eurostat, Commission 2020 spring forecast. 

2. 

DEFICIT CRITERION  

Based  on  the  technical  update  to  the  Stability  Programme,  Austria’s  general  government 
deficit in 2020 is planned to reach 8.0% of GDP, above and not close to the Treaty reference 
value of 3% of GDP. 

The planned excess over the Treaty reference value in 2020 is exceptional, as it results from a 
severe economic downturn. Taking into account the impact of the COVID-19 pandemic, the 
Commission 2020 spring forecast projects a contraction of real GDP in 2020 by 5.5%.  

The  planned  excess  over  the  Treaty  reference  value  would  be  temporary,  based  on  the 
Commission 2020 spring forecast, which projects the general government deficit to fall under 
3%  of  GDP  in  2021.  However,  those  projections  are  surrounded  by  an  exceptionally  high 
degree of uncertainty.  

In  sum,  the  planned  deficit  for  2020  is  above  and  not  close  to  the  3%  of  GDP  Treaty 
reference value. The planned excess is considered to be exceptional as defined by the Treaty 
and  the  Stability  and  Growth  Pact,  while  the  nature  of  the  excess  is  currently  considered 
temporary. Hence, the analysis suggests that prima facie the deficit criterion as defined by the 
Treaty and Regulation (EC) No 1467/97 is not fulfilled. 

3. 

DEBT CRITERION  

The  government  debt-to-GDP  ratio  decreased  from  74.0%  in  2018  to  70.4%  in  2019.  That 
decline is mainly driven by an improvement of the primary balance and supported by stock-
flow adjustments stemming from the divestment of impaired assets from bad banks included 
into government accounts.  

The notified data show that Austria complied with the debt reduction benchmark in 2019, as 
the gap to the benchmark is -6.1% of GDP. 

The analysis thus suggests that the debt criterion is fulfilled based on the 2019 outturn data. 

4. 

RELEVANT FACTORS  

Article 126(3) of the Treaty provides that, if a Member State does not fulfil the requirements 
under one or both of those criteria, the Commission has to prepare a report. That report must 

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also  “take  into  account  whether  the  government  deficit  exceeds  government  investment 
expenditure  and  take  into  account  all  other  relevant  factors,  including  the  medium-term 
economic and budgetary position of the Member State”.  

Those factors are further clarified in Article 2(3) of Regulation (EC) No 1467/97, which also 
provides  that  “any  other  factors  which,  in  the  opinion  of  the  Member  State  concerned,  are 
relevant in order to comprehensively assess compliance with the deficit and debt criteria and 
which the Member State has put forward to the Council and to the Commission” need to be 
given due consideration. 

As specified in Article 2(4) of Regulation (EC) No 1467/97, as regards compliance with the 
deficit criterion in 2020, since the government debt-to-GDP ratio exceeds the 60% reference 
value and the double condition is not met – i.e. that the deficit remains close to the reference 
value and that its excess over the reference value is temporary – those relevant factors cannot 
be  taken  into  account  in  the  steps  leading  to  the  decision  on  the  existence  of  an  excessive 
deficit on the basis of the deficit criterion for Austria.  

In  the current  situation, a key additional  factor to  take into  consideration regarding 2020 is 
the economic impact  of the COVID-19 pandemic, which has a very substantial impact on the 
budgetary  situation and results  in  a highly uncertain  outlook. The pandemic has  also  led to 
the activation of the general escape clause.  

4.1. 

 COVID-19 pandemic  

The  COVID-19  pandemic  has  led  to  a  major  economic  shock  that  is  having  a  significant 
negative  impact  throughout  the  European  Union.  The  consequences  for  GDP  growth  will 
depend  on  the  duration  of  both  the  pandemic  and  of  the  measures  taken  by  national 
authorities and at European and global level to slow its spread, protect production capacities 
and  support  aggregate  demand.  Member  States  have  already  adopted  or  are  adopting 
budgetary  measures  to  increase  the  capacity  of  health  systems  and  provide  relief  to  those 
individuals  and  sectors  that  are  particularly  affected.  Significant  liquidity  support  measures 
and  other  guarantees  have  also  been  adopted.  Subject  to  more  detailed  information,  the 
competent statistical authorities are to examine whether those measures entail an immediate 
impact on the general government balance or not. Together with the fall in economic activity, 
those measures will contribute to substantially higher government deficit and debt positions. 

4.2  Medium-term economic position  

The  COVID-19  pandemic  is  strongly  affecting  Austria’s  growth  prospects.  Being  a  small, 
open economy, developments in Austria’s economy are strongly linked to those in its main 
trading partners. As a result, containment measures against the virus and related supply chain 
disruptions  hit  both  the  demand  and  supply  side  of  the  economy,  leading  to  a  broad-based 
downturn.  The  tourism-related  sectors  are  hit  particularly  hard  due  to  international  travel 
restrictions. However, given the relatively rapid fall in new infections, Austria was one of the 
first Member States to announce a progressive relaxation of lockdown measures starting from 
mid-April. The contraction in the first half of the year is therefore expected to be somewhat 
less  severe  than  in  other  euro  area  Member  States.  The  Commission  2020  spring  forecast 
projects real GDP to decline by 5.5% in the current year, which is broad-based, and affects in 

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particular domestic demand and export of services. This a mitigating factor in the assessment 
of  Member  State’s  compliance  with  the  deficit  criterion  in  2020.  Assuming  a  gradual 
normalistion, GDP growth is expected to rebound in the second half of the year, followed by 
a solid recovery of 5.0% in 2021. The macroeconomic outlook is marked by an exceptional 
degree  of  uncertainty  related  to  the  duration  of  the  COVID-19  pandemic  and  its  ensuing 
economic impact. 

 4.3 

Medium-term budgetary position 

Based on outturn data and the Commission forecast, Austria was compliant with its medium-
term budgetary objective  in 2019.  

According  to  the  Stability  Programme,  the  mitigation  of  the  socio-economic  effects  of  the 
pandemic  takes  centre  stage  for  managing  the  crisis  and  largely  shapes  the  budgetary 
development. The federal government has launched a comprehensive aid package of EUR 38 
billion (around 9.9% of GDP). The main purpose of the ‘Corona Aid Package’ is to ensure 
the  provision  of  health  care,  secure  jobs  and  preserve  Austria  as  a  business  location.  The 
package consists of immediate help for SMEs, increased public expenditures for health care 
and social policy, direct liquidity provision and transfers for distressed companies, funds for 
short-time  work  and  tax  deferrals.  In  addition,  the  budgetary  impact  of  further  measures  to 
revive the economy is not yet incorporated in the projections.  

4.4.  Medium-term government debt position  

According to the Commission 2020 spring forecast, general government debt is expected to 
rise from 70.4% of GDP in 2019 to 78.8% by 2020. The debt sustainability analysis has been 
updated  on  the  basis  of  this  forecast.  The  analysis  confirms  that,  notwithstanding  risks,  the 
debt  position  remains  sustainable  over  the  medium  term  in  Austria,  also  given  important 
mitigating factors (including  the debt  profile and the historic low level of interest rates). In 
particular, while the government debt position deteriorates as a result of the COVID-19 crisis, 
the debt ratio in the baseline is expected to be on a sustainable (declining) trajectory over the 
medium term (Graph 1).3 

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The baseline  is  based on  the  Commission  2020  spring forecast.  Beyond  2021,  a gradual adjustment  of 
fiscal  policy  is  assumed,  consistent  with  the  EU  economic  and  fiscal  coordination  and  surveillance 
frameworks. Real GDP growth is projected according to the so-called EPC/OGWG T+10 methodology. 
In particular, (real) actual GDP growth is driven by its potential growth and affected by any additional 
fiscal adjustment considered (through the fiscal multiplier). Inflation is assumed to converge gradually to 
2%.  Interest  rates  assumptions  are  set  in  line  with  financial  market  expectations.  Under  the  adverse 
scenario,  higher  interest  rates  (by  500  bps.)  and  lower  GDP  growth  (by  -0.5  pp.),  with  respect  to  the 
baseline, are assumed (throughout the projection horizon). 

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Graph 1: Government debt-to-GDP ratio, Austria, % of GDP 

Source: Commission services. 

4.5  Other factors put forward by the Member State  

On  11  May  2020,  the  Austrian  authorities  transmitted  a  letter  with  relevant  factors  in 
accordance with Article 2(3) of Regulation (EC) No 1467/97. The analysis presented in the 
previous  sections  already  broadly  covers  the  key  factors  put  forward  by  the  authorities. 
Additional  factors  not  yet  mentioned  above  are  measures  to  revive  the  economythat    the 
authorities  are  planning  jointly  with  social  partners.  As  for  the  measures  referred  to  in  the 
technical update to the Stability Programme, the guiding principle of the announced recovery 
programme is to preserve the production potential of the Austrian economy.  

 5. 

CONCLUSIONS 

According to the technical update to the Stability Programme, Austria’s general government 
deficit in 2020 is planned to increase to 8.0% of GDP, above and not close to the 3% of GDP 
Treaty  reference  value.  The  planned  excess  over  the  reference  value  is  considered  to  be 
exceptional and currently considered to be temporary.  

The general government gross debt stood at 70.4% of GDP at the end of 2019, well above the 
60% of GDP Treaty reference value. Austria complied with the debt reduction benchmark in 
2019.  

In line with the Treaty and the Stability and Growth Pact, this report also examined relevant 
factors. As specified in Article 2(4) of Regulation (EC) No 1467/97, as regards compliance 
with the deficit criterion in 2020, since the government debt-to-GDP ratio exceeds the 60% 
reference value and the double condition is not met – i.e. that the deficit remains close to the 
reference  value  and  that  its  excess  over  the  reference  value  is  temporary  –  those  relevant 
factors cannot be taken into account in the steps leading to the decision on the existence of an 
excessive deficit on the basis of the deficit criterion for Austria.  

Overall,  the  analysis  suggests  that  the  deficit  criterion  as  defined  in  the  Treaty  and  in 
Regulation (EC) No 1467/1997 is not fulfilled.  

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