UPDATE 2-Budget discipline in regions trims Austria's deficit

Thu Mar 28, 2013 6:20am EDT

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* 2012 budget gap 2.5 pct of GDP under Maastricht criteria

* Debt 73.4 pct of GDP

* Provinces, municipalities balanced budgets (Adds comment from Finance Ministry)

By Georgina Prodhan

VIENNA, March 28 (Reuters) - Austria ran a state budget deficit of 2.5 percent of gross domestic product in 2012, smaller than the government had forecast and below EU targets, the country's statistics office said on Thursday.

The country had projected a 2012 deficit of 3.1 percent given the cost of aid to struggling state-owned banks and because of slower-than-expected economic growth.

But the finance ministry said the better-than-expected result was due to the country's provinces and municipalities' having balanced their budgets, exceeding targets agreed with the federal government.

Euro zone countries are supposed to have deficits of no more than 3 percent of GDP. Austria's deficit was 2.5 percent in 2011, according to revised figures.

The ministry did not immediately comment on whether the better-than-expected finances meant Austria could reach future targets early.

It aims to run a budget surplus in 2017 by extending its spending curbs an extra year, the government said this month.

Austria last year had to help state-owned 'bad bank' KA Finanz shoulder writedowns on Greek debt, did a 1 billion euro ($1.3 billion) rescue that gave the state a stake in Volksbanken AG, and also supported state-owned Hypo Alpe Adria bank.

Volksbanken said on Thursday it could not rule out having to ask for more state aid.

Public sector debt stood at 73.4 percent of GDP in 2012, the statistics office said, up from 72.5 percent in 2011. State revenues and spending both rose by 4.4 percent. ($1 = 0.7824 euros)

*For a table of forecasts see: (Reporting by Georgina Prodhan; Editing by Jeremy Gaunt)

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