VIENNA Feb 9 Austria's governing
coalition is close to clinching a deal to improve public
finances by around 27 billion euros ($35.8 billion) by 2016 via
a mixture of spending cuts and tax hikes, a government source
The accord, which aims to nearly eliminate the structural
budget deficit amid European countries' campaign to put their
financial houses in order, may be presented within days and as
early as Friday, the official said.
Chancellor Werner Faymann of the Social Democrats and his
deputy Michael Spindelegger of the conservative People's Party
were holding "final negotiations" on Thursday, the source said,
after weeks of sometimes frosty jousting over the package.
The 27 billion euro figure represents the cumulative impact
of spending cuts and tax hikes through 2016. The federal
government is supposed to generate 21-22 billion euros of the
total, and states and municipalities the rest.
"The percentage is 30 percent taxes to 70 percent (spending)
cuts," said the source, who declined to be identified because
the discussions were confidential.
Faymann's spokesman did not immediately return messages.
Stung by Standard & Poor's decision last month to strip
Austria of its top debt rating, the government has focused on
whipping finances into shape to help guard against threats from
Austria's strong ties to eastern Europe and struggling Italy.
Austria's 2012 budget forsees the deficit narrowing to 3.2
percent of gross domestic product from a preliminary 3.3 percent
last year. The government wants to get state debt below of 60
percent of GDP by 2020 after peaking at 75.5 percent next year.
Weeks of talks clearly put strains on the coalition by
forcing the parties to confront their voter bases ahead of
parliamentary elections due next year.
While tempers sometimes flared, chances seem low for a
rupture that could trigger early elections even though the
resurgent far-right Freedom Party has stumbled in polls as its
leader takes a beating over clumsy remarks.
The Social Democrats pushed hard for taxes linked to wealth,
while the conservatives were dead set on spending cuts to plug
the hole. Pensioners and public-sector employees have expressed
reservations about the potential impact on them.
According to media leaks, the compromise package under
discussion includes raising the ceiling on social security
contributions, boosting tax rates on holiday and Christmas money
that high earners get, and closing a loophole that exempts
properties owned more than 10 years from capital gains tax.
The conservatives have demanded changes to make early
retirement less attractive, tackle health care costs, reduce
administrative spending and chop subsidies.
The finance ministry says direct and indirect subsidies to
companies and individuals make up around 26 percent of GDP, the
highest rate in the European Union. Beekeepers, oompah bands and
electric bicycles are among the items that qualify for support.
Austrians also stop working sooner than most, in part
because employers offer good deals for older workers to leave.
Men on average retire just shy of age 59 and women at 57.5 even
though the legal minimum age is 65 for men and 60 for women.
Austria spends nearly 13 percent of GDP on pensions.
($1 = 0.7545 euros)
(Editing by Toby Chopra)