* Government unveils 26.5 bln euros in savings, tax hikes
* Pact emerges after weeks of talks
* Vienna pursues deal to tax undeclared assets in Swiss
(Adds details from government plan)
By Michael Shields
VIENNA, Feb 10 Austria's fractious
governing coalition has embarked on its most ambitious project
to date - balancing the budget by 2016 in a risky campaign
before an election battle next year against the resurgent far
The Social Democrats (SPO) and conservative People's Party
(OVP) unveiled details on Friday of a cumulative 26.5 billion
euro ($35 billion) package of spending cuts and tax hikes.
The goal is to chop structural budget deficits within five
years, on the way to getting state debt below the European
Union's ceiling of 60 percent of economic output this decade,
from an expected peak of 75.4 percent next year.
Chancellor Werner Faymann of the SPO and Vice Chancellor
Michael Spindelegger of the OVP laboured for weeks on the
package, which gained added momentum when Standard & Poor's
stripped Austria of its top notch triple-A debt rating last
Spending curbs make up around 70 percent of the mixture and
tax hikes 30 percent. State and local governments will
contribute more than 5 billion euros to the pot.
The deal makes Austria a shining example of euro zone
countries' efforts to convince financial markets they are
serious about taming deficits. But the cost could be high with
Retirees will see pensions rise by less than inflation in
2013 and 2014. It will be harder to take early retirement, a key
step in a country where few work until the regular retirement
Civil servants face a pay freeze next year and a minor
increase in 2014. The government slapped a hiring freeze on
posts outside the police, justice and teaching sectors.
People who earn more than 184,000 euros a year face tax
surcharges until 2016 and investors who sell properties after 10
years will no longer escape capital gains taxes, but the SPO
failed to push through the general wealth tax it favours.
The pact limits corporate tax deductions for losses abroad;
sees income from an EU-wide financial transaction tax from 2014;
slashes costs for health care and infrastructure projects; and
cuts the size of parliament - a step more for symbolism than
It said taxing an estimated 12-20 billion euros in
undeclared Austrian assets in Swiss accounts - along the lines
of a deal Germany struck with Switzerland - could raise around 1
billion in 2013 and 50 million a year later.
The deal hammered out over weeks of talks links the fates of
Faymann and Spindelegger, whose parties have dominated post-war
In a humorous play on the "Merkozy" tag for the allied
leaders of Germany and France, the Kurier paper wondered in a
cartoon whether to call the domestic duo Faylegger or Spinmann.
But with a resurgent right-wing and eurosceptic Freedom
Party waiting in the wings before parliamentary elections due by
September 2013, the future of the consolidation pact is no
Political analyst Peter Filzmaier noted that opinion polls
since the end of 2010 have shown that neither party has been
able to match its showing in 2008 elections, when the SPO won 30
percent and the OVP 26 percent.
"It is not the case that (the proposed) concrete savings and
tax measures will bring the chances of the parties to a middling
level. It is more whether the government can really implement
them," he told Austrian radio.
"If yes, it shows determination, the ability to make
decisions and leadership qualities, which could give them an
advantage over the opposition. If the image of the least common
denominator (approach) firms up, then chances for the opposition
parties will of course rise further."
The pact still has to make its way through parliament, which
gives lobby groups more time to exert pressure for changes.
"The final chapter has not been written on the savings
package. Now we have to wait and see how hefty the protests are
and if the government gives in," wrote Claus Pandi, columnist
for the mass-circulation Krone newspaper.
($1 = 0.7517 euros)
(Editing by Susan Fenton)