VZCZCXRO8449
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHVI #0495/01 1141427
ZNR UUUUU ZZH
R 241427Z APR 09
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC 2435
INFO RUCNMEM/EU MEMBER STATES
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 VIENNA 000495 
 
SIPDIS 
 
AMEMBASSY VIENNA 
SECSTATE WASHDC, PRIORITY 
DEPT OF TREASURY WASHDC, PRIORITY 
INFO EU MEMBER STATES 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN AU
SUBJECT: Austria's 2009/2010 Crisis Budgets - 
Overview 
 
REF:  VIENNA 0402 
 
¶1.  SUMMARY:  Austria's grand coalition government 
introduced its 2009 and 2010 budgets this week, 
projecting federal deficits of 3.2%/GDP in 2009 and 
4.1% in 2010 (total public sector deficit to be 3.5% 
and 4.7% respectively).  Consolidated public sector 
debt will rise to 73%/GDP in 2010 (from 62.5% in 
2008).  Local economists support the expansive 
2009/10 budgets -- and say last year's pre-election 
spending spree was well timed in retrospect -- but 
question the outdated economic forecasts underlying 
the 2010 budget.  Even FinMin Proell acknowledges 
the GoA faces a growing structural deficit, hinting 
at the need for drastic post-crisis consolidation. 
END SUMMARY. 
 
Details of 2009 and 2010 Budgets 
- - - - - - - - - - - - - - - - - 
 
¶2.  On April 21, Vice-Chancellor and Finance 
Minister Josef Proell presented the GoA's budgets 
for 2009 and 2010 to Parliament.  Parliament is 
currently discussing these drafts;  the final vote 
on both budgets is scheduled for May 29.  The delay 
in the 2009 budget submission is due to Austria's 
September 2008 general election (since January 1, 
the GoA has operated via an automatic continuing 
resolution based on 2008 appropriations).  By 
submitting the 2010 budget at the same time, the GoA 
wants to avoid returning to Parliament this fall in 
the midst of a deepening economic crisis. 
 
¶3.  The 2009 budget foresees revenues of EUR 63.9 
billion ($83.0 billion at the current exchange rate 
of $1.30/EUR), expenditures of EUR 77.4 billion 
($100.7 billion), and a deficit of EUR 13.6 billion 
($17.6 billion).  The 2010 budget sees revenues of 
EUR 57.6 billion ($74.9 billion), expenditures of 
EUR 70.7 billion ($91.9 billion), and a deficit of 
EUR 13.1 billion ($17.1 billion).  The federal 
budget deficit (EMU Maastricht definition) will be 
3.2%/GDP in 2009 (0.6% in 2008) and 4.1% in 2010.  A 
2008 agreement requires provincial governments and 
other public bodies to render a small surplus of 
0.5%/GDP annually, but due to the economic crisis 
they are now expected to run a deficit of 0.3- 
0.5%/GDP, so that the total public sector deficit is 
projected to reach 3.5%/GDP in 2009 and 4.7% in 
¶2010. 
 
¶4.  Austria's federal government debt will rise from 
EUR 160.6 billion ($208.8 billion) at the end of 
2008 to EUR 174.2 billion ($226.5 billion) in 2009 
and EUR 187.4 ($243.6 billion) in 2010, in terms of 
GDP from 56.9% to 62.2% in 2009 and 66.0% in 2010. 
The more relevant consolidated public sector debt 
(encompassing all levels of government, according to 
the EMU's Maastricht definition) is projected to 
rise from EUR 176.4 billion ($229.3 billion) in 2008 
to EUR 191.9 billion ($249.5 billion) in 2009 and 
EUR 207.2 billion ($269.3 billion) in 2010 -- i.e. 
from 62.5%/GDP in 2008 to 68.5% in 2009 and 73.0% in 
¶2010. 
 
¶5.  The 2009/10 budgets are based on WIFO/Austrian 
Institute for Economic Research March 2009 economic 
forecasts for economic growth (-2.2% in 2009, 0.5% 
in 2010) and unemployment (5.0% in 2009, 5.8% in 
2010).   These now look overly optimistic.  The 
budgets are also premised on positive effects from 
two economic stimulus packages and an income tax cut 
(retroactive to January 1, 2009). 
 
Broadly Endorsed as Response to Crisis 
- - - - - - - - - - - - - - - - - - - 
 
¶6.  In delivering the budgets to Parliament, FinMin 
Proell drew a dark portrait of the crisis and the 
need to economize wherever possible while not 
undermining aggregate demand.  National Bank 
Governor Ewald Nowotny and leading economists such 
as WIFO's Margit Schratzenstaller voiced support for 
the budgets as appropriate for the crisis. 
Chancellor Werner Faymann rejects any new taxes, but 
 
VIENNA 00000495  002 OF 002 
 
 
expressed openness to discuss further tax reforms. 
Opposition parties were predictably opposed to the 
GoA budget, but voiced no common line. 
 
COMMENT 
------- 
 
¶7. Pre-election sweeteners (like free tuition and 
higher child payments) helped soften the initial 
crisis impact but have widened the permanent gap 
between revenues and expenditures.  Presenting a 
double budget in the midst of a crisis appears to be 
political expediency, intended to save Austria's 
coalition another messy set of hearings in 
Parliament this fall.  FinMin Proell fought a number 
of new spending proposals while preserving spending 
in priority areas, including economic stimulus, bank 
rescue efforts, and science/research.  He will face 
a much trickier challenge in 2011 and 2012, 
especially as elections then loom larger on the 
horizon. 
 
KILNER