In 1998, the Federal government will continue the consolidation process. The net deficit of ATS 67.3 billion amounts to 2.6 percent of GDP (1997 2.8 percent). The states and municipalities will also continue to pursue fiscal restraint. Thus, the general government deficit according to the Maastricht criteria will fall to 2.5 percent of GDP, and Austria will meet an important requirement for participation in the European Economic and Monetary Union. The reduction in the deficit ratio, which reached 3.7 in 1996, was achieved by savings on the expenditure side as well as additional (tax) revenues. Federal expenditures as a percentage of nominal GDP are expected to drop from 29.6 percent in 1996 to 28.9 percent in 1998, while revenues are projected to rise from 25.9 percent in 1996 to 26.3 percent, according to the draft budget for 1998. To an increasing extent, the Federal administration finances the activities of other public sector entities and of private enterprises. This renders difficult an analysis of the (direct) employment effects of the Federal budget. These changes, particularly the decision to move certain items off-budget, mainly concern investment outlays. According to the draft budget for 1998, investment expenditures will total ATS 11.3 billion, 1.5 percent of total expenditures in the regular budget. By comparison, investment spending accounted for almost 10 percent of expenditures in the mid-1970s. Outlays for the provision of retirement income account for a major part of the Federal budget. The Federal administration will spend a total of ATS 155 billion on this item, more than 20 percent of total expenditures. Offsetting items on the revenue side are social security contributions by public servants, and payments by the railroads and the postal service; nonetheless, net spending on the pension system (including transfer payments to the social security institutions) is projected to be ATS 136.8 billion. Interest payments for the public debt also loom large in the Federal budget, amounting to ATS 101.1 billion in 1998, up 0.6 percent from 1997. This figure would be higher were it not for the austerity program and the decline in interest rates. At the end of October 1997, the average interest rate of the Federal debt was 6.0 percent (down from 6.2 percent at the end of 1996). A drop in the average interest rate by 0.2 percentage points translates into savings of about ATS 3 billion per year. In the 1998 draft budget, tax revenues are set to rise by 5.7 percent to ATS 667.7 billion, but a substantial part of this increase (some ATS 27 billion) is due to measures which will not raise the effective tax rates. This applies to the shift in the time period when a tax refund is recorded (ATS 15 billion) and changes in the value added tax (a limited exemption from the value-added tax for hospitals and social institutions), which will generate ATS 12 billion in additional receipts but which are to be reimbursed. The share of personal income tax receipts will stagnate at 11.6 percent, after a hefty increase in the previous year.
Der Bundeshaushalt im Konsolidierungsprozeß; The Consolidation Process of the Federal Budget
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