Bloomberg News

Austria Sees 2012 Deficit Narrowing to 3.2%, Fekter Says

October 19, 2011

Oct. 19 (Bloomberg) -- Austria’s budget deficit will narrow to 3.2 percent of gross domestic product next year on increased revenue from sales and income taxes even as the economy slows more than forecast, the finance ministry said.

The Alpine republic, one of the six remaining AAA-rated countries in the euro area, will probably beat its deficit target of 3.9 percent this year, Finance Minister Maria Fekter told journalists late yesterday in remarks embargoed for today. She declined to elaborate. Fekter is presenting the 2012 budget in Austria’s parliament today in the capital Vienna.

“We expect to be able to keep the AAA rating with this budget,” Fekter said. She also said she hopes that the extra interest Austria has to pay for its debt compared with German government bonds “won’t rise further.”

The spread of Austrian over German 10-year bonds yesterday rose to 101.7 basis points, the highest since April 2009. While Austria’s deficit is below the euro-area average, investor concerns still linger that some of lenders may require more aid because of their exposure to eastern Europe. Two of Austria’s four biggest banks last week postponed repayment of a total of 1.5 billion euros ($2.1 billion) of aid because of unexpected losses.

The government had in April foreseen a deficit of 3.3 percent in 2012, based on an estimated 2 percent GDP growth. While it now assumes growth to slow to 0.8 percent, it sees solid consumption to help expand sales tax revenue and high employment to increase wage tax receipts, together more than making up for the loss in output growth, Fekter said.

--Editors: James Hertling, Andrew Davis

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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