EU puts Austria under budget watch for breaching deficit rules

The European Commission rebuked Austria on Wednesday for violating EU budget rules, after its deficit exceeded the bloc’s limit of three percent of GDP — triggering a procedure that places Vienna under increased spending scrutiny.

Austria posted a budget deficit of 4.7 percent of national output in 2024. The Commission forecasts the deficit will decline slightly to 4.4 percent in 2025 and 4.2 percent in 2026, but still remain above the threshold.

The decision puts Austria among nine countries — including France, Italy, and Belgium — facing an excessive deficit procedure.

Austria joins EU’s ‘sin bin’ for overspending

The European Commission said “the opening of a deficit-based excessive deficit procedure is warranted for Austria,” and will now ask EU finance ministers to formally greenlight the measure.

The excessive deficit procedure (EDP) requires countries to negotiate a fiscal correction plan with Brussels in order to bring their finances back in line with EU rules.

Under those rules, a country’s public deficit must not exceed three percent of GDP, and national debt must remain below 60 percent of GDP.

The Commission also singled out Romania for failing to take “effective action” to curb spending, warning that its expenditure growth poses “clear risks” to reaching its 2030 deficit target.

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Fiscal pressure grows on Austria

Austria’s inclusion in the group of countries facing formal EU deficit procedures comes at a politically sensitive time. With public finances strained by inflation, pandemic-era spending, and rising interest costs, Vienna will now need to convince Brussels of its commitment to fiscal discipline.

The Commission’s recommendation is the first step in a longer process that could lead to greater surveillance — and potentially financial sanctions — if Austria fails to comply.