2023-09-14 18:27:41
Brunner: The federal government’s debt management strategy will not change
Vienna (PK) – The Budget Committee expressed by the majority today. The amendment responds to changed conditions on the financial market. In addition, the financing of the anti-inflation package measures for families should be secured. The MPs from the ÖVP, FPÖ and the Greens spoke out in favor of corresponding changes to the 2023 budget and the Federal Financial Framework Act 2023 to 2026.
The Budget Committee also dealt with the report on the preliminary results of budget implementation for 2022 as well as the monthly results of budget implementation for the months of May, June and July. The majority of people took note of these reports. The majority also acknowledged the Finance Minister’s report on overuse of funds and prior charges in the second quarter of 2023. Furthermore, a report on the status of the European Stability Mechanism (ESM) in the second quarter of 2023 and a report on the Austrian liabilities for the European Financial Stability Facility ( EFSF) was noted by the majority at the end of the second quarter of 2023.
Federal liquidity management reacts to changes in the capital market
An amendment to the Federal Financial Framework Act 2023 to 2026 and the Federal Finance Act 2023 is intended to provide for the financing activities of the Austrian Federal Financing Agency (OeBFA) (2170 d.B.). As ÖVP MP Rudolf Taschner explained, when the 2023 budget was drawn up, an average term of three to six months was assumed for the short-term obligations. Changed conditions on the financial market have meanwhile led to an actual average period of just two to eight weeks, as investors assume further interest rate increases by the European Central Bank (ECB) and prefer shorter investments.
The higher turnover rate leads to additional deposits and additional payments in the cash flow from financing activities. According to the draft law, the Federal Finance Act 2023 provides for an excess of the payment cap in the cash flow from financing activities of €45 billion for short-term financing. The authorization shows the sum of all additional possible payments for the repayment of short-term obligations, which must be covered by corresponding additional payments from new financing.
The amendment also makes provisions for the expected financial needs within the framework of the Cost of Living and Housing Costs Compensation Act; the Finance Minister is granted the authority to exceed this amount of up to €140.5 million for 2023.
The SPÖ and NEOS MPs did not approve the amendment. SPÖ budget spokesman Kai Jan Krainer warned that the finance minister might increasingly rely on short-term and therefore highly risky financing via the capital market when servicing the federal government’s debt. That would contradict the long-standing political consensus that the republic relies on long-term financing of the national debt.
Finance Minister Magnus Brunner emphasized that this is not regarding national debt management, but rather regarding ensuring the OeBFA’s ability to act in liquidity management. The department stated that in view of a higher volume of federal government liabilities and due to the changed conditions on the capital market, the OeBFA must be enabled to act accordingly.
Preliminary annual result for 2022: €20.8 billion deficit in 2022
The bottom line is that the federal government’s deficit of €20.8 billion (net financing balance) for 2022 was €2.3 billion better than originally budgeted. This emerges from the Finance Minister’s report on the preliminary fiscal success for 2022, which was noted by the Budget Committee with the votes of the ÖVP and the Greens (123/BA).
The federal government’s disbursements amounted to €111.4 billion. The Ministry of Finance attributes the increase compared to the planned values primarily to COVID-19 crisis management (+€3.4 billion), combating the energy crisis (+€2.2 billion) and higher refinancing costs (+1.7 billion). . €.) returned. However, less was spent than expected on the investment bonus, the green transformation and the export promotion law.
In terms of deposits, there was an increase of €4.6 billion (+5.3%) in 2022, at €90.6 billion, compared to 2021, and the estimated values were even exceeded by €6.2 billion. The Ministry of Finance justifies this with the more positive economic development, which results in higher deposits from public taxes, in the labor sector (mainly unemployment insurance contributions) and in the family and youth sector (FLAF deposits). According to Statistics Austria, the general government Maastricht balance in 2022 will be -3.2% of GDP, and the debt ratio will be 78.4% of GDP (-0.1 percentage points). The total reserves amounted to €21.2 billion as of December 31, 2022, which is €1.3 billion more than in 2021.
In response to a question from FPÖ MP Hubert Fuchs regarding how reporting might be improved, the head of the parliamentary budget service, Helmut Berger, explained that the departments would present extensive figures. However, there is often insufficient transparency regarding the reasons for the increase or decrease in key figures. The budget service tries to research these reasons when preparing the figures for the MPs. However, it would be desirable if they were included in the delivery.
Budget achievements for May, June and July 2023
The Budget Committee also had the monthly results of the federal budget for May, June and July 2023 (131/BA, 132/BA, 136/BA). They were noted with the votes of the ÖVP and the Greens.
The federal government’s deficit was €8.4 billion at the end of July 2023, which was €0.2 billion more positive than in 2022. Both deposits and withdrawals increased. The Ministry of Finance cites higher payouts for pensions, particularly due to the pension adjustment in 2023, as well as covering the liquidity needs of the pension insurance providers with an increase of +€1.7 billion as the main factors for the increase in payouts (+€3.4 billion). In addition, higher refinancing costs were recorded as a result of the increased interest rate level (+€1.6 billion). The payments of the energy cost subsidy and the investment bonus resulted in additional expenditure of +1.0 billion euros, as can be seen from the reports.
In terms of deposits, tax revenue increased while at the same time there were fewer transfers to states, municipalities and the EU in the period from January to July 2023, meaning that more public net contributions remained with the federal government (+€1.6 billion). Higher dividends and returns in connection with Austria’s first RRF payment application to the European Commission and the winding up of immigon portfoliobau AG also contributed positively to the development of deposits.
In response to her detailed questions regarding budget development, Green MP Elisabeth Götze learned that increasing company profits had a positive impact. However, a breakdown by industry is not yet possible, according to the department.
NEOS MP Gerald Loacker concluded from the figures that nothing had changed in the federal government’s policy of spending primarily at the expense of the younger generation. He also sees no improvement in the Maastricht deficit.
SPÖ MP Karin Greiner pointed out that the second tranche of funds from the EU’s Recovery and Resilience Facility amounting to €750 million had not yet been transferred because Austria had not yet met several of the required “milestones”.
Finance Minister Brunner assured that the necessary “milestones” or reform steps are being worked on and that he assumes that these can be achieved in a timely manner. SPÖ finance spokesman Krainer referred to statements that COFAG might reclaim up to one billion euros in COVID-19 funding from companies and wanted to know whether a draft of the necessary directive was already available. After all, this is a not inconsiderable sum for the federal budget. The Finance Minister informed him that the relevant votes were currently underway among the coalition partners.
Excess use of funds and previous charges in the 2nd quarter of 2023
As the Finance Minister reports, in the second quarter of 2023, overuse of funds amounting to €1.392 billion was approved in the financing budget and €1.339 billion in the earnings budget. 84% of these were covered by loans, 14% by reallocations and 2% by additional deposits. The largest overrun was €400.0 million for the COVID-19 crisis management fund. The reserve balance as of June 30, 2023 is €19.591 billion. In terms of preliminary charges, €205.3 million was approved in the second quarter of 2023. The highest prior burden of €108.1 million relates to maintenance and renewal investments on the Pinzgauer Lokalbahn (133/BA). This report was also noted with the votes of the ÖVP and the Greens.
ESM: According to the EU Commission, no repayment risks in the short term
According to a current report by the Finance Minister on the European Stability Mechanism (ESM) in the second quarter of 2023, the EU Commission sees no short-term repayment risks for the outstanding ESM loans (repayment by the end of 2027). In the medium term, Spain will at least be classified as a medium risk in terms of its debt sustainability. According to the report, there are also no short-term repayment risks from the ESM in Cyprus. Accordingly, the Cypriot economy is robust, with real GDP growth of 5.6% in 2022. The Finance Minister’s report to the Budget Committee (135/BA) was noted with the votes of the ÖVP, the Greens and NEOS.
EFSF: Outstanding loan amount from Greece to Austria is €1.32 billion
The cumulative interest income from the bilateral loans according to the Balance of Payments Stabilization Act for Greece amounted to €139 million at the end of the second quarter of 2023. This emerges from a report from the Finance Minister to the Budget Committee (134/BA), which was acknowledged with the votes of the ÖVP, the Greens and NEOS. This brings Greece’s outstanding loan amount to Austria to €1.32 billion. According to plan, this is to be repaid by 2041. The legally relevant status of Austrian liabilities for the EFSF (European Financial Stability Facility) was €9.17 billion for capital at the end of the second quarter of 2023. In total, the federal government’s liabilities for financing the EFSF (for capital plus interest, including excess guarantees) amounted to €10.36 billion.
Post-programme audit reports are also available for Portugal and Ireland. Ireland therefore continues to have strong economic growth, which is expected to slow to 5.5 or 5%. The risks that Ireland will not be able to meet its obligations to the EFSF are still considered to be low.
No risks regarding the ability to repay the financial assistance loans were identified for Portugal. According to the current post-program report, the Portuguese economy grew robustly at +6.7% in 2022. The current Commission forecast is more optimistic than last year’s. A public deficit of just -0.1% of GDP is forecast for the current year. (Continuation of the Budget Committee) sox
NOTE: The Parliamentary Budget Service offers economic analyzes of budget policy and templates from the Federal Ministry of Finance. All current data on budget implementation (monthly reports) can be found on the Ministry of Finance website.
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