Austrian coalition focuses on Maastricht criteria

Date: 14/03/1996

By Thomas Klau

AUSTRIA'S re-formed government coalition of Social Democrats and moderate conservatives has agreed to make fulfilling the Maastricht criteria for monetary union the focal point of its future policy.

After tortuous negotiations, party leaders Chancellor Franz Vranitzky of the Sozialdemokratische Partei Österreichs (SPÖ) and Foreign Minister Wolfgang Schüssel of the Österreichische Volkspartei (ÖVP) have agreed on a set of drastic measures to bring their country's spiralling budget deficit in line with the Maastricht requirements.

Although the Social Democrats emerged as victors from Austria's snap elections in December, which were called after both parties failed to agree on the 1996 budget, the ÖVP managed to coax its reluctant ally into wide-ranging cuts in social benefits.

As a result, maternity allowances, early retirement privileges and student grants will be slashed, while taxes are increased.

The government will also contribute to the budgetary effort by abolishing its transport and family ministries.

The aim is to cut the deficit - which stood at 32.56 billion ecu or 4.3&percent; of GDP in 1995 - by 13.8 billion ecu by the end of next year to ensure compliance with the Maastricht criteria when the list of EMU's initial participants is drawn up in early 1998.

Both party leaders expressed confidence that this time their renewed alliance would last the full four-year term. “We have agreed on an enormous programme,” said Vranitzky after announcing the finalised coalition deal last week.

Austria, whose currency, the schilling, has long been pegged to the deutschemark, is a sure candidate for early participation in monetary union, provided its spiralling budget deficit can be brought under control.

In another sign of Austria's eagerness to belong to the inner core of the EU, the SPÖ and the ÖVP appear to have agreed on the outlines of a plan to bring the country into the Western European Union (WEU), the defence organisation which is to become the EU's military arm and NATO's European pillar.

Defence matters are a highly-sensitive subject in Austria. The country's post-war policy of neutrality is seen as part of its national identity by the Austrian left.

Although the wording of the coalition agreement does not clearly spell out a firm intention to join the WEU, it would appear the Social Democrats have now accepted that full membership of that organisation can be compatible with Austria's neutrality law.

This interpretation would mean that Austria could participate in the EU's future defence efforts without formally having to throw its neutrality overboard.