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Author Topic: Austria to introduce balanced budget + 60% debt cap law  (Read 2120 times)
Tender Branson
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« on: November 15, 2011, 03:17:28 am »
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Will be passed today. There will be a 60% debt cap starting with 2020, steadily down from the 72% of debt now. The budget should be balanced from 2016 on, down from the current 3% deficit.

SP, VP, FP, BZ will vote for the measure, the Greens will vote against it.

The VP wants to primarily reform the pension system, by raising the "real" pension entry ages to 65. Austrians are record holders in early retirement. They also want to cut spending for the BB (rail and bus system).

The SP wants to raise taxes on the Wealthy instead and cut spending for bureaucracy (merging smaller towns and cities) as well as reforming the health-care system and cuts in agriculture subsidies.

Well, a lot to do in the next 9 years. The first reforms and spending cuts will probably be agreed on next year.

http://derstandard.at/1319182819077/Sparkurs-Regierung-plant-Notoperation-am-Budget

http://diepresse.com/home/politik/innenpolitik/708598/Schuldenbremse-fix-Sparpaket-folgt
« Last Edit: December 08, 2011, 02:55:54 am by Tender Branson »Logged
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« Reply #1 on: November 15, 2011, 04:36:23 am »
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Will be passed today. There will be a 60% debt cap starting with 2020, steadily down from the 72% of debt now. The budget should be balanced from 2016 on, down from the current 3% deficit.

SP, VP, FP, BZ will vote for the measure, the Greens will vote against it.

The VP wants to primarily reform the pension system, by raising the "real" pension entry ages to 65. Austrians are record holders in early retirement. They also want to cut spending for the BB (rail and bus system).

The SP wants to raise taxes on the Wealthy instead and cut spending for bureaucracy (merging smaller towns and cities) as well as reforming the health-care system and cuts in agriculture subsidies.

Well, a lot to do in the next 9 years. The first reforms and spending cuts will probably be agreed on next year.

http://derstandard.at/1319182819077/Sparkurs-Regierung-plant-Notoperation-am-Budget

http://diepresse.com/home/politik/innenpolitik/708598/Schuldenbremse-fix-Sparpaket-folgt

Congratulations! I wish Austria well going forward this is a very big deal!
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Tender Branson
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« Reply #2 on: November 15, 2011, 04:48:01 am »
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Will be passed today. There will be a 60% debt cap starting with 2020, steadily down from the 72% of debt now. The budget should be balanced from 2016 on, down from the current 3% deficit.

SP, VP, FP, BZ will vote for the measure, the Greens will vote against it.

The VP wants to primarily reform the pension system, by raising the "real" pension entry ages to 65. Austrians are record holders in early retirement. They also want to cut spending for the BB (rail and bus system).

The SP wants to raise taxes on the Wealthy instead and cut spending for bureaucracy (merging smaller towns and cities) as well as reforming the health-care system and cuts in agriculture subsidies.

Well, a lot to do in the next 9 years. The first reforms and spending cuts will probably be agreed on next year.

http://derstandard.at/1319182819077/Sparkurs-Regierung-plant-Notoperation-am-Budget

http://diepresse.com/home/politik/innenpolitik/708598/Schuldenbremse-fix-Sparpaket-folgt

Congratulations! I wish Austria well going forward this is a very big deal!

The devil is always in the details. Let's see how much SPVP are willing to cut next year, just 1 year ahead of the next election. Maybe they can get a deal from the sectors I mentioned above that isn't too bad for both parties and for the general population.

The bigger problem are our banks, which are heavily present in Eastern Europe and Italy. It really depends how the economy evolves there in the next years, because now there are many consumers who cannot re-pay their loans to the banks and the banks are into the red.

That's the main reason why the debt has gone from 60% to 72% in the last 3 years, mostly because the Eastern-European problem and the bailout of a Carinthian bank with strong Jrg-Haider/Far Right ties.

But I think this is a good decision and it will keep the rating agencies from lowering the AAA rating, for now ...
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Tender Branson
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« Reply #3 on: November 15, 2011, 04:56:34 am »
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There's a Reuters article out, which describes things better than I do ... Tongue

...

VIENNA, Nov 15 (Reuters) - Austria will try to balance its budget faster than first planned and use a constitutional debt brake to get a firmer grip on public finances and protect its AAA rating, officials said on Tuesday.

The steps come amid mounting market pressure on euro zone members to reduce debt and some market talk that Austria -- one of only six top-rated sovereigns using the euro currency -- could drop out of the club.

"We will set spending caps that will lead us to a balanced budget faster than originally planned, and we want to bring the debt down to 60 percent of gross domestic product by 2020," Finance Minister Maria Fekter said in a radio interview.

She gave no more specific details.

The head of one of Austria's main research institutes raised the possibility last week that its triple-A rating could be at risk if the euro zone crisis continued to deepen. That has prompted a round of market speculation on a downgrade.

The governing coalition has agreed to adopt a debt brake in the constitution that will automatically cap the euro zone country's national debt.

Euro zone leaders last month embraced such an approach as a way to master the region's sovereign debt crisis.

Fekter said the plan was to limit federal budget deficits in future to no more than 0.35 percent of gross domestic product (GDP). Austrian provinces and municipalities would have to present balanced budgets by 2017.

The government has projected national debt to peak at 75.5 percent of GDP in 2013. Its 2012 budget due up for final approval in parliament on Friday envisions a 3.2 percent deficit.

Spreads on 10-year Austrian government debt over benchmark German Bunds have widened to euro-era highs on talk Austria could lose its AAA, but government officials have said they had no indication of this from ratings agencies.

In the radio interview, Fekter called for tighter rules on agencies.

She also reiterated that Austria had to work on gradually reducing its deficit and debt with an eye to ensuring that radical steps don't snuff out economic growth.

"We want to generate more tax revenue via full employment and growth. Only via good growth will we reach our goal. You have to proceed cautiously given the economic slowdown that is emerging," she said.

Key areas in which to save included the country's high rate of early retirement, administrative costs and health care, she said. Tax reform had to reduce the burden on earned income and raise it on things that harm the environment.

Fekter, a fiscal hawk from the conservative People's Party, has been resisting calls from her Social Democrat coalition partners to adopt a wealth tax, arguing that Austria already takes a relatively tough approach on taxing the well to do.

Economy Minister Reinhold Mitterlehner said the envisioned budget measures would send a clear signal that Austria could get its finances in order.

"We have time to implement this over the next few years. The ratings agencies rate above all the decision-making abilities of those responsible," he told journalists.

Andreas Schieder, state secretary in the finance ministry, played up Austria's economic credentials.

"We have high productivity, a high export orientation, a moderate deficit, a debt ratio that will go down in the coming years. I see from the fundamental data, for real economists, that Austria is well positioned," he told reporters.

Conservative leader Michael Spindelegger has said reducing state stakes in energy group OMV and Telekom Austria to 25 percent plus one share would be one way to help pay down debt quickly.

State holding company OIAG has a 31.5 percent stake in OMV and 28.4 percent of Telekom Austria among other holdings.

http://af.reuters.com/article/energyOilNews/idAFL5E7MF03Q20111115?sp=true
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« Reply #4 on: November 15, 2011, 12:48:14 pm »
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Congratulations to Austria but I wish Italy would do the same!
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« Reply #5 on: November 15, 2011, 12:59:35 pm »
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Those amendments are ridiculous.

It just reduces the power of the democratically elected parliament, and therefor the power of the sovereign.
And in situations where it really would make a difference, politicians will always find a way of weaseling out.
It will just be a nice tool for the right wing to cut social programs etc.
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« Reply #6 on: November 15, 2011, 01:01:39 pm »
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The bigger problem are our banks, which are heavily present in Eastern Europe and Italy. It really depends how the economy evolves there in the next years, because now there are many consumers who cannot re-pay their loans to the banks and the banks are into the red.

Yeah Erste isn't looking the strongest of the European banks!
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« Reply #7 on: November 15, 2011, 01:09:58 pm »
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It just reduces the power of the democratically elected parliament, and therefor the power of the sovereign.

That's why I oppose balanced budget amendments except in the euro zone. But your guys'es goose was cooked when you gave up your currency.

Quote
And in situations where it really would make a difference, politicians will always find a way of weaseling out.

That's a good point. These amendments must be very carefully designed so that they are as difficult to get around as possible, preferably impossible to manipulate by any accounting techniques.

Quote
It will just be a nice tool for the right wing to cut social programs etc.

Pretty much the entire euro project is a right wing project to export German rectitude to everyone else.
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Tender Branson
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« Reply #8 on: November 15, 2011, 01:21:35 pm »
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Those amendments are ridiculous.

It just reduces the power of the democratically elected parliament, and therefor the power of the sovereign.
And in situations where it really would make a difference, politicians will always find a way of weaseling out.
It will just be a nice tool for the right wing to cut social programs etc.

In Switzerland it worked.

About 10 years ago, the Swiss voters OK'd the constitutional balanced budget amendment with more than 80%.

Since then, the debt has fallen from more than 50% of GDP into the lower 30s.

When it comes to cuts in social programs: these programs were already cut back a bit last year with a small austerity package, so I don't think there will be another one. Like I posted in the 1st paragraph, the cuts will primarily focus on waste and inefficiencies like phasing out the early retirement age and bring it to 65 years, cuts in BB debt, hospital debt, bureaucracy mergers and wealth taxes.

"Social programs" that you probably refer to are basically left uncut in the austerity measures and they will even be expanded. Just last week, the government agreed to raise the pensions and the salaries of bureaucrats of more than 2.5 million Austrians by 3% next year.

How many countries are there right now who can raise their pensions and salary for bureaucrats by 3% ?

Austria is pretty well known as having a huge welfare state (like Sweden) and I've not read anything that for example the unemployment benefits are cut or that transfers/benefits to low-income people are cut (the transfers/benefits are also one of the highest in the EU).

But yeah, contrary to the generic leftist view I think this constitutional balanced budget amendment is a good thing, because otherwise the debt would really explode and times like these demand that we all fasten our belts a little bit more. Because just recently I've read that a downgrade from AAA to AA+ would mean an additional 1 Bio. in interest each year.
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« Reply #9 on: November 16, 2011, 11:41:06 pm »
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That's why I oppose balanced budget amendments except in the euro zone. But your guys'es goose was cooked when you gave up your currency.

But why not saving the remaining bit of democracy we have left in Euroland?

Pretty much the entire euro project is a right wing project to export German rectitude to everyone else.

I wouldn't that that was the plan behind the Euro project, but it is definitely the way it works today.
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« Reply #10 on: November 20, 2011, 02:03:40 am »
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Here comes the first 24 poll from GALLUP on the constitutional balanced budget amendment + 60% debt cap. And it seems that when it comes to public opinion on constitutional balanced budget amendments, debt and spending, Austrians think much like Americans:

78% of those polled think that the Government and states should get their act together and spend less and save more. A strong majority of 57% are in favor of the constitutional balanced budget amendment.

Here is an overview of what Austrians want from the government and what they don't want:

- Hhere Steuern auf Arzneien 5% Ja / 95% Nein (higher taxes on medicine)
- Urlaubsgeld hher besteuern 6% Ja / 94% Nein (higher taxes on the 13th/14th wage)
- Minerallsteuer erhhen 10% Ja / 90% Nein (higher gas taxes)
- Zahl der Spitler reduzieren 19% Ja / 81% Nein (reduce the number of hospitals)
- Pensionsalter erhhen         24% Ja / 76% Nein (raise the pension age)
- Frderungen krzen         26% Ja / 74% Nein (reduce transfer payments)
- Erbschaftssteuer einfhren 31% Ja / 69% Nein (introduce death tax)
- Hacklerpension abschaffen 34% Ja / 66% Nein (abolish early pension entry for hard workers)
- Nulllohnrunde fr Beamte 47% Ja / 53% Nein (zero-wage round for civil servants)

- Studiengebhren einfhren 54% Ja / 46% Nein (introduction of tuition fees in universities)
- Gemeinden zusammenlegen 59% Ja / 41% Nein (merge cities and towns)
- Einfhrung Vermgenssteuer 74% Ja / 26% Nein (introduction of a wealth tax)
- Weniger Abgeordnete         86% Ja / 14% Nein (reduce the number of MPs)

http://www.ots.at/presseaussendung/OTS_20111120_OTS0001/oesterreich-umfrage-78-der-oesterreicher-fuer-sparpaket
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Tender Branson
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« Reply #11 on: November 20, 2011, 02:13:33 am »
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BTW:

The passing of the constitutional balanced budget amendment + 60% debt cap in parliament might not even be a sure thing now, because a 2/3 majority is needed to amend the constitution.

And SPVP doesn't have a 2/3 majority, so they would either need the FP, BZ or Greens to do so.

And they are now bitching around and make demands.

The Greens refuse to vote for it, unless the VP agrees to introduce a wealth tax - because the Greens fear that a constitutional balanced budget amendment + 60% debt cap would strongly cap spending for education and science.

The FP on the other hand now says they want a referendum on any further payment to Greece and other struggling Euro members. They will not vote for it, unless it is made sure that future Austrian money is only spent on Austrians and not on bailouts.

And the BZ already wants the constitutional balanced budget amendment + 60% debt cap introduced with the 2013 budget and not starting in 2020. They also want to see the details of the planned austerity/reform package first and would only vote in favor if taxes are not raised.

http://derstandard.at/1319183227817/Nach-Treffen-Opposition-blockiert-bei-Schuldenbremse-weiter
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« Reply #12 on: November 20, 2011, 03:27:43 am »

It just reduces the power of the democratically elected parliament, and therefor the power of the sovereign.

That's why I oppose balanced budget amendments except in the euro zone. But your guys'es goose was cooked when you gave up your currency.

Well said.
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Tender Branson
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« Reply #13 on: November 22, 2011, 02:31:26 am »
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Fitch has just given Austria the AAA rating again.

Moody's has now said that they welcome the steps that were taken to control spending and lower the future debt. They'll probably also keep the AAA rating.

The big unknown is S&P.
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Tender Branson
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« Reply #14 on: November 22, 2011, 02:44:10 am »
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Austrian banks told to limit lending to east

November 21, 2011 7:37 pm
By Eric Frey in Vienna and Neil Buckley and Stefan Wagstyl in London

Austrian bank supervisors have instructed the countrys banks to limit future lending in their east European subsidiaries, a further sign of the potential knock-on effects of the eurozone crisis for economies around the world.

The restrictions come as Austrian officials seek to defend the countrys AAA credit rating, amid concerns that the government might have to bail out its banks because of losses in central and eastern Europe, where they are the biggest lenders, and their exposure to Italy.

The moves by Austria, which appear to be unilateral, show how even the eurozones strongest economies are feeling the pressure of the sovereign debt crisis.

Neighbouring Hungary on Monday officially requested precautionary financial help from the International Monetary Fund and the European Union, confirming a U-turn after it shunned further IMF support 18 months ago.

The Austrian central bank said in a statement that Erste Group, Raiffeisen Bank International and Bank Austria, owned by UniCredit of Italy, would be prevented from loaning significantly more in CEE countries than what they raise in local deposits. Subsidiaries that are particularly exposed must ensure the ratio of new loans to local refinancing is not more than 110 per cent.

The three banks CEE exposure exceeds Austrian GDP, raising concerns that the government would be unable to bail them out if their loan portfolios turned sour. The announcement came just as the spreads of Austrian bond yields over German Bunds rose to record highs and was also designed to calm market jitters, a central bank official said.

Under the new rules, the minimum core tier one capital ratio of 9 per cent by mid-2012 that the European Banking Authority has set as a temporary measure for EU banks would be made a permanent requirement for Austrian banks.

Austrian banks shares fell sharply, with Erste closing down 9 per cent and Raiffeisen down 4.7 per cent.

Bank officials said the lending curbs would not have a significant impact on their east European businesses as they were already committed to funding future borrowing from local deposits. But analysts said the move was bound to affect availability of credit.

It is something that in principle makes Austrian banks [and thereby also the Austrian sovereign] safer. However, it is also pro-cyclical and the immediate impact may not be helpful for countries where Austrias banks are active, said Christian Keller, emerging markets economist at Barclays Capital.

Ewald Nowotny, Austrias central bank governor, said the measures would not only benefit the stability of the local financial markets, but Austrias exposure to this region will also become more sustainable.

http://www.ft.com/cms/s/0/2c35bb1e-1469-11e1-85c7-00144feabdc0.html#axzz1ePyItG74
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« Reply #15 on: November 22, 2011, 05:47:45 pm »
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Those amendments are ridiculous.

It just reduces the power of the democratically elected parliament, and therefor the power of the sovereign.

What's the problem with that? There's nothing wrong with limiting the power of democracy and every successful liberal democracy has plenty of non-democratic elements in their institutional machinery. That's what constitutions are to a large extent.

I think these kind of amendments become the rule. They're as necessary as independent central banks. Otherwise current voters will keep screwing future ones.
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« Reply #16 on: November 23, 2011, 01:44:14 am »
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BTW:

The passing of the constitutional balanced budget amendment + 60% debt cap in parliament might not even be a sure thing now, because a 2/3 majority is needed to amend the constitution.

And SPVP doesn't have a 2/3 majority, so they would either need the FP, BZ or Greens to do so.

And they are now bitching around and make demands.

The Greens refuse to vote for it, unless the VP agrees to introduce a wealth tax - because the Greens fear that a constitutional balanced budget amendment + 60% debt cap would strongly cap spending for education and science.

The FP on the other hand now says they want a referendum on any further payment to Greece and other struggling Euro members. They will not vote for it, unless it is made sure that future Austrian money is only spent on Austrians and not on bailouts.

And the BZ already wants the constitutional balanced budget amendment + 60% debt cap introduced with the 2013 budget and not starting in 2020. They also want to see the details of the planned austerity/reform package first and would only vote in favor if taxes are not raised.

http://derstandard.at/1319183227817/Nach-Treffen-Opposition-blockiert-bei-Schuldenbremse-weiter

Well of course, they're making demands in exchange for support, it makes sense to do as a political party. Smiley All meet-able demands, it seems, except for the FPO if it goes back on existing agreements. If the demand refers to new bailouts, then it would be reasonable as well (but it appears it does not).
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« Reply #17 on: November 23, 2011, 05:45:40 am »
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BTW:

The passing of the constitutional balanced budget amendment + 60% debt cap in parliament might not even be a sure thing now, because a 2/3 majority is needed to amend the constitution.

And SPVP doesn't have a 2/3 majority, so they would either need the FP, BZ or Greens to do so.

And they are now bitching around and make demands.

The Greens refuse to vote for it, unless the VP agrees to introduce a wealth tax - because the Greens fear that a constitutional balanced budget amendment + 60% debt cap would strongly cap spending for education and science.

The FP on the other hand now says they want a referendum on any further payment to Greece and other struggling Euro members. They will not vote for it, unless it is made sure that future Austrian money is only spent on Austrians and not on bailouts.

And the BZ already wants the constitutional balanced budget amendment + 60% debt cap introduced with the 2013 budget and not starting in 2020. They also want to see the details of the planned austerity/reform package first and would only vote in favor if taxes are not raised.

http://derstandard.at/1319183227817/Nach-Treffen-Opposition-blockiert-bei-Schuldenbremse-weiter

Well of course, they're making demands in exchange for support, it makes sense to do as a political party. Smiley All meet-able demands, it seems, except for the FPO if it goes back on existing agreements. If the demand refers to new bailouts, then it would be reasonable as well (but it appears it does not).

Currently, it looks like the BZ is most likely to the party that will secure the 2/3 majority. They are already negotiating with SPVP.

They have 3 demands though:

* the constitution has to be amended so that total tax revenue as a percentage of GDP never rises above 42% and in the longer term should be reduced to less than 40%

* tough sanctions if the annual deficit reduction plans are not met: BZ-boss Bucher said that he wants that 1/3 of MPs in parliament can launch a complaint of unconstitutionality in the event that the budget plan is not met, which would lead to the resignation of the Finance Minister.

* The BZ wants to introduce the constitutional balanced budget amendment + 60% debt cap already next year and a step-by-step deficit reduction plan to zero for the next years.

...

On the other hand, Greens and FP are likely to vote against, because they have demands that cannot be agreed on by SPVP (see above).

http://diepresse.com/home/politik/innenpolitik/710894/Schuldenbremse_Josef-Bucher-sagt-Ja-aber
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« Reply #18 on: November 26, 2011, 02:35:39 am »
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New OGM poll for "Kurier" (historically, the have been the best pollster):



Do you favor or oppose the constitutional balanced budget amendment + 60% debt cap ?

68% Favor
22% Oppose

Do you think government subsidies (state rail, agriculture, economy etc.) should be cut ?

62% Yes
27% No

Do you favor or oppose savings in administration by merging smaller towns into bigger cities ?

66% Yes
28% No

Do you think the women pension age (60) should be brought into line with the men pension age (65) more quickly (before the target date of 2020 that is) ?

52% Yes
39% No

Do you favor or oppose raising the "real" average pension entry age from the current 59 years until 2020 ?

19% Yes, by one year
24% Yes, by two years
22% Yes, by four years
32% No, it should stay at 59 years



TAXES

Do you favor or oppose the introduction of a inheritance tax ?

29% Favor
63% Oppose

Do you favor or oppose the introduction of a wealth tax on personal wealth such as real-estate, stocks and money etc. ?

45% Yes, starting with capital worth at least 1 million
33% Yes, starting with capital worth at least 500.000
17% No

Do you support or oppose raising the top tax rate from 50% to 55% for high income earners, those who earn more than 300.000 a year ?

71% Yes
23% No

http://kurier.at/nachrichten/4318523.php
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« Reply #19 on: November 26, 2011, 03:05:23 am »
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Minister of Finance Maria Fekter, a hardcore conservative, gave an interview for the weekend edition of the Standard and said she wants to strongly increase savings and spending cuts starting already next year. She now wants to save 3 Bio. each year, out of a 70 Bio. budget. The SPVP coalition previously only wanted to save 1.5-2 Bio. each year.

In US terms, that would amount to annual savings of about 150 Bio. $

She also said she wants to drag down the deficit to about 2.5% next year, even with the coming economic downturn (most economists think that GDP growth won't be higher than 1% next year).

She also reiterated her opposition to any form of wealth tax, because in her opinion that would lead to mass capital emigration out of Austria, and a loss of jobs. She also referred to the state as a "big jellyfish" and backs BZ-leader Josef Bucher's plan to amend the constitution so that tax revenue is never higher than 42% of GDP (below 40% long-term).

http://derstandard.at/1319183830853/Schuldenbremse-Finanzministerin-Fekter-will-noch-mehr-sparen-Drei-Milliarden-Euro-im-Jahr

This 42% tax revenue amendment that Maria & Josef want, is also the problem for the SPVP-proposed constitutional balanced budget amendment.

The SP has said that it wants the state to be flexible, therefore the 40% tax amendment that the BZ wants for their constitutional 2/3-support is off the table.

SPVP therefore have already said that if the BZ refuses to back their proposal to amend the constitution, it will just pass a simple law for a balanced budget amendment + 60% debt cap ...
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« Reply #20 on: November 26, 2011, 11:08:21 am »
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Woah, Austria is pretty right-wing.
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« Reply #21 on: November 26, 2011, 01:43:54 pm »
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Woah, Austria is pretty right-wing.

That really depends on what you classify as "right-wing" ...
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« Reply #22 on: November 26, 2011, 09:37:37 pm »
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Woah, Austria is pretty right-wing.


Yeah, who could have guessed? I'm deeply shocked.
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E: -7.10, S: -6.09

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« Reply #23 on: November 29, 2011, 01:14:14 pm »
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One (bigger) problem is now solved: the support of the 9 state governors (4x SP, 4x VP, 1x FP) for the constitutional balanced budget amendment + 60% debt cap.

They have now agreed to back it. Before, they also bitched around and wanted more flexibility for their state budgets.

There's also a date for when SPVP wants to pass this thing in parliament: Dec. 7

The only problem now is the needed opposition support of at least 1 party. They are still talking about some deal and SPVP is now playing the "traitor card": if the opposition doesn't back the amendment, they will brand Greens/FP/BZ as traitors for the country, because they are risking the country's fiscal future and surrender Austria to the rating agencies and speculators and so on ...
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Austria


Political Matrix
E: -7.10, S: -6.09

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« Reply #24 on: December 02, 2011, 02:28:02 am »
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Decision Day for the opposition (especially the BZ) is coming closer.

For next Wednesday, the government has set the vote for the constitutional balanced budget amendment law.

Meanwhile, a parliamentary committee has passed 2 draft laws:

One constitutional balanced budget amendment law (in case the BZ is swayed to vote for it) and one "normal" law (in case no opposition party votes for it).

http://derstandard.at/1322531652608/Budget-Schuldenbremse-von-Rot-Schwarz-im-Verfassungsausschuss-beschlossen
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