Austria To Nuke 20% Of Green Subsidies In $6.5 Billion Savings Plan

Austria is set to eliminate roughly 20% of all subsidies related to climate change initiatives, as negotiators trying to form a nationalist-conservative government seek to avoid a budget reprimand from the European Union, Bloombergreports.

Solar panels at the Natural History Museum Vienna

The EU’s so-called ‘excessive-deficit’ procedure would limit Austria’s budget independence, according to a Thursday statement from Freedom Party representative Hubert Fuchs.

As part of a €6.4 billion ($6.58 billion) budget saving program for 2025, the government would cut €1.6 billion of payouts compensating households for a carbon tax, and slash about €500 million in subsidies introduced to help the economy adopt emissions-free technologies.

The government would also eliminate tax incentives to buy electric vehicles and install solar panels, as coalition negotiators seek €435 million in additional dividends from state holdings that include a minority stake in energy company OMV AG.

Most of the measures on the chopping block were introduced by the previous conservative-green government, however with Austria’s economy in its longest recession since World War II –and may contract again in 2025 if budget steps hurt growth, according to the Wifo research institute.

Meanwhile, Austria’s Fiscal Advisory Council anticipates needing to slash costs by more than €12 billion by 2028, which comes as Fitch lowered Austria’s AA+ rating to “negative” on Jan. 10, pointing to political instability and persistent deficits which exceed the EU’s 3%-of-output limit.