960804

Austria confident

of meeting EMU

conditions-Klima

SINGAPORE: Austria is confident of joining the European Monetary Union (EMU) on time and already meets three of the five criteria for membership, Austrian Finance Minister Viktor Klima told Reuters.

Klima was in Singapore accompanying Austrian Federal Chancellor Franz Vranitzky on an official visit.

"As of today, we meet three of the five criteria. The inflation rate, the long-term interest rate and exchange rate stability," Klima said in an interview on Saturday.

However, in 1995 the budget deficit was 6.2 percent of gross domestic product (GDP) compared with the EMU criteria of three percent.

But Klima said that as early as 1997 the deficit would be pared to three percent.

"Why I can tell you that we will have three percent (in 1997) is because my task in the first three or four months of this year was to negotiate and prepare a consolidation package to cut down the budget deficit by more than 100 billion schillings ($9.60 billion)," he said.

He said the package already approved by the Austrian parliament involved changing of more than 100 laws.

"We had for the first time in Austrian history two budgets. That means we already have a budget for 1997," Klima said.

Two-thirds of the savings will come through cuts in expenditure and one-third from increasing revenue, he said.

"For example, we negotiated with the unions in the public sector that there will be no (wage) increases in 1996 or 1997 for all public employees," he said.

Cuts in social expenditures were necessary, but the welfare safety net would be left intact.

"For example, we had two years paid maternity leave and are reducing that to 18 months," he said, adding that another saving would come from the abolition of a state payment on the birth of a child.

He said Austria was not increasing tax rates, with the present 34 percent corporation tax unchanged. "But we have eliminated some historical tax privileges."

The second criteria which Austria does not presently meet is that the debt ratio should be at 60 percent or below GDP. It is presently around 69 to 70 percent.

The minister said the debt ratio would be lowered through privatisation and corporatisation, which would boost state coffers.

"So, in consequence, Austria will be in the first (group) to join the European Monetary Union," he said.

Klima said he expected the euro the currency created by EMU to be a strong currency. "If it is a strong currency, it will be a good competitor to the yen and the dollar on the global financial markets."

It was important that EU members did not just attempt to meet EMU criteria to join and then let things slide. "We have to have a disciplined fiscal policy in the following years," he said.-Reuter