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Austrian budget plans for deficit of 9.5%, exceeding EU limit until 2023

VIENNA, Oct 14 (Reuters) - Fiscally hawkish Austria plans to run a deficit of 9.5% of economic output this year, only returning to within the European Union’s 3% of GDP limit in 2023, its budget presented by Finance Minister Gernot Bluemel on Wednesday showed.

The conservative-led government, a vocal member of the “frugal four” that oppose lavish EU spending, took office in January pledging to balance the books. But with the onset of the coronavirus pandemic in March it scrapped that playbook and said it would spend whatever it takes to keep the economy afloat.

It soon outlined plans to spend tens of billions of euros on loan guarantees and grants for companies, as well as a layoff prevention scheme.

“Securing jobs is definitely the central theme,” Bluemel told reporters before his budget speech to parliament.

His draft budget provides for 6.8 billion euros ($8 billion) to be spent this year on the so-called kurzarbeit layoff prevention scheme, which enables companies to keep staff on their books and only pay for hours actually worked, which the state tops up.

More than a million people received money from that scheme at its peak in April, still significantly fewer than were initially registered for it, Finance Ministry data show. The current level is a fraction of that, and 1.5 billion euros have been earmarked for the scheme next year.

In total, 50 billion euros in coronavirus-related economic aid is planned for this year and next, of which 24.8 billion euros has either been paid out or approved for disbursement, the ministry said.

The budget is based on economic forecasts by economic think-tank Wifo, which compiles gross domestic product data for the government and expects GDP to fall 6.8% this year before rebounding 4.4% next year, provided there is no second lockdown.

The government says it wants to avoid a second lockdown, which Wifo says would knock another 2.5 points off GDP this year and cause stagnation in 2021. The country is grappling with a second wave of infections, with daily cases having recently exceeded March’s peak.

“Honestly, I don’t even want to speculate about that because if I read through the newspapers, speculation in and of itself is poison for economic expectations, and no second lockdown is planned - that is simply a fact,” Bluemel said.

His budget provides for a deficit of 6.3% next year, 3.5% in 2022 and 1.9% in 2023. The EU has suspended its budget rules including its 3% deficit ceiling during the pandemic.

$1 = 0.8522 euros Reporting by Francois Murphy; Editing by Catherine Evans