Austrian far right and conservatives outline a budget deal

By Francois Murphy

VIENNA (Reuters) - Austria's far-right Freedom Party and the conservative People's Party said on Monday that after three days of coalition talks they had reached a deal on bringing the budget deficit back within the European Union's limit.

They gave few details.

The eurosceptic, Russia-friendly Freedom Party (FPO) came first in a parliamentary election in September with about 29% of the vote but was not tasked with forming a government until a centrist attempt to do so without the FPO collapsed a week ago.

The first order of business in its coalition talks with the People's Party (OVP) was how to bring the budget deficit back within the EU limit of 3% of economic output to avert a so-called excessive deficit procedure by Brussels.

"We have taken a fundamental decision and developed a joint roadmap to avert an EU excessive deficit procedure against Austria," FPO leader Herbert Kickl said in a statement after a press conference with OVP leader Christian Stocker.

Weak growth in the economies of important trading partners including neighbouring Germany and consumers holding back on spending helped push Austria into a second year of recession last year, denting the country's tax take.

The budget deficit is expected to come in at 3.7% of gross domestic product in 2024 and 4.2% this year if no corrective action is taken, according to economic think-tank Wifo which provides forecasts the government relies on.

Kickl and Stocker said they had agreed on mainly spending-related measures to save about 6.3 billion euros ($6.4 billion) this year, or about 1.7% of the GDP currently forecast by Wifo.

"What I can rule out is an increase in taxes for the masses, so no increase in value-added tax ... no increase in the fuel tax, nothing being taken back, so to speak, in the area of corporations tax," Kickl said, adding that tax privileges and loopholes would also be addressed.

A table issued by the OVP showed the biggest item was a 3.2-billion-euro reduction in subsidies, followed by a 1.1 billion euro "contribution to stability by ministries" and 950 million euros in "other measures". It did not elaborate. "Adjustments to the tax system" amounted to 920 million euros.

Both parties said they would hammer out the figures in greater detail and present them to the public at a later date but caretaker Finance Minister Gunter Mayer would now inform the European Commission of the agreement.

($1 = 0.9804 euros)

(Editing by Timothy Heritage)