Austrian ruling parties agree last-minute extension of fuel price 'brake'
Extension and Adjustment of Fuel Price Mechanism
VIENNA, April 30 (Reuters) - Austria's three ruling parties struck a last-minute deal on Thursday to extend but shrink a mechanism introduced a month ago to cushion the blow to consumers of higher petrol prices, avoiding what would have been an embarrassing stalemate.
Political Implications of the Fuel Price Mechanism
The political repercussions of failing to prolong a flagship inflation-fighting measure could have been significant. Polls show the cost of living is voters' biggest concern, and a flash estimate by the national statistics office on Thursday put inflation at 3.3% in April, up from 2% in January.
Details of the Fuel Price Mechanism
The mechanism, which combines trimming retailers' margins and returning an increased value-added-tax take from higher fuel prices to consumers in the form of lower petrol tax, requires the government to set the size of those two elements.
Current and Future Reductions
The reduction in petrol prices is currently set at 5 euro cents (6 cents) per litre from each measure, or a total of 10 cents from both, and expires on Friday, meaning an agreement had to be struck on Thursday for there to be a seamless extension.
The parties agreed to trim the tax reduction to 2 cents per litre from May 1 while the margin cut would initially stay the same but then shrink to 2.5 cents mid-month, the finance ministry, which is led by the Social Democrats, said.
"This will enable us to achieve a reduction of 7 cents initially and then 4.5 cents," Finance Minister Markus Marterbauer said in a statement, referring to the total of the two.
Political Party Responses and Future Outlook
The smallest of the three ruling parties, the liberal and fiscally conservative Neos, issued a statement saying a deal had been reached but it did not provide details for May. It did say, however, that the margin cap would end in June.
The economy ministry, which is in charge of energy and is led by Chancellor Christian Stocker's conservative People's Party, did not immediately respond to a request for comment.
Additional Information
($1 = 0.8549 euros)
(Reporting by Francois Murphy. Editing by Mark Potter and Barbara Lewis)
