Austria Starts New Stimulus After Insolvency Shows Not Immune

Austria committed to increase spending by as much as 1.6 billion euros ($2.1 billion) until 2016 for construction projects after a builder filed for the country’s biggest post-World War II insolvency and put 5,000 jobs at risk in an election year.

The measures decided in the weekly government meeting in Vienna today include both new projects and bringing forward planned ones to this year and next year, Chancellor Werner Faymann told journalists today. Faymann said he still plans to balance the budget by 2016.

“Our budget goal is intact but we have to act to avoid unemployment from rising,” Faymann said. “That’s devastating for those who are affected, and for the budget it’s a disaster because of rising payments and lost revenue.”

The decision by Faymann and his conservative coalition partner led by Vice Chancellor Michael Spindelegger comes ahead of a national vote scheduled for Sept. 29 in the country that sports the euro area’s lowest unemployment rate. Their parties are fighting to keep a majority and stay ahead of opposition groups. These include Austro-Canadian billionaire Frank Stronach, the populist Freedom Party and the Greens.

Alpine Bau GmbH, Austria’s second-biggest builder, filed a 2.6 billion-euro insolvency last week, caused mostly by losses in eastern European projects. The company, owned by Spain’s Fomento de Construcciones y Contratas SA, will be liquidated after funds were found to be insufficient for a restructuring and neither FCC nor creditors were ready to provide liquidity.

The stimulus measures include subsidies for social-housing projects, care facilities for children and the elderly, tunnels, road and rail projects as well as repairwork for flood damage and flood-protection measures, Faymann said. The government will tap revenue from a mobile-phone spectrum auction later this year. It will also release reserves at ministries and in state-owned companies.

The Finance Ministry had no immediate comment about the impact the package will have on the 2013 and 2014 deficit.

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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