Nowotny Disappointed by No Debt Stop in Austria Constitution

Austrian Central Bank Governor Ewald Nowotny said he’s “very disappointed” that the Alpine republic won’t change its constitution to impose borrowing limits.

“We are under close international surveillance,” Nowotny told reporters in Vienna today. “A debt limit in the constitution is increasingly becoming a necessity, this means we can’t fulfill an important European challenge.”

Austria’s coalition government hasn’t been able to sway one of the three main opposition parties to support its proposal to limit budget deficits to 0.35 percent of gross domestic product. Nowotny, who also is a member of the European Central Bank Governing Council, declined to say if a lack of a debt limit in Austria’s constitution may hurt its AAA rating.

“We’ll continue to work on structural reform,” Finance Minister Maria Fekter said today at the parliament. “We will propose a savings plan so that the deficit is successively reduced.”

Moody’s Investors Service called Austria’s plans on debt restrictions “credit positive,” in a research note issued Nov. 21. Austria and Spain were both seeking a so-called debt-brake legislation this year. Spanish lawmakers approved the constitutional amendment in September.

The Alliance for Austria’s Future, the opposition party founded by Joerg Haider in 2005, rejected the proposed debt limit in a statement today, citing a lack of trust in the ruling parties intentions. The opposition Green Party said it won’t support debt limits until new taxes are imposed on wealthy individuals.

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