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Austria Benefits from Low Loan Interest Rates

Published: December 13, 2010; 23:03 · (Vindobona)

Because of low interest rates and spreads, Austria is able to get convenient financing on the loan market. Euro-bonds would mean significant costs for Austria.

Austria Benefits from Low Loan Interest Rates / Picture: © Flickr / Werner Faymann

For the Minister of Finance, the coming year will bring a slight improvement. The financial needs of the state are expected to fall, because on one side stimulus programs are ending and on the other new taxes are are being introduced. In addition, bank assistance which was for a total of € 5bn is to be paid back gradually.

A new bond financing for € 22bn to € 24bn is expected for the coming year. Still in the previous year the Republic had to take on € 27bn. Financing conditions on the capital market are also considered as favorable by the Minister of Finance. Because of the triple-A rating, the spreads are low, interest rates are only slightly above those of Germany, the country which pays the lowest interest rates in Europe.

Accordingly, the division between supporters and opponents of the current euro-bonds concept remains solid. The German Chancellor, Angela Merkel, stays by her strongly negative position. Germany would have to pay € 17bn more interest, because the rate with euro-bonds would rise from 1.71% to 3.31%. Austria would have to cope with higher interest payments for € 2.0bn. For Austria and Germany, this would be also be difficult to justify from the point of view of the internal policy.

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