Austria plans to lower its borrowing in 2025, aiming to raise between 43 and 47 billion euros through federal bonds, down from 49 billion euros in 2024. The introduction of green federal securities will also continue, with around 6 billion euros anticipated. Despite ongoing government negotiations affecting fiscal regulations, Austria aims to keep its budget deficit below the EU’s 3 percent threshold. Investor interest remains strong, as evidenced by recent bond auction results showing solid demand.
Austria’s 2025 Borrowing Plans
In the upcoming year, Austria is set to reduce its borrowing from financial markets compared to the previous year. The government plans to raise between 43 and 47 billion euros through federal bonds in 2025, a decrease from 49 billion euros in 2024. Although there will be a slight increase in short-term financing, these figures are subject to change as ongoing government negotiations will extend the current budget for the time being.
Markus Stix, head of the Austrian Federal Financing Agency (OeBFA), explained that the anticipated reduction in borrowing for next year is primarily due to lower repayment expectations. The OeBFA estimates a maximum of 47 billion euros to be secured through federal bonds in 2025, whereas 2024’s estimate stands at approximately 49 billion euros. This year also saw a minor drop in short-term instruments by 2.5 billion euros, totaling an estimated 22.2 billion euros by the end of 2024. However, the OeBFA anticipates an increase of 2 to 4 billion euros in this area for the next year, along with plans for three new syndications similar to this year.
Green Financing Initiatives
In 2025, Austria will also introduce green federal securities, including medium- and long-term green offerings and short-term instruments, amounting to around 6 billion euros, down slightly from 6.2 billion euros in 2024. Stix expressed pride in Austria’s high volume of green financing, noting that about 8 percent of the total financing is sourced from eco-friendly products, positioning Austria at the forefront within the EU. The OeBFA is set to launch a new green short-term product next year, adding six-month green T-Bills to its offerings alongside the well-received three-month green T-Bills, which are scheduled for release in March.
Stix stated that while the financing volume is slightly lower than this year, the current outlook lacks a legal basis due to ongoing government negotiations. This means that the budget from 2024 will continue to apply, with the federal government allowed to incur new financial debts only up to half of the maximum limits established for 2024.
Given the potential for budget revisions amid upcoming government savings pressures, Stix emphasized that fiscal regulations must be adhered to. Austria is determined to maintain its budget deficit below the EU threshold of 3 percent, despite the Fiscal Council’s current projections of a 3.9 percent deficit for this year and 4.1 percent for 2025.
Investors are keeping a close eye on these developments. Despite political uncertainties in several European countries that are issuing larger amounts of debt, Stix believes Austria remains in a favorable position. He reassured that the long-term management of the budget deficit is crucial for maintaining investor confidence and the country’s credit rating.
Looking ahead, Austria faces challenges as the Eurosystem, which includes the European Central Bank and national central banks, will cease bond purchases starting next year. This means that other investors will need to fill the gap left by central banks. Nonetheless, Stix remains optimistic about the demand for domestic bonds, citing a strong appetite from investors this year, particularly from banks benefiting from increased savings rates.
At the last bond auction of the year, held recently, Austria saw solid demand for its securities, issuing just over one billion euros in bonds. The ten-year bond had a bid-cover ratio of 3.51 and an issuance yield of 2.454 percent, while the 30-year bond achieved an issuance yield of 2.835 percent, indicating strong market interest.
The Austrian Federal Financing Agency (OeBFA) oversees the country’s financial debts and also provides financing for various legal entities, including federal states and major infrastructure projects. As of November 2024, Austria’s financial debt stood at 296.3 billion euros, with an effective interest rate of 1.91 percent and an average remaining term of 11.42 years.