Austria is set to eliminate roughly 20% of all subsidies related to climate change initiatives, as negotiators trying to form a nationalist- conservative government seek to avoid a budget reprimand from the European Union, Bloomberg reports.

Solar panels at the Natural History Museum Vienna The EU's so-called 'excessive-deficit' procedure would limit Austria's budget independence, according to a Thursday statement from Freedom Party representative Hubert Fuchs.

As part of a €6.4 billion ($6.58 billion) budget saving program for 2025, the government would cut €1.6 billion of payouts compensating households for a carbon tax, and slash about €500 million in subsidies introduced to help the economy adopt emissions-free technologies.

The government would also eliminate tax incentives to buy electric vehicles and install solar panels, as coalition negotiators seek €435 million in additional dividends from state holdings that include a minority stake in energy company OMV AG.

Most of the measures on the chopping block were introduced by the previous conservative-green government, however with Austria's economy in its longest recession since World War II - and may contract again in 2025 if budget steps hurt growth, according to the Wifo research institute.

Meanwhile, Austria's Fiscal Advisory Council anticipates needing to slash costs by more than €12 billion by 2028, which comes as Fitch lowered Austria's AA+ rating to "negative" on Jan. 10, pointing to political instability and persistent deficits which exceed the EU's 3%- of-output limit.