Austria's coalition government announced on Friday a five-year austerity plan to claw back 26.7 billion euros ($35.2 billion) in savings and increased tax revenue.
The target would primarily be reached through spending cuts but one third would be achieved through increased taxes, the government said. Austria's regions will be asked to slash spending by 5.2 billion euros.
The austerity package is intended to put the country in line with European Union rules on public deficits and make Austria "independent of financial markets", Chancellor Werner Faymann of the Social Democratic party.
Vice Chancellor and Foreign Minister Michael Spindelegger of the conservative People's Party was at Faymann's side when he spoke.
Civil servants, pensioners and the national rail service will be the hardest hit in the austerity measures.
But the package also includes 7.0 billion euros in new taxes, including a special tax on high earners, the government said, adding that Austria could earn 500 million euros annually through a proposed EU-wide financial transaction tax.
In 2010, Austria's public deficit hit 4.4 percent of gross domestic product, according to Eurostat data.
Preliminary finance ministry figures for 2011 put Austria's public deficit at 3.3 percent of output, lower than the 3.9 percent forecast by the government and just above the EU three-percent ceiling.
Chancellor Faymann has said Austria needs to achieve around two billion euros in savings every year but his governing coalition has squabbled over where the axe should fall and on whether taxes should rise.
Austria lost its triple-A credit rating with Standard & Poor's last month on worries about the eurozone crisis and concerns -- dismissed as exaggerated by Vienna -- about the exposure of Austrian banks to Hungary and Italy.