Austrian Finance Minister Karl-Heinz Grasser presented Tuesday a draft budget for 2006 with a public deficit of 1.7 percent of output, down from 1.9 percent in 2005.

The forecast deficit for 2006 comes to 4.3 billion euros (5.6 billion dollars) compared with the 5.1 billion euros forecast for this year, Grasser said.

Under EU rules, public deficits are limited to 3.0 percent of gross domestic product.

The 2005 and 2006 budget deficits are the highest tabled since the ruling coalition between the conservatives and the far-right first came to power in February 2000, observers pointed out on Tuesday.

The draft budget provides for tax cuts of 3.6 billion euros in 2006, an increase of 1.5 billion euros compared with 2005.