March 18, 2020 / 1:58 PM / in 10 days

UPDATE 3-Austria launches 38 bln eur aid fund, border checks with Germany

* Aid package equals 9.5% of Austria's GDP

* 2020 draft budget sees deficit instead of planned surplus

* AUA, Magna Steyr, Strabag hit by effects of the virus

* Gastein Valley, Großarltal and Flachau put under lockdown (Adds border checks with Germany, updates corona case numbers)

By Kirsti Knolle

VIENNA, March 18 (Reuters) - Austria will spend up to 38 billion euros ($42 billion) to secure jobs and keep companies afloat, Chancellor Sebastian Kurz said on Wednesday, joining other European countries providing more funds to limit the impact of the coronavirus pandemic.

Roughly 1,650 people in Austria have been infected and four have died from the virus.

The country has minimized air traffic, put ski regions under lockdown, closed its schools and most shops, urged Austrians to self-isolate, and introduced border controls with Italy, Switzerland and Liechtenstein.

From midnight, Austria will also make checks at the German border, a measure that its northern neighbour introduced on Monday.

"The border controls to Germany will be introduced today at midnight," said Markus Wallner, governor of the province of Vorarlberg, which borders all three states, on Wednesday evening. "This is an Austria-wide measure."

Such controls could significantly slow down traffic on the Brenner Pass, a vital link between northern and southern Europe and in particular between Germany and Italy.

Austria's government will provide another 9 billion euros in guarantees and warranties, 15 billion euros in emergency aid and 10 billion euros in tax deferrals in addition to an already announced 4 billion euro aid package, the chancellor said.

"With the clear goal, no matter what it takes, we try to support the people in our country," Kurz told a news conference.

"My political conviction is that the state must be frugal with tax money in good times so that there are opportunities to help in bad times. That time is now," Kurz said.

The 38 billion package equals 9.5% of the country's 2019 gross domestic product.

The funds are intended to ensure the existence of very small companies as well as to provide larger and very large companies with the necessary means to avoid financial difficulties, finance minister Gernot Bluemel said.

The finance minister issued a draft budget earlier on Wednesday that includes a small deficit instead of the initially hoped-for surplus. Bluemel said it was not possible to predict how much further the shortfall will widen.

"This is an exceptional situation also in budgetary terms. There is only one priority: to do what is necessary to help," the minister said, adding that the government would provide any amount of money that was needed.

Austria already has relaxed its short-time work regulation to make it as easy as possible for companies to keep their staff instead of firing them.

Among large Austrian companies, hit hard by restrictions are Austrian Airlines, which has applied for short-time working for all its 7,000 staff and Magna Steyr, a unit of Canada's Magna International with around 10,000 employees in Austria, which has stopped local production for two weeks, according to media reports.

Strabag, one of Austria's largest construction firms, said on Wednesday it would stop construction operations countrywide.

Gastein Valley, Großarltal and Flachau, ski areas in the western province of Salzburg, on Wednesday joined other popular places including Ischgl and St. Anton in Tyrol that were put under lockdown. ($1 = 0.91 euros) (Reporting by Kirsti Knolle; Editing by Angus MacSwan and Hugh Lawson)

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