Wifo head analyzes

High inflation: the government has made mistakes

(Bild: INGOSFOTOGRAFIE.DE, stock.adobe.com)

Inflation in Austria was too high for a long time - it was even well above average compared to other EU countries. Wifo CEO Gabriel Felbermayr attributes this to "bad luck" and mistakes made by the government.

The head of the economic research institute warned in the ORF press conference on Sunday that the electricity price brake should also have been extended to natural gas. Felbermayr was also self-critical - as an economic advisor, he had not recommended this. However, if the wave of inflation had not receded, a reduction in VAT would have had to be discussed.

The fact that Austria was hit harder by the wave of inflation than other EU countries was also "bad luck". He specifically cited the high economic importance of tourism, which has been badly hit by the coronavirus pandemic, Austria's heavily export-oriented industry and its very high dependence on Russian natural gas as factors.

Wifo boss Gabriel Felbermayr

(Bild: © Harald Dostal / 2023)

Austria has also held back longer than other countries with market interventions. However, countries such as Spain or Belgium, which intervened earlier and more strongly in prices, now have higher inflation because market dynamics are now taking effect after the measures have expired, explained the expert.

Many price increases happen automatically inAustria
 The economist identifies problems because in Austria many price increases happen automatically due to indexation in contracts, for example for rents. This leads to inflation remaining high for longer. The fact that wages should always rise by at least the level of inflation also leads to competitive disadvantages and cannot be in the interests of either employers or employees.

Felbermayr believes that the biggest lever in the working time debate is not the incentives for more overtime, but that more part-time employees should increase their working hours, for example from 20 to 30 hours per week.

EU external borders not bad for the economy
Regarding the EU elections, the economist said that voter turnout is extremely important because it is an indicator of how people feel about Europe. He criticized the fact that the election campaign often focused on national issues and the private life of a leading candidate. Felbermayr takes a pragmatic view of the predicted shift to the right. Secure external borders are not bad for Europe's economic performance. However, a fragmentation of Europe without a clear majority would be a dilemma.

In Felbermayr's view, an important issue for Europe to be able to better assert itself in the world is the capital market union. Put simply, if it were easier for Austrians to hold French shares, for example, this would make it easier for companies to raise money, which in turn would enable them to become stronger and larger.

Felbermayr is opposed to a move into politics - like former IHS boss Martin Kocher, for example. He can do what he thinks is right, he says, but that is not feasible in a political role. "That's why I'm glad I'm not in politics."