Budget watchdog warns:

“We need austerity packages instead of election sweeteners”

We are increasingly falling short of the EU debt limits and there is no money left for aid against the next crisis, warns the Fiscal Council.

(Bild: amazing studio - stock.adobe.com)

Austria's public finances are on fire, warns budget watchdog Christoph Badelt. Debts will rise sharply by 2028, the deficit is too high, reforms are lacking. There can be no election sweeteners now, and the next government will not be able to avoid years of savings packages worth billions, he demands.

"The situation is really problematic," says Badelt, who, as head of the Fiscal Council, examines the state's financial situation. This year is effectively already over, but the outlook for the next few years is even worse. Therefore, there should not be any quick election sweeteners now, and the next government must start with austerity packages right away, Badelt demands.

"We urgently need budget consolidation in order to make room to overcome the next crisis and to be able to make more socio-ecological investments. If they start now with a deficit of ten to twelve billion euros, they won't have this space."

The pressure also comes from outside: according to EU fiscal rules, Austria must present a plan by September to return to the upper limit of 60 percent of GDP for public debt - this year we will rise to 78.5 percent, and the Fiscal Council even expects a further increase to 82.4 percent by 2028.

Fiscal Council head Christoph Badelt: "We need leeway for the next crises."

(Bild: APA/ROLAND SCHLAGER)

In order to at least come close to the 60 percent target, "we will have to deliver 0.5 percent of GDP for four years, which amounts to around 2.5 billion euros per year," Badelt says of the necessary austerity measures. Unfortunately, there are currently no recognizable efforts at all, the Fiscal Council gives the Finance Minister a grade of five: the abolition of the cold progression in wage tax and the inflation adjustment of certain social benefits have been carried out without counter-financing and are therefore automatically driving the deficit.

The constant additional expenditure on care, healthcare and pensions has effectively been "left to run its course", there is "no longer any recognizable ambition on the part of the federal, state and local governments to consolidate the budget", considerable risks due to climate change (e.g. impending fines, environmental damage) mean that additional financing is required and structural reforms are stalling.

More expenditure than revenue
Overall, "the spending dynamic is therefore higher than the revenue dynamic," Badelt soberly summarizes. The direct consequence of this is that Austria's financial rating will deteriorate and we will therefore have to pay higher interest on our growing national debt. This year alone, it will be 1.4 billion euros more than in 2023.

Instead of falling towards 60 percent as prescribed, our debt is rising.

(Bild: Krone KREATIV)

The Fiscal Advisory Council is therefore calling for the next federal government to immediately draw up a comprehensive consolidation plan to bring revenue and expenditure into balance. Expenditure brakes are preferable because they have a more sustainable effect. All potential savings should be exploited, for example by abolishing double subsidies.

Future economic policy measures should no longer be adopted without counter-financing in other areas, and climate policy should be implemented with the aim of reducing financial risks (e.g. through environmental damage, certificate purchases) for the budget.

Nevertheless, unlike seven other EU countries such as France and Italy, Austria is not yet on the "black list" of countries against which Brussels has already initiated proceedings for excessive new debt.