Debate on austerity package

Economists counter Chancellor Nehammer’s plans

Federal Chancellor Karl Nehammer with his Finance Minister Magnus Brunner (r.): The ÖVP leader wants no part of austerity packages in the middle of the election campaign.

(Bild: APA/EVA MANHART)

No austerity package for the people - despite high levels of debt. Karl Nehammer is banking on economic growth instead. Experts disagree and see billions in savings as necessary.

There is no need for an austerity package, said Karl Nehammer in several interviews at the weekend. Probably also to avoid unsettling the electorate. Instead, the ÖVP chancellor is focusing on economic growth.

Experts take a critical view of this. An austerity package will be needed, says Monika Köppl-Turyna, Director of Eco Austria. "Firstly, the forecast deficits in the coming years are higher than the three percent Maastricht limit. A large proportion of these deficits are not cyclical, but structural."

This means that even if we catch up, which is not in sight, we will consistently be confronted with higher expenditure. "For this reason alone, you have to save a few billion, otherwise there is a risk of deficit proceedings." 

"The forecasts are not so great"
 The Fiscal Council is forecasting a deficit of 3.4 percent for this year, which is around 2 billion too much. Köppl-Turyna: That is the "minimum program". According to Eco Austria, up to 4.5 percent of GDP could be saved in the education and healthcare systems and administration - without any loss of performance.

That would be 18 billion. In view of international competition, it is also important to keep government spending efficient. Christoph Badelt, President of the Fiscal Council, also finds the Chancellor's comments "unpleasant". His assumptions are based on economic growth. According to Badelt, there is no evidence for this. "What the Chancellor may not be considering is that all our forecasts are based on economic forecasts. They are not great."

Generally speaking, Austria is not bad in international comparison, according to economic researcher Badelt. "But the debt cannot get any bigger in the long term." Income and expenditure must be taken into account. "We believe that there must be major measures on both sides. If you want to cut taxes, you also have to cut spending." Badelt advocates a budget plan for the coming years.