More billions needed

This blue-black austerity package is just the beginning

Austria's deficit is too large, the EU expects a consistent recovery plan - can ÖVP leader Christian Stocker and FPÖ leader Herbert Kickl (right) deliver?

(Bild: APA/Helmut Fohringer)

Experts are largely positive about the savings plans. However, the next government urgently needs to save billions more over the next few years. Structural reforms, for example in the pension system, must also not be taboo. 

The blue-black coalition wants to save more than six billion euros, with both parties mainly turning the spending screw. Most economic researchers had also recommended this in advance. Both IHS Director Holger Bonin and Wifo Director Gabriel Felbermayr are cautiously positive about the plans. They do not fear any major negative consequences for the economy. The state is primarily making savings on expenditure that does not have a major impact on economic growth. There are also no plans for new mass taxes, which would have had a major impact on consumption.

Consolidation must happen over years
"But this package can only be the beginning," emphasizes economist Bonin at the same time. Further billions need to be saved over the next few years. The tripartite negotiations resulted in a hole of 18 billion euros, which is to be closed within seven years. Franz Schellhorn, head of Agenda Austria, criticizes the fact that the 6.4 billion euros saved will only bring the deficit back down to three percent, which is still too high. "More could have been achieved," he believes.

The savings must now be made exactly as planned, otherwise Austria will not reach its targets. But there would be enough opportunities to make savings. Reducing subsidies to the 2019 level alone would save eight billion euros a year.

When it comes to subsidies, the famous chainsaw will probably be needed in a few corners of the thicket.

Wifo-Chef Gabriel Felbermayr

Bild: APA/HANS KLAUS TECHT

The package also leaves little room for relief in some areas. However, these are urgently needed, as the tax burden in Austria is extremely high. Both parties, the FPÖ and the ÖVP, promised lower taxes and costs for entrepreneurs during the election campaign.

Wifo boss Felbermayr also sees a lot of potential in subsidies: "We will probably need the famous chainsaw in a few corners of the thicket." Bonin also emphasizes that climate subsidies were too generous here and there. "In the case of photovoltaics, the subsidies met with a fully utilized market." Subsidies artificially drive up demand, which also causes prices to rise, but at the same time there is a lack of capacity.

"Pushing back the watering can"
Economist Monika Köppl-Turyna also says that subsidies are not always the best instrument for achieving a goal, and they should also be efficient. "Wherever the watering can has been used, it should be reconsidered," adds the new Secretary General of the Chamber of Commerce, Wolfgang Hattmannsdorfer.

I still see question marks over the savings in the ministries, which are expected to amount to over a billion.

IHS-Chef Holger Bonin

Bild: SEPA/SEPA.Media | Martin Juen

There should be no taboos; measures are needed in the pension system, for example, emphasizes Felbermayr. For example, retirement pensions could be increased a few times below inflation after having risen above inflation for years.

Question marks over savings in the ministries
Bonin sees question marks over the savings made by the ministries, which are expected to bring in 1.1 billion euros. It is also difficult to estimate the impact of the end of the additional earnings limit for the unemployed and whether the actual retirement age will actually rise as planned. Here, politicians are relying on changes in behavior - but whether the unemployed will actually look for a job and not work illegally and whether pensioners will actually retire later thanks to incentives to work longer is not certain.

AK criticizes: "Hits the weakest"
Criticism comes from the AK. Director Silvia Hruška-Frank sees an "unbalanced burden package" for everyone: "The abolition of the climate bonus hits people on low incomes the hardest." The abolition of educational leave is also wrong.