WIFO Director: "A Large Savings Package in Historical Comparison"
WIFO Chief Gabriel Felbermayr sees a great need for reform and savings for the federal government until 2029 following the double budget 2025/26 presented on Tuesday. "Significant savings measures" and structural reforms are needed to finance stimulus programs for the business location, Felbermayr said on Thursday at the Club of Economic Journalists in Vienna. "To restore confidence, a reform agenda and a long-term plan are needed."
Labor Costs, Energy, Bureaucracy
The top economist wishes for a "credible path for reducing labor costs, measures to reduce energy costs, and to cut bureaucracy" from the ÖVP/SPÖ/NEOS government. Only then will the mood among companies brighten, and investment activity will rise again. Improvements in "location quality" could partly be financed by reducing climate-damaging subsidies, according to Felbermayr. The director of the Economic Research Institute (WIFO) sees financial leeway for the public sector in the valorization of the mineral oil tax and a reform of the commuter allowance and diesel privilege.
The topic of pensions is something politics will likely not be able to avoid in the coming years. Further measures are needed to curb the rise in pension costs, as these will otherwise "dramatically increase" by 2029, according to the WIFO chief. The government must "align the effective and statutory retirement age" and introduce "the linkage of the retirement age to life expectancy" in the long term. "Such reforms should be tackled."
"Relatively Drastic Austerity Package"
The WIFO director praises the budget preparation by the new federal government. ÖVP, SPÖ, and NEOS, along with Markus Marterbauer (SPÖ) as the "new yet inexperienced finance minister," have "put together a relatively drastic austerity package" without conflict. "It is a large austerity package in historical comparison," explained Felbermayr.
According to the government's plans, the budget deficit is to decrease from 4.7 percent last year to 4.5 percent of the gross domestic product (GDP) this year. Next year, it should be 4.2 percent, and by 2028, the government aims to exit the (looming) EU deficit procedure. "The debt ratio remains high. The medium-term budget plan is not crisis-proof," commented the WIFO chief on the government's budget policy. For the public sector's revenues and expenditures to occur as budgeted, the Austrian economy and tax revenues must develop as forecasted. At the end of March, WIFO expected a decline in economic output of 0.3 percent this year and economic growth of 1.2 percent for 2026. WIFO Chief Felbermayr identifies some economic news "indicating" that the economic forecast holds.
(APA/Red)
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