Fiscal Council: Better to put money for relief measures into debt reduction

Financing sales tax reductions doesn’t work

A number of government aid measures, such as sales tax reductions for certain foods or drought relief, were introduced without functioning financing concepts. The sales tax reduction was originally supposed to be financed from a plastic tax and the parcel levy. The plastic tax is not coming now, the parcel tax may soon be abolished. Overall, the Fiscal Council sees an additional burden of 240 million euros by the government’s latest plans. At least that doesn’t change the forecasts for the budget deficit.

Gaping gap indicates structural problem

As in the spring, the Fiscal Council forecasts a 4 percent budget deficit for 2026, and 3.6 percent for 2027. But: “The gap between income and expenses remains open,” says Alena Harrer-Bachleitner from the tax council office. “This is unusual. In other crises, the gap has closed more quickly. This shows that we have a structural problem.” There are currently increases in pensions and health spending in particular, but interest expenses in servicing national debt are also increasing. “From 2025 to 2027, interest expenses will grow from 8.2 billion euros to 11 billion euros,” says Johannes Holler from the tax council office.

A 3 percent deficit is not achievable and is not a solution

According to Badelt, there should be a much greater focus on reducing national debt. The existing budget plans mean that more money has to be spent on interest every year. Badelt considers the target of a 3 percent budget deficit by 2028 – the limit actually set by the EU – to be unrealistic. But even if the government succeeds: “The goal may be good for averting an EU deficit procedure, but economically it is an absurd goal. 3 percent still means rising national debt and rising interest payments.” The government’s additional costs of 240 million euros described would have been better used for debt reduction.

Reform partnership fails to reduce spending

According to Badelt, the achievements of the reform partnership between the federal, state and local authorities to reduce bureaucracy and costs are frustrating. He gives the example of planned financing from a single source in the healthcare system. “According to current decisions, that is perverted into caricature.” There is “not a single cent” in the budget for 50 planned specialist medical centers. Additional funding streams have been created in the healthcare and education sectors. “It is desirable in itself to create more quality and simplify administrative structures. But what has not yet arrived: We don’t have the money at the momentto improve anything. We have to consolidate state finances.”

“A consolidation of budget deficits is no longer just taking place at the federal level, but at the state and local level,” says Holler. “This is actually something new that we are observing. In the past, states and municipalities budgeted around the zero line. Now it is the new normalthat states and municipalities are heavily in deficit.”

One cannot hope for constant EU contributions

Another stumbling block for state finances could be EU contributions. The current budget framework does not provide for an increase in payments to Brussels. But it is unclear whether it will stay that way. In addition, Austria has one Discount receives 500 million euros annually from the EU. “This will also continue to be planned into the budget as if we would have it forever,” says Badelt. It is difficult to imagine that the discount will be granted in the long term.

Overall, it can be said that the new looseness in counter-financing political measures is problematic. “It’s always easy to invent something to improve something.” The task of financial policy is to keep an eye on the costs, which is why its representatives are often referred to as “the bad guys“The Fiscal Council, as an independent body, is happy to accept the position of admonisher: “Today we are the bad guys.”

Chancellor Stocker cannot understand criticism

Chancellor Christian Stocker couldn’t understand the criticism on Friday. The drought relief, for example, was counter-financed by reserves from social security, which the federal government made possible through its subsidies, and the future depot was already included in the double budget, he emphasized on the sidelines of a media event. He expected from the reform partnership definitely positive effectsnot in the short term: “The fact that a reform causes additional costs at the beginning and only leads to efficiency when it takes effect is also nothing new.”