Statement on budget speech: Budget shows serious need for action

The 2025/26 double budget provides for savings measures of EUR 6.4 billion and EUR 8.7 billion in the two years. Despite these consolidation measures, the budget deficit remains at 4.5 and 4.2 percent of GDP respectively, compared to 4.7 percent in 2024. Without this consolidation, the deficit this year would even amount to 5.8 percent. The planned slight improvement in the Maastricht balance in the two years is not due to the federal government, but to the contribution from social security and the provinces and municipalities .

The debt ratio is set to rise noticeably again and increase to just under 85% this year and over 86% next year, thus reaching a peak value. The Maastricht target of 60 percent is receding into the distance .

Despite consolidation measures, public pensions remain the main driver of the federal budget. For example, transfers to the pension insurance scheme are set to increase by 12% this year and by 4.4% next year, which corresponds to EUR 2.1 billion or EUR 850 million. A further EUR 770 million or EUR 450 million will be added for civil servants in retirement .

Another driver is the interest payments for the federal government's public debt. Specifically, additional financial expenditure of over EUR 1 billion is estimated for this year and EUR 560 million for next year. The lack of consolidation in the past and the high level of debt are taking their toll here. By way of comparison, Germany had a debt ratio of just under 80 percent in 2012, which is comparable to Austria's figure of 82.9 percent. Since then, the ratio in Germany has fallen significantly to 62.5% in 2024, which has noticeably reduced the interest burden of our neighboring country.

The salary agreements for federal employees will lead to an increase in personnel expenditure of just under 5 percent. In view of the current economic situation and the exemplary role of the public sector, a renegotiation of the wage and salary agreements for next year is to be welcomed .

The consolidation measures are a step in the right direction. Reductions in the area of funding are sensible and must be continued. The funding task force may reveal potential for further savings. However, it would be more important to define targets for funding, monitor them on an ongoing basis and evaluate their achievement. On a positive note, it should be noted that the area of education is only slightly affected. The opportunity bonus for socially challenged schools is also seen as positive .

Individual measures in the consolidation package are not designed to be sustainable, but only improve the budget temporarily. These include higher dividend distributions from state-related companies, the increased bank levy and the contribution from energy companies. The increase in the retirement age for the corridor pension also only improves the budgetary situation temporarily. In the longer term, the postponement of retirement and the associated higher pensions will result in additional budgetary burdens. With regard to subsidies, it will also be important to ensure that the abolition of individual subsidies does not lead to the introduction of similar subsidies or that comparable subsidies are introduced in other regional authorities .

The economic development in recent years has meant that Austria has primarily increased its spending. The share of public spending in GDP increased to over 56% in 2024. This is almost as high as in the pandemic year 2020 (57.3%) and more than 7 percentage points higher than in 2019. This is a dramatic increase that, according to the strategy report, will hardly be reduced by 2029.

However, the tax ratio is also expected to remain stable at a high level of over 45%. This will mean that the already significantly declining competitiveness of Austrian companies will not improve. The high government share will further exacerbate the problems. The general economic conditions are certainly challenging for the budget, but revenues will be supported by a still relatively robust labor market .

"The high deficit and the high level of debt significantly limit the scope for future stabilizing measures. The crises in recent years have shown that healthy public finances are an important basis for being able to react effectively. For this reason, we see further consolidation efforts as necessary, whereby structural changes are unavoidable in order to significantly reduce the demographic financial burden," summarizes EcoAustria Director Monika Köppl-Turyna.