Wifo boss: State support is important, but not by watering can

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Wifo boss Gabriel Felbermayr considers the multibillion-euro state aid measures in the energy crisis important. At the same time, however, criticizes the watering can principle used and sees the need for new measures diminishing. “We must create the conditions that allow us to provide more targeted aid in the next crisis,” Felbermayr demanded. High inflation will accompany the country for a long time to come.

The director of the economic research institute (Wifo) repeatedly regretted in the ORF “Persuur” on Sunday that it was administratively not feasible to link support such as the electricity price brake to household size and income level. On the one hand, there are not enough incentives to save energy, Felbermayr confirmed, and on the other hand, this also fuels inflation. And with this “unfortunately we will have to live with high figures for a long time to come, even if they are going to decrease”.

Inflation lower than feared thanks to mild winter
The Treasury Department has “spent a lot in recent years, paid a lot of real aid, but the more you support, you stimulate demand and that stimulates inflation”. The watering can may be left in the shed more often. For this year, Wifo expects an annual inflation of 6.5 percent. The forecast may be lowered if energy prices remain at current levels. This is lower than feared due to well-stocked gas storage facilities and a mild winter so far.

“Social partnership wage policy works”
“It is already clear that wage increases lead to a sustained increase in prices,” says Felbermayr. But he does not see a wage price spiral: “I do not like the word spiral in this context”. The recent, sometimes heated KV negotiations have shown “that wage policies based on social partnership really work even in times of stress”. Purchasing power will increase thanks to the deals for this year and next year.

Due to the high demand, rents are rising
According to Felbermayr, consideration should also be given to how rent increases can be leveled off. The increase has already taken place in recent years and is now being reinforced by inflation. Not only rents are rising, so are operating costs. In short, there is too little supply in the domestic metropolitan areas compared to demand, which drives up prices. “I would warn against further subsidies without thinking fundamentally about it.” There are also indications of increasing monopolization internationally, and it is also a question of competition.

The Wifo boss regretted that there was no major reform of unemployment insurance because the ÖVP and the Greens could not agree. The issue should be addressed in the next legislature. As for better incentives to continue working at a slightly older age, Felbermayr said that while this is good, it doesn’t really leverage the number of workers that can be hired. On the contrary, the part-time level in this country is far too high and there are far too few women on the labor market, Felbermayr confirmed.

Source: Krone

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