Inflation has not only penetrated all households in the country, but is increasingly threatening the survival of the country itself. In many cases it led to extra costs of several hundred euros – not per year, but per month. As the current debt report shows, the number of first contacts with debt counseling centers will increase by ten percent in 2022. Social Affairs Minister Johannes Rauch (Greens) is now calling for the food summit.
The over-indebtedness amounted to an average of 61,430 euros, the debt counseling announced on Tuesday. Not only low-income people are affected. “The over-indebtedness has entered the middle of society,” the head of asb Schuldnerberatungen GmbH, Clemens Mitterlehner, said at a press conference.
Affected: “Actually, they didn’t make a mistake”
“People are increasingly saying: ‘I actually didn’t make a mistake and I’m still in debt counseling’,” the director of the asb told journalists in Vienna on Tuesday. According to him, the number of first consultations in the first quarter of 2023 was far above the level of the past year.
“Higher costs and higher interest rates on loans can make it financially tight now, even for those who could previously afford a good life,” Mitterlehner stressed.
Few unemployed, but big problems
The main cause of over-indebtedness is unemployment or lower income. In the event of a job loss, incomes drop “in one fell swoop to 55 percent” and customers have no reserves to dispose of. Mitterlehner advocated on behalf of the umbrella organization of government-approved debt assistance for an increase in the net replacement rate in case of unemployment to 70 percent.
Overall, unemployment in Austria is relatively low at the moment, but there are five times more unemployed in welfare than in the general population. In addition to an increase in the net replacement rate in case of unemployment, it would be necessary, according to the asb boss, “to raise the subsistence minimum to at least the poverty risk threshold of 1371 euros per month”.
Rauch does not accept criticism
Social Affairs Minister Johannes Rauch (Greens) defended the federal government’s measures to deal with the extremely high inflation. “It was about acting quickly,” he countered criticism that various one-off payments to all households had not been “socially accurate” enough according to the watering can principle. A total of 30 billion euros has been spent on this so far. “If we had not done that, the social situation would have been considerably different,” said the minister.
Inflation exacerbates the situation even further
According to the debt report, the number of private bankruptcies opened in 2022 rose 13.5 percent to 8,176 from the previous year, with 71 percent of them assisting with debt counseling. The trend in defaults continues to rise. “An initial increase can already be seen; in some cases, debt counseling doubled the number of initial consultations in early 2023 compared to early 2022,” Mitterlehner reports.
The risk of over-indebtedness and poverty is increasing – the situation of over-indebted people is exacerbated by inflation. “Experience shows that the enormous price increases will only really be felt in debt advice after some time,” said the asb boss.
Entrepreneurs “better off than private individuals“
It becomes especially problematic when people can no longer afford to file for personal bankruptcy. Because for this, all expenses must be covered by the income and no new debts may be incurred. The asb boss argued for retaining the possibility of debt relief for private individuals within three years. There is a risk of an increase to five years. For entrepreneurs, it remains at three years. “We are in talks – it cannot be the case that entrepreneurs are better off than private debtors,” said the Minister of Social Affairs.
Inflation top should provide clarity
According to Rauch, low-income people spend most of their household income on housing, energy and food. It is precisely in these areas that prices have risen particularly strongly – often much faster than inflation. For example, general inflation in March was 9.2 percent, but groceries rose by 14.5 percent. The Minister of Social Affairs wants to take a closer look at this.
“The aim must be for prices to reach a representative level.” On May 8, representatives of food chains and agriculture, social partners and economic researchers are invited to a meeting to discuss the high prices.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
