Austria craves the persistently high cost of living. Finance Minister Magnus Brunner rejects direct market intervention and instead proposes a French model. Meetings with experts should bring solutions, while local aid organizations and economic institutions sound the alarm.
Finance Minister Magnus Brunner (ÖVP) wants to examine the French model in the fight against high food prices. There, grocers and the government had agreed not to raise the prices of certain foods for a quarter. “I find that interesting and you could bring it up and discuss it at the food summit on Monday, for example,” explains Brunner in the Ö1 series “Im Journal zu Gast”.
Brunner rejects a reduction in VAT on food, as introduced by Green Party leader Sigrid Maurer, as a “classic watering can method” that would particularly benefit people with higher incomes. Brunner doubts “whether that is smart”.
Brunner rules out rent control
In other European countries it has been found that this measure is not or only partially passed on to the end user. Brunner also rules out other additional price controls, such as rents – although prices are rising unusually sharply in Austria (see chart).
decide days
In the fight against high inflation, Brunner and Minister of Economic Affairs Martin Kocher (ÖVP) have announced meetings with experts and – at their request – the social partners for next week. Social Affairs Minister Johannes Rauch, Vice Chancellor Werner Kogler (Greens) and Agriculture Minister Norbert Totschnig (ÖVP) have now invited experts and trade representatives to a food summit.
According to Brunner, the government has already taken measures such as the electricity cost brake, the reduction of network costs and energy taxes. These would have already contributed to reducing inflation. In addition, there is a fall in prices in some areas, such as energy. The question now has to be asked with all measures whether they are still necessary or can even have a price-raising effect and should be phased out.
Austrians lose money
A Caritas survey paints a different picture of the current situation. About nine out of ten “materially and socially disadvantaged people” could no longer afford “regular leisure activities” (see graph).
According to Statistics Austria, by the end of 2022, more than a third of Austrians had to accept a loss of income due to the continued high price pressure. More and more citizens are also clearly slipping into the red. “Over-indebtedness has reached the middle of society,” the head of asb Schuldnerberatungen GmbH, Clemens Mitterlehner, said at a press conference.
People would increasingly say: “I have not actually made any mistakes and yet I am in debt counseling.” A recent study by the think tank Bruegel shows that Austria has made the least intervention in prices in the comparison of the eurozone. The motto so far: one-off payments.
“You’re not tackling the inflation problem at the root, you’re just fighting the symptoms,” Momentum economist Marie Hasdenteufel said in a broadcast. According to the analysis of the union affiliated institute, most opt for a mix of income and price-cutting measures. Examples are the electricity price cap and the rent price brake in Spain and the gas price brake in Germany.
Significantly higher inflation compared to Germany
Especially in Germany, the price difference is now clear. Wifo boss Gabriel Felbermayr fears a further deterioration of the European comparison if the government does not intervene. “We now certainly have to pull a lot of levers to close this relatively large and unfortunately also growing inflation gap to the eurozone,” Felbermayr recently said in ZiB2. “The fact that the distance to the eurozone is so great should make us think.” The most recent data shows that the average price level in Germany is already more than seven percent below that in Germany (see graph).
In a price comparison, the Workers’ Chamber documents the extent to which inflation in Austria has an impact, especially for people with little money. According to this, the cheapest food and cleaning products in supermarkets have become 20 to 35 percent more expensive and the cheapest drugstore products have become up to 33 percent more expensive, depending on the chain. According to AK, the price of selected individual products has doubled or, in extreme cases, even quintupled, mainly because the particularly cheap offers from the previous year are no longer available.
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.
