Austria’s current economic outlook is bleak given rampant inflation. Following his warning last week, WIFO chief Gabriel Felbermayr repeated his criticism of the federal government. If we “let things take their course”, we would suffer a fate similar to that of the “Southerners”.
Massive inflation in Austria continues to drive politics. And last but not least: after Monday’s failed food summit, there seems to be no real prospect of a sufficient containment of inflation.
One aspect of the higher costs in particular worries the economic experts in the country – compared to neighboring countries (eg Germany) and especially the eurozone, the country is still lagging behind. Felbermayr already warned last week that politicians, who rely too much on the European Central Bank (ECB) on this point, should act more courageously.
Fighting Inflation, “Not Just the Effects”
About a week later, he continued with explosive words: the facts now available would change the economic and political classification, he warns via Twitter. If inflation in Austria is permanently above the Eurozone, competitiveness “erods” – it becomes increasingly difficult to cover the costs of daily living (rent, fees, etc.). It is now essential to fight inflation itself, “not just the effects,” Felbermayr continued.
“If you let things go, we end up as the ‘southern countries’,” he finds a drastic comparison after joining the eurozone. At that time, “prices there moved away from those of the ‘Northern countries’, with the well-known disastrous consequences.”
Location Austria in danger?
While inflation in Germany was still below the average for the euro countries in the first phase of the increase, it has risen above it by 2.5 percentage points in the past four months. According to the economic researcher, the first phase of inflation was “mainly a socio-political challenge” to mitigate the effects somewhat.
Are we threatened with a fate similar to that of Greece, which could only be saved with massive financial help from other euro countries? Contrary to the current main explanation for the high price increases, this is not only due to increased energy costs, as Felbermayr further emphasizes, but mainly to services.
Also tax cuts as a last resort
Many measures are now needed to counter this, the economic researcher also has a small package ready for the government: “Freedom of tariffs in the public sector, pressure on the energy industry, transparency offensive, etc.” He also concludes a reduction in VAT – but only as a last resort.
However, what people do should not be financed with debt, the economic expert emphasizes: “Otherwise the effect of the measures will be cannibalized again.”
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.
