Inflation in Austria was too high for a long time and was even significantly above average compared to other EU countries. Wifo boss Gabriel Felbermayr attributes this, in addition to ‘bad luck’, to government mistakes.
The electricity price brake should also have been extended to natural gas, the head of the economic research institute warned in the ORF press hour on Sunday. Felbermayr was also self-critical: as an economic advisor he did not recommend this. If the wave of inflation had not subsided, we would also have had to talk about a VAT cut.
The fact that Austria was hit harder by the wave of inflation than other EU countries was also ‘bad luck’. The factors he specifically mentioned were the great economic importance of tourism, which was hit hard by the corona pandemic, Austria’s highly export-oriented industry and the very high dependence on Russian natural gas.
Austria also hesitated longer than anywhere else with market interventions. Countries such as Spain or Belgium, which previously intervened more strongly in prices, now experience higher inflation because market dynamics are now taking effect after the measures have expired, the expert explains.
Many price increases happen automatically for us
The economist identifies problems because in Austria many price increases are achieved automatically through indexation in contracts, for example for rental prices. This means that inflation will remain high for longer. The fact that wages must always rise at least at the rate of inflation creates competitive disadvantages and cannot be in the interests of either employers or employees.
Felbermayr sees the major leverage in the working time debate not in the incentives for more overtime, but in the fact that more part-time employees are increasing their hours, for example from 20 to 30 hours per week.
The EU’s external borders are not bad for the economy
Turning to the EU elections, the economist said that voter turnout was extremely important as it was an indicator of how people felt about Europe. He criticized the fact that the election campaign often focused on national issues and the private life of a top candidate. Felbermayr sees the predicted shift to the right pragmatically. Secure external borders are not bad for Europe’s economic performance. A dilemma, however, would be a fragmentation of Europe without a clear majority.
From Felbermayr’s point of view, the Capital Markets Union is an important point of attention, so that Europe can better assert itself in the world. Simply put, if it were easier for Austrians to hold French shares, it would make it easier for the company to raise money, allowing them to grow stronger and bigger.
Felbermayr is opposed to a move into politics, just like former IHS boss Martin Kocher. He could do what he thought was right, but that could not be implemented in a political role. “That’s why I’m glad I’m not in politics.”
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.
