The promised ‘cash collapse’ is still a long time coming: the exact size of the budget deficit will only become clear in mid-December. The new Finance Minister Gunter Mayr and Wifo boss Gabriel Felbermayr rule out that there was any cheating with the budget before the elections for the National Council.
New Finance Minister Gunter Mayr cannot afford to lead the department – although the head of the tax department has only taken over the agenda on an interim basis until the new finance minister is sworn in. Because the hat is on fire when it comes to the budget: a package of measures with savings for 2025 must be delivered in Brussels in mid-January. The EU will then decide whether Austria will have an excessive deficit procedure or not. But how did the mega hole in the budget arise? And why did a Maastricht deficit of 2.7 percent suddenly become 3.6 percent? Was there a trick?
In the ‘Krone’ conversation, the new minister Mayr and Wifo boss Gabriel Felbermayr try to clarify the confusing situation.
Consumption brakes widen the budget gap
The ÖVP points to the reason for the increased deficit in the calculations of the Austrian Institute for Economic Research (WIFO for short) – in particular the forecast for economic growth was far off. Therefore, the income for the budget has been calculated incorrectly. Is that correct?
Wifo boss Gabriel Felbermayr answers: “Wifo is not making a miscalculation. But what is true is that we made more optimistic economic forecasts in the spring than in the autumn, because our most important trading partner, Germany, has developed much worse than German economic institutions expected. The timing of the publication of the new forecast on October 4 was also not a trick, but the publication date had already been agreed for a year.”
Economic growth is being revised again
There will be a new forecast from Wifo on December 20, and this will also change because “growth in Germany is now only between 0.1 and 0.4 percent instead of one percent.” “Data is mobile and therefore there are unpleasant surprises,” says Felbermayr.
Moreover, due to the bad mood in the country, people spend less money. “We have a sales tax problem. The reluctance was incalculable,” said the new Minister of Finance. “The deterioration would only be half as great if we didn’t have consumer reluctance.” But there is also good news. By abolishing the cold progression, employees with an annual income of up to 19,600 euros are exempt from wage and income tax for the first time.
What is the budget deficit now? Is it higher than the rumored 15 billion? The new Minister of Finance is showing restraint. The figures should be on the table by mid-December. “We receive a reference trajectory from the EU for four to seven years. This means that we know exactly what we need to save.” And Felbermayr adds: “The Budget Review of the Fiscal Council will take place in mid-December.” We won’t know what Austria does until shortly before Christmas.
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.
