Interview with top economist – Are you flirting with politics, Mr. Felbermayr?

Bregenz early Friday morning: On the shore of the lake between the festival stage and the fishing pier, where seaplanes used to land, life slowly comes to life. Gabriel Felbermayr takes a deep breath: “The air is still nice and cool,” he says, letting his eyes wander over the water. The Austrian top economist is wearing jeans and a white shirt, he is on a short holiday in Vorarlberg after an intensive week. “My wife and I have never been to the Bregenz Festival,” he says. “Now we treated ourselves to the two festival premieres, ‘Madame Butterfly’ and the opera ‘Siberia’. Seeing the stage in a thunderstorm and then fleeing inside was an experience we will always remember.” After a short excursion into the world of culture, Felbermayr has returned to his favorite subject, the economy.

„krone“: You have awakened politics this week with the “Felbermayr model”. Was that the intention?
Gabriel Felbermayr: My original intention was different. Governor Johanna Mikl-Leitner brought a price cap into play. She’s right, we need a cap, but we shouldn’t cap the price, we need to cut the electricity bill. If we artificially make gas and electricity cheaper and the state subsidizes it, we will not see any savings signals. The energy bill – not only that of the very poor, by the way, but also well into the middle class – must remain affordable. Still, the price signal must get through to the people, because electricity, gas and heat are damn scarce.

They propose a basic requirement of free electricity, the rest is expensive. Have you really thought this through? Krone columnist Manfred Schumi wrote: Have fun doing math!
Implementation is the task of politics. An application model worries us a bit. This is a major hurdle for many Austrians. It is better to use the population register to find out how many people live in a household, then it could be automated. And it would be important that the account also states what you have saved. So that consumers can see what percentage of cheaper energy they have consumed and how much the state supports.

If you’re being completely honest, are you flattered that not only the government but also the union wants to adopt your model?
Yes. I have mixed feelings when it comes to the Felbermayr lid or the Felbermayr model. It offends some who have developed similar models and are now not mentioned. In addition, there is of course the danger that you also completely ruin it politically.

How did you get this model accepted by everyone?
The idea was in the air. An essential point, however, is that the WIFO, with the Chamber of Commerce, the trade unions, the National Bank, etc., reflects institutional Austria quite accurately. If we say that would be a good model, then of course we listen to it.

What was it like for you to be in the newspaper every day this week?
If that had gone from zero to a hundred, I would probably have been annoyed. But over the years it has crept in. That politicians are now talking about the “Felbermayr model” is of course of a different intensity.

Could it be that you are flirting with politics yourself? “Superminister” Martin Kocher was also previously an economist.
I am WIFO director and I do that with great pleasure. I also teach at the University of Economics and don’t want to be without it anymore. That is my life.

But can you rule out going into politics forever?
Nothing can be ruled out forever. But that’s not going to happen now and not in the near future. The comparison with Martin Kocher is a good one. We have a professor of economics as minister of economy and minister of labor and that fits. Therefore, there is no need to send someone from the ivory tower into politics. I’m also not sure if the idea of ​​expert governments in a democracy is the right one.

Where do you personally stand politically?
I was never active in party politics, so I don’t have a party book. Our most important asset as economic researchers is our independence. You can’t take it for granted, you have to work on it all the time. Once I was assigned politically, I might lose my credibility in other political camps. The magic word is equidistance.

Where is the limit?
For example, if I went to an election event with my Upper Austrian governor. Not even with our Federal President, as much as I appreciate him – he’s also a professor of economics, so there are definitely affinities there. We also do not make any electoral or party political recommendations. WIFO talks to all parties and I would be happy if there was more dialogue. For example, we don’t have a good connection to the FPÖ. And I actually regret that.

Does WIFO actually have a model for industry? In other words: if gas is rationed, should households also contribute?
Everyone must contribute. And I think that our model also helps the industry, because the savings incentives in households mean less gas is used. And every kilowatt hour of gas left over for the fall and winter helps the industry. But of course also the households. Because the industry might be able to produce for a few more days, provide good jobs for a few more days, pay taxes for a few more days and thus create added value. It would be important for the industry to lower the price of electricity in general. We have a solution for that, but it would have to be done across Europe. It is even nationally dangerous. Because then the cheaper Austrian electricity will emigrate to Northern Italy or Bavaria and we will subsidize Bavarian industry and Northern Italian consumers.

Speaking of Europe, how could Europe’s energy and gas networks be improved to distribute non-Russian gas among Member States?
We have many gaps in the European gas network. Often these are not large holes, but only a few kilometers. For example, the large storage facility in Haidach is not connected to the Austrian grid. You shouldn’t have to build big lines, but maybe just screw on a valve. A first step would be to plug the gaps at a few neuralgic points. Does not cost the earth and can go fast.

Do you stand by the fact that sanctions hit Russia harder than the EU?
You have to distinguish between the economic and the political effects. Economically, sanctions will certainly hit Russia harder. The country has an inflation rate twice ours. And it is already in a severe recession, while we only have to fear one for the time being. With the sanctions, however, we do not primarily want to harm the Russians economically, we want Russia to change its policy. And it must be said that the political effects in Russia have been small so far, while they are large here. We are already having a massive discussion, right up to the whistle at the opening of the Bregenz Festival for the actually popular Federal President.

How did you experience that?
foreign. But it shows that there is anger. And that solidarity with Ukraine is crumbling.

The ECB took a historic decision and raised interest rates to 0.5 percent. Was that good?
Absolute. I would say too late. It would have been better for us Austrians if this step had come earlier. Unfortunately for the eurozone it is not so clear. I think it’s a big mistake that communication didn’t get more “hawkish” much earlier.

Falkenhafter?
This is a term that has become common in zoology. The hawks are the ones who advocate tight monetary policy, a hard euro and a strict separation between the central bank’s agenda and the agenda of the finance minister. The pigeons are more generous. The governor of the Austrian National Bank is probably more of a hawk. He has done what he can. We are a small member of the great monetary union. Holzmann represented Austrian interests.

And ECB boss Christine Lagarde?
Mrs. Lagarde is, so far at least, a pigeon. However, unlike in zoology, there can be transformations in finances and a pigeon can mutate into a hawk under certain circumstances. I would wish that for Lagarde.

When was the moment when you felt you were more interested in business than anything else?
That was at Stiftsgymnasium, I was maybe 16 or 17. We had a geography and economics teacher who was very enthusiastic. This spark jumped to me.

Is the prejudice about economists correct? They know a solution to every problem in the world and love nothing more than to explain this world.
I like to explain. That is also the task of the WIFO boss, to give people insight into a complex situation and to take away their fears here and there. It is also true that we economists always or very often have ONE solution, but we must also have the humility to admit that it is not always THE solution. If we succeed in getting political attention with an economically justifiable solution, then that is a moment of success.

Many people are afraid now. What do you think the world will look like in five years?
Despite everything, I am optimistic. In Austria we have so much talent, so many well-trained people, so many companies that are successful in the global market and have shown so many times in their history that they can handle crises. We also take on the current challenges. In five years we will see the traces of what is happening now. The Corona crisis will still have an impact, the high energy prices will have made us a little poorer than we otherwise would have been. But we can do most of it, I’m pretty sure.

Is there a childhood experience that still gives you optimism today?
Those were our mountain hikes. Like most kids, I didn’t really like her. But after the sweaty and uncool ascent, standing on top of the summit and looking down on the landscape and house, this feeling has shaped me forever. From this I learned for life that you will not get anywhere if you are not willing to pay in advance. This applies both at work and in relationships. Only those who invest are rewarded.

Last question: you look a lot like Secretary Kocher. Could it be that you both have the same hairdresser?
Smiles and strokes his shiny head. – We have the privilege of not needing a hairdresser. With a little help from my wife, I can do it myself with a razor. Not good for the division of labor economy, but very practical.