Instead of the hoped-for recovery in public finances, the crisis and countermeasures are again causing the deficit to explode.
Even before this autumn it was clear that more than four billion euros more would be spent this year alone than foreseen in the budget: various anti-inflation packages, the increase in the climate bonus and donations to families were just the beginning. The brake on the electricity price for households and the associated support for companies will especially burden the 2023 budget with an additional estimated five to six billion euros.
Then there are the costs of abolishing cold progression: 1.8 billion euros in the first year, cumulatively until 2026 it is almost 20 billion euros. Not to be forgotten is the adjustment of social benefits to inflation, which must be added. “This will by no means be the end of the support,” fears Christoph Badelt, who oversees state finances as head of the Fiscal Council.
Communities, universities and others will also ask for help. Badelt remains a realist: “As long as we are in crisis mode, you should accept the additional costs, but you should not increase them willfully.”
The original plan, which envisioned a budget deficit of 2.9 percent for this year and a decline in subsequent years, is a waste. Because the fact that the recovery of the economy after Corona (see Wifo graphic) has stopped abruptly and the trend is clearly pointing downwards has thrown all forecasts overboard.
Badelt expects a budget for this year minus about four percent, in the direction of 20 billion euros. In 2023 it should be “by no means lower”. Electricity price brakes and cold progression are having a clear effect and “In addition, we will clearly feel it in tax revenues if growth falls sharply in 2023” (Badelt).
Everything indicates that the EU will not apply the fiscal rules that were suspended during the Corona crisis in 2023. “But after that, we need a budget consolidation strategy,” Badelt said. It must be remembered that there are still “normal” economic and social policies that also entail additional costs, such as health care or pensions, plus promised additional expenditures for the military.
That is taking revenge on what Badelt has always warned about: the lack of structural reforms in Austria, which should ease the state budget. At the start of the debt crisis, we were in relatively good shape internationally. “However, we no longer belong to the top group, which is clearly visible in the interest rate differentials with Germany (note: for government bonds).”
Source: Krone
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