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Austrian Budget: Experts Call for Further Reforms (Part 2)

Published: October 16, 2012; 16:41 · (Vindobona)

Austrian economic research institutes criticize the state budget and want the government to show more ambition.

Austrian Budget: Experts Call for Further Reforms (Part 2) / Picture: © Vindobona.org

According to the economist Margit Schratzenstaller (Austrian Institute of Economic Research, WIFO), the structural measures in the state budget are a step in the right direction. However, the reforms are not ambitious enough, she said. Moreover, Schratzenstaller called for a tax reform. Above all, income taxes should be lowered. At the same time, property taxes and environmental taxes should be increased.

By contrast, Fekter stressed that the budget would be advanced and progressive. “We are driving forward investment in the areas of education, universities, research & development and infrastructure to boost growth and employment. In addition, we have consistently continued structural reforms in the areas of pensions, healthcare policy, public administration, public funding and the labour market, and will thereby achieve a largely balanced budget by 2016, thus reducing the debt ratio on a sustained basis," declared the Finance Minister.

Fekter explained that the budget contains “ambitious austerity measures”. “The draft Budget Statement 2013 is based on the stabilization and growth package of spring 2012. This package comprises an expense-focused bundle of consolidation measures totalling € 27.8 billion (2012 – 2016). The long-term sustainability of public budgets is being secured through the debt brake at national-government level and the internal Austrian stability pact at federal level.”

As the budget deficit will be higher than expected, the director of IHS Christian Keuschnigg thinks that the budget should be amended. Keuschnigg explaines that the Austrian state needs to plan a cut in expenditures. In the long term, increasing the retirement age to 67 years will be necessary, he says. What is more, the lowered VAT on convenience goods should be abolished, Keuschnigg suggests. At the same time, the loss of purchasing power may be compensated by a tax reform.

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