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Criticism of Austria's Allocation of Subsidies

Published: October 21, 2010; 11:41 · (Vindobona)

Both the volume and the organization of the allocation of subsidies are susceptible of improvement, experts say.

Criticism of Austria's Allocation of Subsidies / Picture: © Vindobona.org

About 10.8% of government expenditure, i.e. 15.4 billion euro, account for subsidies. This a record among OECD countries. Given the need for savings, criticism of the domestic aid policy is growing.

Budget consolidation requires a more rigorous and selective approach, experts warn. The state is particularly generous in the fields of transport and health. The main beneficiaries of subsidies are therefore the ÖBB (Austrian Federal Railways) with a magnitude of 1.3% of the GDP and the hospitals, with 1.7% of the GDP. The problem is the extensive unwillingness to reform or the inability to implement reforms, as the permanent compensation of losses provides little incentive to become more efficient, according to the experts’ opinion.

Subsidies are however essential for the economy, says Johann Moser, managing director of the development bank aws. He justifies their role in correcting market failures and considers them a growth engine. aws alone has at its disposal over a billion in subsidies for the coming year. Moser admits, however, that the large number of grants and institutions that award them could be rationalized. Awards are uncoordinated, which allows for multiple superpositions of subsidies.  For this reason, the so-called transparency data bank where all subsidies are aggregated is absolutely necessary, according to Moser.