Austrian Finance Minister Predicts Tough Budgeting Ahead

Austrian Finance Minister Markus Marterbauer has prepared the public for challenging times ahead as the government navigates a difficult budgetary landscape. In recent statements, he indicated that the country may face 'two hard years' as it addresses fiscal imbalances. Marterbauer emphasized the reality of budget adjustments, noting that they often come at a cost to citizens.

Understanding the financial strains faced by local governments, Marterbauer has acknowledged the need for discussions surrounding the internal stability pact in Austria. He refrained from committing to additional budget cuts beyond the already planned savings of over EUR6.3 billion, particularly if economic forecasts continue to decline. However, he noted that some measures could still be implemented without negatively impacting employment or investments, which could lead to a detrimental cycle of increased deficits.

Marterbauer firmly supports the government's goal of achieving budget stabilization without triggering an EU deficit procedure, although he suggested that such a procedure would not drastically alter the economic situation. He reiterated the importance of fiscal consolidation, stating that failure to achieve it would result in rising interest burdens--funds he would prefer to allocate towards education and climate initiatives.

He candidly recognized that budget stabilization is an uncomfortable process that will be felt by the broader population. However, he stressed that these measures are essential for long-term objectives, such as securing care for the elderly, improving educational opportunities, and combating poverty.

To facilitate this budgetary adjustment, Marterbauer mentioned the necessity for a 15% reduction in operational costs across various ministries. He clarified that not all departments would be required to make the same percentage of cuts, indicating that if some areas need less trimming, others would need to compensate with deeper reductions.

The finance minister also expressed concern about the budgetary challenges faced by municipalities and states. Calls from regions like Styria to renegotiate the financial equalization framework were met with resistance, as Marterbauer argued that such a framework is fixed. He empathized with the financial difficulties local governments are experiencing, particularly in their critical roles regarding climate action and childcare. He intends to address these issues in conjunction with the budget during the restructuring of the stability pact, which dictates borrowing capacities among local authorities.

As for the anticipated increase in property tax that municipalities were hoping for, Marterbauer did not provide a direct response but acknowledged the necessity for a re-evaluation of municipal finances, a topic he stated will be addressed starting in 2027.

The Social Democratic Party (SPÖ), which Marterbauer represents, had proposed a reduction in working hours during the election campaign, though this initiative did not materialize in the current government package. However, he expressed support for the ÖVP's initiative to offer tax incentives for overtime work, emphasizing the importance of collective bargaining in potentially reducing working hours.

Marterbauer noted that the continuation of a higher top tax rate for an additional five years ensures a significant revenue stream for the government. He anticipates that this measure will continue to be extended every several years, possibly even becoming a permanent fixture in tax policy.

Regarding funding reforms, the minister opposed a blanket approach to adjusting subsidies, advocating instead for a thorough review of each individual subsidy to assess their effectiveness and alignment with their intended goals. He indicated a willingness to eliminate ineffective subsidies, while also considering the possibility of enhancing financial support where necessary.

Furthermore, he mentioned plans to increase taxes on smoking and gambling within the current legislative session, while acknowledging that certain other areas, such as alcohol taxes and diesel privileges, might be reevaluated in future tax reforms. He emphasized the need to scrutinize environmentally harmful subsidies, stating that it is counterproductive to offer financial support that negatively impacts the climate.