Austria's budget deficit: slow reduction required by 2029!

Austria's budget deficit: slow reduction required by 2029!

Österreich - On July 17, 2025, there is new findings about the Austrian budget situation. The Vienna Institute for Higher Studies (IHS) expects a total state deficit of 4.1 percent of gross domestic product (GDP) for the coming year, provided that a strict budget discipline is observed. This forecast is directly related to the double budget 2025/26, which is to be adopted by the current government of ÖVP, SPÖ, Greens and NEOS and consolidation measures in the amount of 8.7 billion euros are provided, as the Kleine Zeitung reported.

For the period from 2027 to 2029, the IHS expects a slower reduction in the expenditure rate compared to the planning of the federal government. In order to press the deficit under the Maastricht limit of 3.0 percent, the IHS sees further reform and consolidation needs. These goals require ambitious structural reform and an economic policy that aims to increase potential growth. The forecast for the budget deficit remains strongly dependent on the economic growth of Austria until 2029.

Maastricht criteria and their meaning

The Maastricht criteria determined by the EU member states in the course of the Maastricht contract play a crucial role in monitoring the state finances. According to Bundesbank is limited. These rules support the stability -oriented monetary union in Europe.

A negative financing balance shows that government expenditure can exceed the income, which is a challenge in economically difficult times. In Germany, where a debt brake has been in effect since 2009, debt admission of only 0.35 percent of economic output is allowed, except in exceptional situations, such as the Covid 19 pandemic.

debt and government expenditure

The question of dealing with government spending and debts is more current than ever, especially in the context of the teachings from classic financial science. As the Federal Center for Political Education , high state debts traditionally pose a problem because they can lead to high interest loads. Nevertheless, more modern approaches, such as the Modern Monetary Theory (MMT), call for a re -evaluation of this perspective. MMT argues that government expenditure does not have to be covered by taxes or bonds as long as the economic resources are available.

State debt arises from the difference between public expenditure and the corresponding income. While high expenditure tends to increase debt, they also lead to higher income in the private sector. Accordingly, a clever government expenditure policy could ultimately promote economic growth and lead to more tax yields.