Experts warn: Austria's budget plan is threatening a critical deficit limit!

Experts warn: Austria's budget plan is threatening a critical deficit limit!

On Tuesday, June 2, 2025, the Budget Committee will meet for the traditional budget hearing. Invited experts have already expressed considerable criticism of the government's draft budget in advance. The experts agree that the planned measures are not sufficient to overcome the financial challenges of the coming years. Finance Minister Markus Marterbauer (SPÖ) forecasts a budget deficit that will fall from 4.7% to 4.5% of GDP. A deficit of 4.2% is expected next year, with both figures well above the 3% limit set by the EU.

Given this situation, the EU could initiate an excessive deficit procedure before the summer. To ease the financial pressure, savings of seven billion euros are planned for 2023 and 10.3 billion euros for 2026. The largest savings should be achieved by abolishing the climate bonus and cutting funding.

Criticism from the experts

Christoph Badelt, head of the Fiscal Council, called for more measures at the hearing and emphasized that “many more sharp and unpleasant political decisions” would be required to return below the 3% deficit limit by 2028. Reforms in the areas of pensions and health are also urgently needed. Margit Schratzenstaller from Wifo, who was invited by the Greens, sees the cuts in climate measures as a “downer”, but assesses the budget as positive overall. She emphasizes the need to increase revenue.

On behalf of NEOS, Monika Köppl-Turyna expresses concerns about the lack of structural reforms and the increasing tax rate. She considers the consolidation path to be unrealistic and is calling for additional savings of five billion euros by 2028. Martin Gundinger from the Austrian Economics Center, which was proposed by the FPÖ, also criticizes the high government spending and the increasing debt.

Georg Feigl from the Chamber of Labor, nominated by the SPÖ, criticizes the insufficient burden on wealthy citizens and the excessive cuts that affect lower-income groups.

Budget development and EU requirements

The discussion about budget developments is in the context of the federal government's increasing net financing needs, which are expected to reach 15.4 billion euros in the first nine months of 2024. Payouts are already 13.1% higher than last year, reflecting rising pension burdens and higher spending in other areas. At the same time, there has been a weak development in revenue, particularly in the areas of sales tax and real estate levies. Against this background, various institutions expect the Maastricht deficit for 2024 to be between 3.3% and 3.9% of GDP.

The reform of the Stability and Growth Pact, decided by the EU Council of Ministers on April 29, 2024, will have further impacts on the budget management of the Member States. This reform is intended to simplify the rules for national debt and budget deficits, while taking greater account of the individual situation of the countries. In the future, highly indebted countries will have to reduce their debt ratio by 1% annually, while countries with debt levels between 60 and 90% will have to reduce it by 0.5%. However, critics warn that these rules could hinder necessary investments in climate protection and social areas.

During the hearing, it is expected that the draft budget will then be processed chapter by chapter in the Budget Committee. The debate in the plenary session begins on June 16th, with the budget accompanying law to be passed first; The final decision on the double budget is scheduled for June 18th.

Overall, it is clear that the Austrian government is faced with the challenge of not only observing the EU requirements, but also taking into account the heated political debate and the diverse expert opinions in order to create a sustainable and future-oriented budget proposal.