Government in crisis: Kolm warns of recession and tax increases!

Government in crisis: Kolm warns of recession and tax increases!

The political discussion about Austria's financial future is gaining momentum. SPÖ Vice Chancellor Babler and SPÖ Finance Minister Marterbauer are preparing the public for an impending EU deficit procedure. This comes in the context of an economic recession that is currently affecting the country. According to FPÖ economics spokeswoman Dr. Barbara Kolm attributes this critical situation to inefficient government spending and funding. Kolm describes redistribution through subsidies as a factor that is contributing to the worsening of the recession.

“The government is throwing in the towel,” said Kolm, who sees responsibility for the increasing deficits in the current government leadership. In doing so, she is also clearly reproaching those responsible for possibly trying to blame their failure on the European Union as soon as the excessive deficit procedure begins. Kolm expresses particular concerns about the future financial burdens on citizens, as she warns of increasing international risk premiums for loans, which could result in higher loan interest rates and inflation.

EU deficit procedure in detail

In the summer of 2024, the EU Commission had already initiated criminal proceedings against seven EU member states that are in a similar financial situation. Austria, once seen as a frugal model boy in the area of ​​budget management, is now facing its own EU deficit procedure. The country's deficit is currently around four percent of gross domestic product (GDP), significantly exceeding the Maastricht criterion of less than three percent.

The EU sees itself forced to intervene when debt levels are too high in order to identify and counteract undesirable developments in economic policy at an early stage. The process of initiating an excessive deficit procedure consists of several stages in which the European Commission prepares reports and submits them to the Council of EU Finance Ministers for approval. Failure to comply with the requirements can result in significant sanctions, which in the worst case can include fines.

Future perspectives and solutions

The political reaction to the impending crisis shows a plea for a supply-oriented economic policy, as demanded by Kolm. The current plan calls for savings of around 6.4 billion euros in order to rehabilitate the budget situation. A comprehensive and credible recovery plan, to be submitted by the next Ecofin Council on January 21, 2024, is essential to avert an excessive deficit procedure.

In another policy approach, the deficit procedure could offer more flexibility in times of crisis to ensure Austria's economic stability. However, maintaining sound financial management is essential in order to be able to survive future economic challenges.

The discussion about the economic challenges is only the preliminary stage of a complex process that could have far-reaching consequences for those responsible and for the Austrian population. Time is of the essence and those responsible are called upon to take decisive action to avert something worse.

Further details on the background and processes of an EU deficit procedure and its effects on the member states can be found in the reports from OTS, Small newspaper and daily news to read.