Government starts offensive: Deficit crisis requires massive reforms!

Government starts offensive: Deficit crisis requires massive reforms!

Vienna, Österreich - On April 2, 2025, an important meeting of the top representatives of the federal government, the states and municipalities took place in order to react to the continued deficit crisis. vienna.at reports that Chancellor Christian Stocker (ÖVP) presented a step plan for household consolidation. The first goal of these measures is to reduce the deficit to three percent of gross domestic product (GDP), which corresponds to the Maastricht criteria.

In the long term, the government is aiming for a "slim state". At this first meeting, important objectives and the need for further discussions were emphasized. A "overall exertion" is emphasized to reduce the deficit to one or two percent. Vice Chancellor Andreas Babler (SPÖ) spoke of the need to record the savings goal, while Finance Minister Markus Marterbauer (SPÖ) emphasized the challenges of this task and referred to past crisis coping.

budget Situation and challenges

Budget consolidation is made more difficult by a deficit of 4.7 percent of GDP in 2024. In addition, Austria's total debt ratio is 81.8 percent of GDP, of which 70.8 percent of which are eliminated on the federal government. It is particularly striking that Upper Austria is the only federal state with a positive budget balance in 2024, while Vienna comes first with a deficit of 1.67 billion euros, followed by Styria (525.5 million euros) and Lower Austria (EUR 486.5 million)

Another aspect of the discussion was the contribution of the municipalities to consolidation, which is already visible through investment shifts and cost reductions. Expert Karoline Mitterer from the KDZ warned of the negative effects of further savings on the quality of life and the range of services in the communities.

economic perspectives and public debt

In a broader context, a simulation from the bpb GDP growth of five percent can lead to a permanent debt ratio of 60 percent. This situation is in accordance with the Maastricht criteria that prescribe a maximum debt of a maximum of three percent per year.

A reduction in the deficit can help reduce the debt ratio, provided that GDP growth remains unchanged or does not fall more than the deficit. However, a high Keynesian multiplier could cause that the debt ratio increases despite a lower deficit if GDP growth collapses. In such a case, the lower state demand may not be sufficiently replaced by private demand, which can lead to a reduction in innovation activity and overall economic growth.

The political discussion and the measures initiated to reduce the deficit reflect the challenges that the government faces. It remains to be seen how successful the measures for household consolidation will be and what influence this will have on the economic stability of the country.