Poor prospects

Record national debt: Austerity is getting much tougher

According to the forecast, the government will fall well short of its deficit targets by 2028.(Bild: stock.adobe.com)

Alarm bells are ringing at the Fiscal Council: The government's target of pushing the budget deficit below three percent of GDP by 2028 will be missed by a wide margin - unless measures are taken quickly.

The Fiscal Council is still forecasting a budget deficit of 4.4 percent of gross domestic product (GDP) for the current year. The significantly higher deficit reported in the media due to poorer budget figures from the federal states has never been substantiated, not even to the Ministry of Finance, explained Fiscal Council President Christoph Badelt at the press conference. At 4.1 percent of GDP, the Fiscal Advisory Council's forecast for 2026 is also slightly below the federal government's planned figures (4.2 percent).

For the period after that, however, the picture becomes much gloomier: A large part of the government's planned medium-term consolidation volume is not yet backed up by concrete measures "and would not be sufficient to reduce budget deficits below the three percent ceiling even if fully implemented", says the Fiscal Council.

People, try harder than you have planned so far.

Fiskalrats-Präsident Christoph Badelt

Bild: Zwefo

According to the forecast, the government will fall well short of its deficit targets by 2028.(Bild: stock.adobe.com)

While the Ministry of Finance assumes a deficit of 3.5 percent for 2027 and three percent for 2028 in its budget path agreed with the EU as part of the deficit procedure, the Fiscal Council continues to forecast deficits of over four percent for these years (2027: 4.1; 2028: 4.2). At the same time, the government debt ratio will continue to rise steadily due to the high deficits: from 79.9% of GDP in the previous year to a historic high of 87.7% in 2029.

At least 5.3 billion additional consolidation required
According to the Fiscal Council, an improvement in the budget balance of 8.9 billion euros would be necessary in order to end the EU deficit procedure in 2028 as planned. Even if the federal government implements everything it has announced, there would still be a need for an additional 5.3 billion euros in consolidation, according to Badelt. Consolidation must therefore be "intensified immediately at all territorial levels".

Comprehensive cross-regional reforms in the health, care and pension sectors as well as in the subsidy system were essential. Badelt put it even more directly: "People, make an even greater effort than you have planned so far." He called for a coordinated consolidation strategy between the regional authorities with a prioritization of expenditure. With regard to the structural reforms that have long been called for, he is increasingly impatient: "I don't know what else we have to say in order for these reforms to finally come."

Reforms called for in hospitals, pensions and subsidies
Among other things, the Fiscal Council recommends a hospital reform as the first step in a comprehensive healthcare reform, a pension reform in light of increasing life expectancy and a reform of the subsidy system. The demand for improved, transparent budget controlling for general government budget management is "80 percent covered" by the recently agreed stability pact, according to Badelt.

Despite the expected failure to meet the medium-term budget targets, the Fiscal Council does not expect the EU to impose any financial sanctions. The excessive deficit procedure is likely to be extended beyond 2028 as long as the net expenditure path is adhered to. This is a "lax" EU requirement that does not ensure a sustainable reduction of the budget deficit below the Maastricht upper limit of three percent, criticized the head of the Fiscal Council.

The FPÖ reacted to the report with harsh criticism of the government. "The Fiscal Advisory Council is pulverizing the budget restructuring fairy tale told by the black-red-pink government in a continuous loop," said the blue budget spokesman Arnold Schiefer and called for sustainable savings on the expenditure side. NEOS MP Veit Dengler used the report as an opportunity to make a demand to his own three-party coalition: "A drastic reduction in party funding, which has 'never' been reduced before, is now unavoidable," said Dengler to Bluesky.