European Rating Agency Sees Need for Reform in Austria

"In the long term, Austria must continue to consolidate in order to comply with EU fiscal rules," says an analysis by the European rating agency Scope. The prospects for public finances "depend crucially on how the new government will tackle the country's long-standing problems". There is a need for reform primarily in the pension system and health and care costs.

European Rating Agency Recommends Cautious Fiscal Consolidation

Scope also considers structural reforms necessary for the Austrian labour market. This could create new incentives for higher labour force participation - especially for women and older people. This could "increase production potential and relieve the budget". The credit rating agency expects that the gross domestic product will grow by 0.5 percent this year. "The new government must carefully calibrate fiscal consolidation so as not to stifle the tentative economic recovery," the analysis says. An average annual growth of around 1.2 percent is forecast from 2026 to 2028.

The right-wing FPÖ and the conservative ÖVP are holding talks on forming a government. In mid-January, they presented a billion-dollar austerity package to avoid an EU deficit procedure. The parties want to reduce spending and are primarily targeting climate protection. Scope rates Austria with a credit rating of AA+ and a stable outlook. This gives the country a "very strong credit quality". However, the neighbours Germany and Switzerland are rated even better: They have the coveted AAA rating, which signals an extremely low default risk to buyers of government bonds.

(APA/Red)

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