Fiscal Council Warns: Austria Faces Record Debt Level by 2029

The Fiscal Council urges further major consolidation steps. The government's goal of reducing the budget deficit to below 3 percent of GDP by 2028 will be significantly missed, according to the annual report presented by the Fiscal Council on Monday, unless additional consolidation measures are taken. Until 2026, the Fiscal Council sees the government's budget targets on track, but from 2027, its forecasts are significantly worse than those of the Ministry of Finance.

Fiscal Council Calls for Immediate Further Consolidation Steps

For the current year, the Fiscal Council continues to expect a budget deficit of 4.4 percent of the gross domestic product (GDP). 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, said Fiscal Council President Christoph Badelt at the press conference. For 2026, the Fiscal Council's forecast of 4.1 percent of GDP is even slightly below the planned values of the federal government (4.2). "Remarkable," commented Finance Minister Markus Marterbauer (SPÖ) on Monday on Bluesky, referring to the uncertainty about the deficit level of the federal states.

National Debt Rises to Historic High

For the period thereafter, however, the outlook significantly worsens: The medium-term consolidation volume planned by the government is largely not yet backed by concrete measures "and would not be sufficient, even if fully implemented, to reduce the budget deficits below the 3 percent limit," says the Fiscal Council. While the Ministry of Finance, in its budget path coordinated with the EU as part of the deficit procedure, assumes a deficit of 3.5 percent for 2027 and 3 percent for 2028, the Fiscal Council forecasts deficits above 4 percent for these years (2027: 4.1; 2028: 4.2).

At the same time, the national debt ratio continues to rise steadily due to the high deficits: from 79.9 percent of GDP last year to a historic high of 87.7 percent in 2029.

To still end the EU deficit procedure as planned in 2028, an improvement in the budget balance of 8.9 billion euros would be necessary, according to the Fiscal Council. Even if the federal government implements everything it has announced, there would still be an additional consolidation need of 5.3 billion euros, said Badelt. Therefore, consolidation must be "immediately intensified at all levels of government," demands the Fiscal Council in its recommendations.

Comprehensive inter-jurisdictional reforms in the health, care, and pension sectors as well as in the subsidy system are essential. Badelt put it even more directly: "People, make even more effort than you have planned so far." Between the jurisdictions, a coordinated consolidation strategy with a prioritization of expenditures is needed, he demanded. Regarding the long-demanded structural reforms, he is becoming increasingly impatient: "I don't know what else we have to say for these reforms to finally happen."

Reforms in Hospitals, Pensions, and Subsidies Demanded

Comprehensive inter-jurisdictional reforms in the health, care, and pension sectors as well as in the subsidy system are essential. Badelt put it even more directly: "People, make even more effort than you have planned so far." Between the jurisdictions, a coordinated consolidation strategy with a prioritization of expenditures is needed, he demanded. Regarding the long-demanded structural reforms, he is becoming increasingly impatient: "I don't know what else we have to say for these reforms to finally happen."

The Fiscal Council recommends, among other things, a hospital reform as the first step of a comprehensive health 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 overall state budget management is "80 percent covered" by the recently agreed stability pact, according to Badelt.

No EU Sanctions Expected

Despite the expected failure to meet medium-term budget targets, the Fiscal Council does not expect financial sanctions from the EU. The deficit procedure is likely to be extended beyond the year 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 threshold of 3 percent, criticized the head of the Fiscal Council.

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

(APA/Red)

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