18 billion euros deficit despite austerity
The Austrian Parliament (Nationalrat) approved a double budget for the years 2025 and 2026 on Wednesday, after three days of discussion, with the approval of only the ruling coalition parties: ÖVP, SPÖ, and NEOS. This plan aims to reduce the large budget deficit through a strict austerity package.
In 2025, expenditures will be reduced by 6.4 billion euros, and in 2026 to 8.7 billion euros. Despite these measures, the deficit will remain above the limit allowed by the European Union (3%), as it is expected to reach 4.5% in 2025 and 4.2% in 2026. Without these cuts, the deficit would have been 5.8% this year.
Finance Minister Markus Martenbauer (SPÖ) confirmed that the government is trying to reduce the deficit by cutting expenses and increasing revenues, without causing significant harm to the economy and the labor market. Despite the scarcity of resources, investments will be directed to stimulate the economy, especially in the fields of labor and education. The state has allocated 600 million euros for stimulus projects in 2025, and this amount will rise to 1.6 billion euros in 2026. This money will be invested in the areas of economy, labor, health, education, and social affairs.
Despite these initiatives, all segments of society will feel the impact of austerity. The family allowance (Familienbeihilfe) has been frozen until 2027, meaning it will not be adjusted according to inflation rates. Additionally, child care support and some tax exemptions for families will not be increased in the next two years. These decisions have sparked widespread criticism, especially from the Green Party, where MP Barbara Neßl criticized the decision as affecting single mothers and children, and condemned the replacement of the free lunch with a simple meal worth no more than 35 cents per child. For her part, Family Minister Claudia Plakolm (ÖVP) stated that the aid has not been reduced but has remained at the same level, considering that Austria is still the "champion of Europe" in supporting families.
Regarding pensions, the state will continue to increase spending while trying to reduce the burden by imposing restrictions on early retirement and expanding the partial retirement system. The Ministry of Social Affairs will have to cut some programs, especially support directed to people with disabilities and poverty alleviation. The budget gives special priority to education, with more funds allocated to enhance German language learning, expand training in early childhood areas, and introduce a second mandatory year for kindergartens. As for the environment and climate, there will be significant cuts. The climate bonus (Klimabonus) will be abolished, saving the state 1.8 billion euros, along with a significant reduction in environmental and energy support programs.
Despite the austerity package, the financial deficit will remain high. In 2025, state revenues are expected to reach €105.1 billion, while expenditures will amount to €123.2 billion, resulting in a deficit estimated at €18.1 billion. In 2026, revenues are expected to rise to €107.6 billion, against expenditures of €125.9 billion, with a deficit estimated at €18.3 billion.