Image: GUIDO MONTANI
For more than a decade, states were able to borrow for free because interest rates were practically zero. But the time was not used for reforms, criticizes the liberal think tank Agenda Austria. The mountains of debt would continue to grow, but the debt would become more expensive due to the interest rate turnaround. The national debt ratio in Austria was 76.3 percent of gross domestic product in 2023, 2.5 percent was spent on debt service. “The economic research institute Wifo predicts that the debt ratio will rise to more than 120 percent of GDP by 2060 if politicians do not take countermeasures,” says Agenda Austria economist Denes Kucsera. This would significantly increase the refinancing costs for Austria. Even assuming a normal interest rate environment, interest payments threatened to rise to more than nine percent of government revenue in 2060. In a negative scenario with higher interest rates it could be 14 percent: “Without structural reforms, Austria will be the new Italy.”
“Strict debt brake”
Economist Hanno Lorenz sees linking the retirement age to increasing life expectancy as one of the most important measures. This requires more financial autonomy for the states and new fiscal rules: “Austria does not have an income problem, but rather an expenditure problem. In order to generate surpluses in good years, it needs a strict debt brake.”
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Source: Nachrichten
