Austria Threatened by Recession: Finance Minister Marterbauer Warns of Difficult Year Ahead
Finance Minister Markus Marterbauer (SPÖ) made a grim forecast for the Austrian economy at a meeting of the EU Economic and Financial Affairs Council (ECOFIN) in Brussels. According to Marterbauer, the country must expect a recession in 2025. This could have far-reaching consequences for the budget and the government's ability to act financially. Despite this negative development, the federal government is sticking to its goal of avoiding an EU deficit procedure.
Austria's Finance Minister Dr. Markus Marterbauer warns of shrinking economic growth and explains that the government nevertheless wants to avoid the EU deficit procedure with austerity measures. / Picture: © BKA/Brauneis
As the Finance Minister emphasized, the next forecast by the Austrian Institute of Economic Research (WIFO) is expected to show negative economic growth. The WIFO had already warned in an earlier assessment that Austria could experience a decline in gross domestic product (GDP) of 0.7 percent in 2025. This would put Austria in a particularly bad position compared to the rest of Europe.
Economic experts see several reasons for this negative development: in addition to persistently high inflation and weak global demand, Austria's economy is suffering in particular from sluggish industrial production. The restrictive interest rate policy of the European Central Bank (ECB), which is intended to help curb inflation, is also hampering growth.
Avoid deficit proceedings - government sticks to savings targets
Despite the economic difficulties, the German government is sticking to its goal of averting an EU deficit procedure. “We will analyze how to deal with the situation based on the new forecast figures,” said Marterbauer in Brussels. The exchange with the European Commission is central to this.
The planned double budget for 2025/26 is to be presented to Parliament in the first half of May. Insiders expect it to contain considerable austerity measures to counteract rising expenditure. There could be cuts in the areas of social benefits and public investment in particular.
No unlimited defense spending
Another key topic at the ECOFIN meeting was the financing of defense spending in the EU. Marterbauer emphasized that budgetary discipline must also be maintained here. “'Whatever the cost' is not an option in any area, because funds are scarce,” he said.
The Finance Minister pointed out that defense spending must be used efficiently. This was his response to calls from Brussels to increase military spending in the EU member states. Given the tense geopolitical situation, particularly due to the ongoing war in Ukraine, there is growing pressure on EU member states to increase their defense budgets.
Lack of clarity on heating replacement funding
Another hotly debated topic remains the state subsidy for replacing heating systems. In recent years, programs have been introduced to convert oil and gas heating systems to more climate-friendly alternatives, but these have been put to the test in the course of the budget debates.
Marterbauer did not want to commit himself to this issue. “I am committed to phasing out oil and gas,” he emphasized but made it clear that he did not want to commit to individual measures. The decision on a possible continuation of subsidies is to be made in consultation with the Ministry of Agriculture and Climate.
Austria faces difficult economic times
The coming months will show whether Austria can avert the impending recession or whether harsh austerity measures will be necessary. The development could have noticeable consequences for citizens in particular - be it through rising taxes, fewer state subsidies, or a restricted budget policy.
The government still faces the challenge of cushioning the economic downturn and ensuring fiscal stability at the same time. The 2025/26 double budget is likely to be decisive in determining how Austria prepares for the coming crises.