The budget deficit is supposed to sink this year from 4.7 to 4.5 percent of the GDP. Next year it is supposed to be 4.2 percent, and in 2028 the government wants to come out of the (emerging) EU deficit procedure again. Those are the essential conclusions from the double budget that Finance Minister Markus Marterbauer (SPÖ) presented on Tuesday. Newly announced were also new savings measures like an increase of the e-card fee and a more expensive climate ticket.

Marterbauer called the initial situation in a background talk “quite dramatic.” The budget is now not being consolidated for the sake of consolidation. Rather, it’s about avoiding dependence on high interest payments and financial markets, and creating room for actual state expenditures.

Without consolidation, debt explosion

What would happen with the state finances if one didn’t save, Marterbauer calculated during his joint media appointment with State Secretary Barbara Eibinger-Miedl (ÖVP). Then the deficit would, according to his ministry’s estimate, already rise to 5.8 percent this year and 5.9 percent next year. The debt would climb to 89.2 percent of GDP by 2026 and reach 96.9 percent in 2029 (the endpoint of the current financial framework). Even now it grows: from 81.8 percent in 2024 to 84.7 percent this year and 86.2 percent next year.

The consolidation amount should be 6.4 billion this year, 8.7 billion next year. That makes even higher savings necessary, since also offensive measures like support for older unemployed people or the second kindergarten year are being introduced. The savings therefore total seven billion this year and 10.3 billion in 2026.

One third of savings come from revenues

As to the type of savings: about one third is on the revenue side, the rest on the expenditure side, said Marterbauer: “That corresponds to the pattern of past consolidation episodes.” Among the tax measures, starting next year the retention of one third of the “cold progression” weighs most heavily. Also bringing in much money are the bank levy and the contribution from the electricity industry.

The biggest items in the consolidation were already known in advance, many have also already been decided. Most of all – namely two billion – the government gets from abolishing the climate bonus. Next come the subsidies.

Climate ticket becomes more expensive

The biggest cuts here are in the environmental sector, no less than 557 million this year and nearly 820 million in 2026. Also included are already effective savings this year on the climate ticket of 120 million, rising next year to 150 million.

That’s not only due to the already known abolition of the free ticket for 18-year-olds, but also to a price adjustment above inflation. The price is to rise by about 200 euros – likely to around 1,400 euros – starting next year. Already in September there should be an increase, according to Marterbauer.

That climate policy is taking new directions is evident also in that while money is being saved on the climate ticket, the commuter euro is being tripled. Marterbauer emphasized that climate and environmental protection are of course important to him. But the responsible department head, namely Agriculture Minister Norbert Totschnig (ÖVP), had especially made cuts in this area. The Finance Minister also regretted the painful cuts to development cooperation and the foreign disaster fund, which will amount to ten million this year and 40 million annually starting in 2026.

Cuts in the social and family sector

There will also be cuts in the social and family sector. Already known was that, among other things, the valorization of family allowance and child benefit will be suspended for two years. Now the Finance Minister added that all those benefits whose indexation was decided three years ago will be affected. That includes rehab money, student grants, school start money, and family time bonus.

Apparently, at least for now, there are no plans to reopen the generous civil servant wage deal for 2026. The Finance Minister called the rule, which provides for a raise 0.3 percent above inflation, “unfortunate,” because the hoped-for economic upswing ultimately didn’t materialize. He visibly expects more budget-friendly results from the 2027 pay rounds.

As for national defense, the Finance Minister said that the two-percent goal for defense spending by 2032 is not yet foreseeable under the current financial framework. A government working group will look into how further planned procurement measures can be financed. What has already been ordered will of course be paid.

States should reduce deficit

Regarding the distribution of the deficit between sectors, the federal government is to record a deficit of 3.5 percent this year and next, states and municipalities one percent this year and 0.7 percent in 2026. The Finance Minister pointed out that other government bodies will benefit from the tax measures – with 350 million more next year alone. The social insurance system is to break even in both years – also thanks to measures like the increased health insurance contribution for pensioners and the raised e-card fee.

The two top officials of the Finance Ministry expressed satisfaction that the package has ultimately been put together: “I do believe we’ve pulled off a major coup and we’re a bit proud of it,” said Marterbauer. Eibinger-Miedl emphasized that the budget had been developed in a very constructive manner in an extremely short time: “That’s a signal that not only work is being done, but also good cooperation is happening.”

By the end of the financial framework in 2029, the deficit is to be at 2.8 percent, after already returning to compliance with EU fiscal rules in 2028 (3.0 percent). Consolidation will not end then. Marterbauer said he would like to reach a sustainable level of 2.0 percent: “In 2031 we’d probably be there.”