Three points on Finance Minister Marterbauer's budget speech: consolidation, dispute over party funding, and an uncertain austerity course

Under the motto "Upswing, Justice, Reforms," the largest offensive measure – a reduction in non-wage labor costs starting in 2028 amounting to two billion euros – is to be partly financed by companies themselves, namely through a higher corporate income tax and a bank levy. Cuts in the family area add up to around 280 million euros, savings in the social and labor market sector to 664 million euros. On pensions, the government intends to raise 550 million euros in 2027 and 2028 through an adjustment below the inflation rate.

Chancellor Christian Stocker (ÖVP) described the budget as "It is a budget in a crisis, but not a crisis budget." Vice-Chancellor Andreas Babler (SPÖ) said: "It is good that we are finally sending a clear signal now." At the same time, NEOS leader Beate Meinl-Reisinger expressed approval of the agreement.

Dispute over party funding

In parallel to the budget presentation, the planned increase in funding for political parties, parliamentary clubs and academies caused political dispute. The ÖVP and SPÖ had reportedly considered a one-percent increase; the planned increase would have amounted to around three million euros. Following criticism from within their own ranks and from the NEOS, who had entered the negotiations calling for cuts, the step was however abandoned. Stocker and Babler publicly rejected an increase on Tuesday. Party funding is usually valorized, i.e. adjusted to inflation.

The FPÖ sharply criticized the plan and saw a contradiction between cuts for the population and additional spending for politicians. FPÖ Secretary-General Christian Hafenecker deemed the renunciation a "important success of the FPÖ." Budget spokesperson Arnold Schiefer was however skeptical as to whether the planned savings measures would actually suffice. Schiefer said "that Austria is more likely to play in the Football World Cup final than this double budget holding," and demanded: "The state would have to become massively leaner."

Structure of the budget and open questions

The President of the Fiscal Council, Christoph Badelt, also doubts that the federal government's savings will be sufficient to exit the EU deficit procedure in 2028. The budget draft is based on the Wifo economic forecast from April, which assumes economic growth of 1.5 percent for 2027 – provided the Iran war ends. The EU Commission, by contrast, estimates GDP growth at only 0.9 percent next year, which by a rule of thumb would increase the deficit by 0.3 percentage points and open a gap of around 1.6 billion euros in 2027.

Structurally, the budget is divided into five headings: Law and Security, Labor and Social Affairs, Education, Research and Culture, Economy and Infrastructure, as well as Money and Interest. Beneath these are 35 sub-divisions, which in turn are broken down into global budgets. At the level of the detailed budgets, the government can shift funds without parliamentary approval. The budget package comprises the Federal Finance Act, a budget accompanying act with an increase in the bank levy, as well as the Federal Finance Framework Act with a medium-term path to 2031.

A reintroduction of the partner income imputation in emergency assistance for high-earning partners, originally planned for 2027, will reportedly not be implemented. The measures against the so-called intermediate parking of long-term unemployed at the AMS, demanded by the Wirtschaftsbund and the ÖVP, are also expected to be dropped. Also planned – as demanded by the FPÖ – is not refilling vacant positions in the public service.

Deficits of states, cities and municipalities

Last year, the federal deficit amounted to 15 billion euros, that of the eight states to 2.3 billion, Vienna's to 2.4 billion and that of the smaller municipalities to 900 million euros. Overall, the federal government will disburse 125 billion euros this year, of which 33 billion for pensions, 10 billion for the labor market and 9.2 billion for family policy. Under the current stability pact, states and municipalities must keep their figures this year; their deficits must fall from 1.1 to around 0.69 percent of GDP over the next two years, requiring savings of around 2.2 billion euros.

Wednesday's budget speech in the National Council is only the kickoff: the debate in the plenary follows the day after, committee deliberations begin at the end of June, and the final adoption is planned for 10 July. The accompanying laws belonging to the budget for the legislative implementation of the ministerial measures were still missing on Tuesday. Uncertainty over possible further budget measures is likely to persist into the autumn.

Timeline and political outlook

On the margins of the budget deal, several NGOs demonstrated in front of Parliament on Tuesday and called for a substantial wealth tax of 22 billion euros per year. The Corona aid alone had cost 46.7 billion euros; the extraordinary pension adjustments since 2019 come to 1.7 billion euros per year. The family bonus, introduced by the ÖVP and FPÖ and increased under the black-green coalition, is also estimated by the Fiscal Council at 2.4 billion euros per year.

Against the backdrop of the state elections in Upper Austria in 2027 and Lower Austria in 2028, the budget policy debate is likely to remain politically charged. Statistik Austria revised the previous year's economic growth slightly upwards, which eases the budget situation. The government is announcing the second austerity package within two years – the third, if one adds the public service measures from autumn 2025.