Coalition feud continues as think tanks up outlook

Political decision-makers are at odds over what conclusions to draw from economic predictions made today (Fri).The Institute for Economic Research (WIFO) and the Institute for Higher Studies (IHS) announced they expected the Austrian economy to recover quicker from the credit crunch than initially predicted.IHS said the country’s gross domestic product (GDP) will rise by 1.8 per cent year on year in the second half of 2010, while WIFO forecast a two per cent improvement.IHS said in July Austrian GDP will rise by 1.5 per cent, while WIFO announced at that time it expected it to grow by 1.2 per cent compared to the second half of last year.Both think tanks expect the unemployment rate to decline further throughout the next few months, but also warned that a certain insecurity about the future of the domestic and the global economy would keep investments at a relatively low level.The institutes said investments in construction projects across Austria will decline by three per cent year on year this year after spending on building dropped by six per cent from 2008 to 2009.WIFO pointed out that Austrians’ salaries will rise by just 0.8 per cent year on year in 2010. It added consumption spending will remain on a solid level after Austrians spent around 1.4 per cent more on services and products like food and clothes in “crisis year” 2009 compared to the previous year. The think tank said it expected consumption investments to rise by around one per cent overall in 2010 compared to 2009.The announcements are set to worsen the bickering between the Austrian government coalition partners over how to restore the state budget.People’s Party (ÖVP) Finance Minister Josef Pröll warned earlier this year all ministries will have to make cuts. Pröll, who also heads the ÖVP, said he hoped for a “debate without any taboos”.These statements angered NGOs which fear the poorest will be hit worst as jobless subsidies and financial support for families might be slashed from next year too.Pröll also said he wanted the Austrian tax system to become an “eco tax focus” in 2011 – an announcement tempting motorist associations to appeal to the government not to raise car fuel taxes.Left-wing officials of the Social Democrats (SPÖ) headed by Chancellor Werner Faymann called for a tax on assets to enforce rich Austrians to help cutting the state debt. Analysts, however, expect pragmatist Faymann to opt for a compromise with the ÖVP which might not include such a levy.Both parties want to introduce a new tax on banks’ assets after most of the country’s biggest financial institutes received around 6.5 billion Euros in state aid last year to help them get through the crisis.Faymann said this tax could help the government to an extra 500 million Euros a year, while some bankers warned customers will bear the brunt.Pröll announced today he could imagine raising taxes not as strongly as initially planned next year as the quick recovery of the economy could help the government to unexpected extra takings.The finance minister said previously he wanted to take an extra 1.7 billion Euros in taxes in 2011, while the plan would also be to enforce ministries to spend around 1.7 billion Euros less year on year. Provincial leaders signalised opposition when he suggested towns and communities should spend 800 million Euros less next year compared to investments they carried out in 2010.The minister explained today he would focus on creating a “reasonable” 2011 budget in his bid to lower the deficit which soared to 3.9 per cent from 2008 to 2009.Pröll also claimed the government was right with deciding to present detailed plans for 2011 only in December instead of next month as required by the constitution. He said: “Today’s predictions – which strongly differ from previous announcements – confirm that we made the correct decision. It is important to try to rely on the latest statistics and forecasts in economically unstable times.”SPÖ financial issues councillor Andreas Schieder said the 2011 budget must be a “balanced mix of measures”. He announced: “The budget gap must be closed fair and socially balanced.”Greens deputy leader Werner Kogler suggested the coalition should spend an extra 250 million Euros on schools and universities every year from 2011.Freedom Party (FPÖ) boss Heinz-Christian Strache claimed today the think tanks’ predictions were “expectable”.The right-wing opposition politician said: “The government’s decision to delay the presentation of the state budget for next year was just a political manoeuvre.”Strache accused SPÖ and ÖVP of trying to avoid plans for harsh cuts from leaking to the public ahead of the upcoming provincial elections in Styria this Sunday and Vienna (10 October).Josef Bucher, head of the Alliance for the Future of Austria (BZÖ), accused WIFO and IHS of having deliberately given wrong figures.The opposition politician said: “I have the suspicion that the state-funded economic research institutes faked their outlook shortly ahead of the elections in Styria and Vienna to influence the government parties’ performance in these ballots.”The right-winger – whose party would, according to polls, win just two per cent if there were general elections this Sunday – added: “These lies are shabby and unworthy.”