Pühringer plans to prevent reduction of subsidies

Upper Austrian People’s Party (ÖVP) Governor Josef Pühringer has put the federal government’s cost reduction course into question.

Pühringer said today (Tues): “Everybody who thinks that subsidies could be reduced by billions of Euros is wrong.”

The ÖVP wants to reduce the state’s annual spending on private and public companies, cultural institutions and various organisations by 15 per cent in the coming years. Austria invests more than 15 billion Euros this way, according to economists. The Republic of Austria not only provides companies close to the state such as Federal Railways (ÖBB) with credits and guarantees but also financially backs traditional folk music events, galleries and local theatres.

Speaking to the Kurier, Pühringer said the funding of brass bands must not be reduced. The ÖVP Upper Austria boss – whose party forms a coalition with the provincial Green Party department – claimed such institutions were receiving “ridiculously low sums” at the moment. Pühringer praised the bands for doing a lot for the country’s youth.

Pühringer recently caused a stir by declaring his support for a taxation measure colloquially called millionaires’ tax. Some Social Democrats (SPÖ) – including SPÖ Upper Austria chief Josef Ackerl and SPÖ Burgenland Governor Hans Niessl – spoke out in favour of a tax on assets affecting the country’s wealthiest residents. Pühringer explained he would not try to prevent the creation of such a tax “if it really affects no one else but millionaires”.

SPÖ Chancellor Werner Faymann and SPÖ Finance State Secretary Andreas Schieder said 80,000 to 90,000 households could be affected by the possibly upcoming measure. Faymann explained he wanted to “catch” the richest Austrians. The chancellor said the state’s wealthiest citizens must contribute more strongly to restore the budget.

Faymann is under pressure by the Labour Chamber (AK) and the Federal Trade Union (ÖGB). The institutions – which are dominated by SPÖ officials – called for higher income taxes for rich Austrians, a tax on assets and a tax on financial transactions. AK and ÖGB warned about increasing the tax burden on labourers and the middle class. The organisations also pointed out that the planned constitutional debt brake must not negatively affect the job market.

The ÖVP opposes the tax hike ideas of its coalition partner. ÖVP Vice Chancellor and Foreign Minister Michael Spindelegger said he wanted to concentrate on austerity and structural reforms. However, papers report that SPÖ and ÖVP already agreed that people with high salaries would soon have to pay more taxes as a mandatory contribution of solidarity in crisis times. The measure could be introduced for a limited time span depending on how the economic situation develops.

Austria had a budget deficit of 3.3 per cent last year. The government feared it would range around 3.9 per cent of gross domestic product (GDP). Latest figures show that the deficit was lower than expected due to extraordinarily high revenues and less than planned spending. SPÖ and ÖVP want to set up a constitutional debt limit nevertheless. The measure is considered as supportive to attempts in lowering the state debt. All ministries will have to make cuts in the coming years.

SPÖ Labour Minister Rudolf Hundstorfer must not spend more on job market initiatives in 2012 than last year despite predicted unemployment increases. ÖVP Environment Minister Nikolaus Berlakovich was asked to present more ambitious cost reduction concepts after he said that only a few million Euros could be saved by merging his ministry’s agricultural authorities. The SPÖ is determined to slash subsidies for farmers. Berlakovich warned that cuts could ruin the agricultural sector.

ÖVP Justice Minister Beatrix Karl plans talks about closing small courts in the countryside to improve the juridical sector’s efficiency. District courthouses with fewer than three judges will shut in the coming months if the ex-science minister prevails in negotiations with unionists. The foreign ministry started closing down several embassies and consulates across the world already before business newspapers claimed that rating agencies were about to downgrade Austria because of its soaring debts and close economic ties with economically challenged states like Italy and Hungary.

Standard & Poor’s (S&P) issued a worse outlook on the Austrian economy earlier this month. The influential rating agency also lowered Austria’s credit rating by one grade from the best possible estimation of AAA to AA+. Moody’s and Fitch did not change their AAA rating but appealed to the SPÖ-ÖVP government to show more determination in carrying out reforms to reduce the state’s sky-high debts.