Fekter: "We have to do even more than before to cut our debts"
In a topical debate in the Austrian National Assembly, Finance Minister Fekter points to the urgency of a consistent austerity path.
Press Release, 18 January 2012
"If you spend more than you are earning, you have to borrow the money you need. And governments do this by issuing government bonds on the capital markets. Unfortunately, over the past two years it has become evident that a considerable amount of confidence has been lost in government bonds. All the same, we are trying with all our might to finance states such as Greece, Ireland and Spain. And here, the rating agencies influence how high the interest rates are that such states have to pay for the money they borrow," explained Finance Minister Dr Maria Fekter on 18 January 2012 during a topical debate session of the Austrian National Assembly.
Regarding the downgrading of a number of euro countries, including Austria, by Standard & Poor’s, Fekter had this to say: "Two rating agencies have classified Austria among the debtors with the best standing. Last week, one agency attributed a degree of risk to Austria as regards our government debts. However, this risk is not based on our economic output or the work of our workers, but the fact that our neighbours Hungary and Italy, with which we have close economic associations, are currently in a weak position." Only this link is considered a risk as regards our credit standing. Austria's healthy economy, our current-account surplus, growth and the high level of employment, are beyond dispute, she continued.
"This risk could get bigger if our debt mountain grows to over 80%," stressed Fekter further, adding that the federal government and parliament had therefore already anchored a debt brake in law back in December last year, which was not supported by the opposition purely for reasons of party-political manoeuvring. Finance Minister Fekter however gave this assurance: "We will not let ourselves be led off course from the path of consolidation", and she declared that measures to reduce the deficit and cut debt would be even more consistent in future than before. "Unfortunately, Austria was as creative in inventing new government expenditure as it was in inventing new taxes", and by this Fekter was referring to 24 September 2008, the day on which, immediately before elections, the National Assembly adopted expenditure of over 3 billion euro. "Of course it is difficult to undo such expenditure," she added.
Between 1970 and 1999, the federal government's debt quota multiplied almost fivefold from 12.5% to 59.2%. From 2000 to 2007, this deficit mountain was reduced to 53.8%. From 2008 however, due to the international financial and debt crisis, the level of debt grew once again to 62.1%. "Step by step, we must work together and use our combined efforts to ensure that the debt mountain does not grow bigger. For leaving such a debt burden to the next generations would mean bequeathing them a socially-destructive sword of Damocles," added Fekter, reinforcing the necessity of a consistent austerity path.
"We do not have a problem with revenues, we have a problem with expenditure. We have a high tax quota and collect enough taxes. Austria is a high-tax country and reaches into the pockets of its people more than any other country," stressed Fekter, adding that the problem lay in expenditure. The task was to make intelligent savings, i.e. not with central investments in the future, but wherever there exist inefficiencies: with early retirement, the Austrian Railways, administration, subsidies, healthcare and in cooperation arrangements with the Austrian provincial governments. "With pensions, there are laws which make it attractive to retire early, and that is a huge burden on our national economy. We have to remove these incentives. For if such workers are active in their occupations for longer, the economy will benefit and the taxpayer will save money," reiterated Fekter.
"We have to save on the expenditure side, we must not negatively impact on growth, we must not endanger jobs, not heat up inflation, and not put a damper on investments. Only through such measures can we successfully lead our country out of crisis and ensure Austria's viability for the future," she concluded.