The FPÖ Under Kickl: On the Path to a Fiscal Miracle in Austria

_ J.C. Kofner, economist, MIWI Institute for Market Integration and Economic Policy, Munich – Graz, January 18, 2025. First published in FREILICH Magazine.

The FPÖ is set to lead Austria’s federal government under the leadership of Chancellor Herbert Kickl, in a senior coalition with the ÖVP. This achievement highlights the constructive and effective governance potential of right-wing administrations. While coalition negotiations between the ÖVP, SPÖ, and NEOS faltered after 100 days with no result, the FPÖ and ÖVP took just three days to outline the fundamental framework of the state budget. This swift progress underscores the capability of a government committed to urgently needed reforms—a credit largely due to Herbert Kickl and FPÖ’s economic expert Arnold Schiefer.

However, the country faces a serious challenge: the past five years under the ÖVP-Green coalition have been marked by persistent budget deficits. Since 2019, national debt has surged by nearly 40%, not due to essential investments for the future but through the squandering of taxpayer money on leftist ideological projects. The peak of this wastefulness occurred during the so-called “Corona plandemic,” the rising social expenditures for mass immigration, the Green Party’s climate policies, and the misguided energy transition. For 2024, the budget deficit stands at a staggering €14.6 billion, while national debt has reached €386.5 billion. This trajectory has caused a significant rise in yields on 10-year government bonds, prompting Fitch Ratings to downgrade Austria’s outlook from “stable” to “negative.”

The imminent threat of an EU deficit procedure is now critical. Should the new government fail to balance the budget, Brussels could impose sanctions on Austria—a rare positive mechanism within the EU to enforce fiscal stability among member states and safeguard economic interests, particularly those of Germany. Nevertheless, there is hope: during its two years in government (2018 and 2019), the FPÖ achieved a budget surplus for Austria, demonstrating that responsible fiscal management is only attainable under a “blue” administration.

The new coalition has set ambitious austerity targets. In just three days of negotiations, they presented a savings plan of €6.4 billion for 2025, aiming to save up to €24 billion by 2028. The federal budget is expected to be balanced by 2026, paving the way for tax reductions and lower levies. A hallmark of every right-wing administration is its commitment to reducing spending, cutting taxes, and striving for a lean but robust state that prioritizes native families, the middle class, and national security. This is coupled with promoting a free market economy that empowers individuals and ensures an efficient government apparatus.

Remarkably, the blue-black savings plan avoids imposing new taxes—unlike the SPÖ’s absurd proposals for wealth taxes. Instead, the plan is financed by cutting subsidies for the Green Party’s “climate redistribution” and energy transition policies. Eliminating the climate bonus, the “Klimaticket” for 18-year-olds, and subsidies for the so-called green transformation will save €2.5 billion alone. Further savings of €1.1 billion will come from reduced federal ministry spending, including cuts to administrative costs and advertising budgets. The government’s clear direction is also reflected in reinstating taxes on photovoltaic systems and electric vehicles, generating an additional €140 million. Only modest increases in federal fees, such as for driver’s licenses, will affect citizens directly, accounting for just 1% of the entire savings package. Notably, some justified tax increases from a right-wing perspective, such as the digital tax for international platform companies (€50 million) and a gambling tax (€35 million), are also part of the new plan.

A responsible FPÖ government should, however, aim not only to counteract the spending excesses of the ÖVP-Green administration but also to provide genuine relief for Austrian citizens in the long term. In a country where the tax burden stands at an alarming 43.5% of GDP and the government expenditure ratio at 52%, Austrians endure one of the highest tax rates in Europe—higher even than in Germany, which seems unfathomable given the socialist agenda of the political elites. The answer to this burden lies in a resolute reduction in state spending.

But how can this be achieved? The path to fiscal relief lies in eliminating expenditures that do not promote the well-being of the population. Climate hysteria, the energy transition, and mass immigration remain untouchable “sacred cows” of the ruling elites, yet these areas hold vast savings potential for an FPÖ government.

Eliminating development aid alone could free up €1.8 billion annually. A stark example of misplaced priorities is the €2 billion Austria has provided in aid to Ukraine since February 2022, amounting to €750 million per year. Halting these payments could significantly ease the tax burden without compromising national security or domestic welfare.

Additionally, savings in the social sector could be realized. In 2023, approximately €1.1 billion was spent on minimum income and social assistance, with over 57% of recipients being non-Austrian citizens. Through a robust remigration policy and a restriction of eligible recipients, this expenditure could be reduced by up to €627 million annually.

Not to be overlooked are the roughly €2 billion in net contributions Austria pays to the EU annually, including obligations under the controversial COVID-19 recovery fund. Reforming the EU into a true economic community that respects member states’ sovereignty could significantly reduce this annual net outflow. A withdrawal from the current redistribution mechanisms would be a boon for taxpayers.

By implementing these four major cost-saving measures, an FPÖ government could save up to €5.1 billion annually. These funds should not merely replenish state coffers but instead be returned to citizens and businesses in the form of tax relief. The immediate repeal of the CO2 tax, which currently generates €1 billion annually and disproportionately affects middle- and lower-income groups, should be a priority. Beyond this, corporate taxes could be reduced from 23% to 20%, providing €3.74 billion in relief to businesses. Finally, raising the tax-free allowance for income tax would ensure workers keep more of their hard-earned money.

If the €5.1 billion in savings were returned to Austrians through tax cuts, the average household could save over €1,200 annually. This would not only provide tangible tax relief but also restore purchasing power and enhance the prosperity of Austria’s citizens.

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