According to calculations by the liberal think tank Agenda Austria, Austria’s economy has not been performing well compared with other EU countries.

Of the 15 countries that joined the EU before 2004, Austria had the lowest growth and highest inflation between 2019 and 2023. While life became around 22 percentage points more expensive, real gross domestic product per capita (GDP) shrank by 1.6 percentage points in the same period.

Some of Austria’s neighbours, such as Germany, also saw high inflation, but prices rose 19.3 percent with the gross domestic product (GDP) per capita decreasing by 0.9 percent from 2019 to 2023. Italy, on the other hand, saw a 17.2 percent price increase but its GDP rose by 4.8 percent over the same period.

So why are things so much worse for people in Austria than elsewhere?

‘Partly home-made’

According to Jan Kluge an economist with Agenda Austria the answer is multifactorial. 

Luge says that Austria’s inflation has skyrocketed compared to its neighbours, particularly as the federal government spent money with aid programs during the coronavirus and inflation crisis. 

“The high inflation is therefore partly homemade”, he told Kurier.

This aid was also afforded to companies that were not financially sound.

“We have created zombie companies. In other countries, companies were allowed to go bust during the pandemic. We dragged ailing companies along with us and are still doing so today,” Kluge said.

READ ALSO: Can my landlord in Austria increase the rent whenever they want?

Following a sharp decline in insolvencies during the pandemic, Austria is now experiencing massive bankruptcies. Creditforum estimates that 7,500 companies will go bankrupt this year. 

Kluge attributes this – in addition to the rise in interest rates, high energy costs and strict regulations – to inadequate aid money. “Insolvencies are now slowly catching up because many have finally run out of steam”, he said.

According to Kluge, Austria’s weak performance is even more worrying when compared globally.

This is because the performance European economic area had already deteriorated compared to the USA during the 2008 financial crisis. In other words, Austria is weakening within an EU that is also under performing.

What can be done?

Liberal think tank Agenda Austria, which says its focus is on “market-based solutions”, has a list of “recommendations” for the Austrian economy, although they might not all go down well with workers or unions.

They start by calling for an end to “election sweets”, as they call them.

This means politicians should “stop handing out election gifts”, as any populist measure and handout contributes to rising prices.

“Popular interventions in prices are also strongly discouraged. Prices have an important function. Switching them off does not combat inflation; it only hides it. And only in the best-case scenario”, the think tank said.

They also recommend that the government “get a grip on the spending spree,” suggesting the adoption of a spending brake model based on Swedish or Swiss tools. 

READ ALSO: What is the ‘friendship economy’ in Austria and how does it work?

Additionally, Agenda Austria advocates for reducing labour costs which would continue to boost prices in Austria. They pointed out that tough wage negotiations led to increases in salaries in 2024.

They suggested: “To counteract this, the government can lower taxes on labour, thus reducing the increase in labour costs and counteracting a wage-price spiral.”

Finally, the liberal think tank also recommends that the government promote lively competition, increase supply, and ” let the market work.” They also mention that consumers can benefit from a range of products “from abroad,” even if domestic ones “naturally give us the best quality in every situation.”