Krugman Comment: Pröll versus Bankruptcy

Photos: Finance Minister Josef Pröll (standing) delivering the budgetary speech, Apr. 21, 2009. Photo Credit: Matthias Wurz

The plenary chamber of the Austrian parliament was packed by 9:00 on Apr. 21, just like the stands for the general public in anticipation of ÖVP Finance Minister Josef Pröll’s 63-minute presentation of the budget.

At 9:05, Pröll rose from his seat to deliver what was expected to be his most important speech of his career so far, presenting the budgets for 2009 and 2010, which was broadcast live by ORF Austrian Television.

Austria, along with much of the world, is in the worst economic crisis in recent memory and the financial outlook is gloomy. The country’s national debt will increase by 3.5% in 2009 and 4.7% in 2010, well above the permitted Maastricht level of 3%. Consequently, the total national debt will reach an alarming 78.5% of Austria’s GDP by 2013, up from 62.5% in 2008. The bank rescue package (Vienna Review reported, April 2009) weighs with EUR 9.3 billion heavily (2009).

Economic Minister Reinhold Mitterlehner added in Der Standard of Apr. 25 that in order to consolidate the budget in the years to come “we also need new sources of income.” In other words, raise more taxes as the estimated tax income for the state drops by EUR 4.5 billion in 2010.

NATO passé – Austria’s NATO Strategy

Photo: from left to right, (Former) NATO General Secretary Jaap de Hoop Scheffer, U.S. President Barack Obama, French President Nicholas Sarkozy and Germany’s Chancellor Angela Merkel at the NATO Summit 2009. Photo Credit: Getty Images

The North Atlantic Treaty Organization (NATO), found cause to celebrate this year: On Apr. 4, 1949, the collective defense alliance was founded in Brussels on the eve of the Cold War. Sixty years later and now with 28 member states – Croatia and Albania were formally accepted this year – the organization set out to redefine its role after the collapse of communism 20 years ago.

For the first time, the annual NATO Summit was jointly hosted by two member states, France and Germany, whose “close partnership during the course of NATO’s history symbolizes a vision of a Europe whole and free,” according to the NATO website. Following the Summit, member countries’ leaders called for a new doctrine, as the previous one of 1999 neither reflects the changes in Russia nor takes global terrorism – like the 9/11 – into account.

The 60th anniversary also marked the return of France to the allied command structure – a move hailed by members, though deeply controversial within France. French President Nicholas Sarkozy defended his decision by saying that now was time for change:
“Our strategy cannot remain stuck in the past,” he urged at a talk at France’s Strategic Research Foundation in mid-March, “when the conditions of our security have changed radically.” France, Sarkozy argued, will have more influence in NATO missions while the independence of the nuclear-equipped French military will remain untouched.

But all seems well without NATO for Austria, now surrounded by alliance members, except Liechtenstein and Switzerland. The dramatic NATO membership plea by news magazine profil journalists Gernot Bauer and Georg Hoffmann-Ostenhof in the article ‘Holt uns da rein!’ (‘Get us in there!’ Apr. 6 edition) did not, however, spark any further political debate. All political parties seem happy to remain neutral, including those who once argued for NATO membership.