Krugman Comment: Pröll versus Bankruptcy

3 05 2009

Pröll Budgetrede 21. April 2009Photos: 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. Read the rest of this entry »