Coronavirus: Emergency Aid Must be Distributed Quickly. WIFO Economist Margit Schratzenstaller on the Budgetary Aspects of the Crisis

Margit Schratzenstaller

19.03.2020

Coronavirus: Emergency Aid Must be Distributed Quickly

WIFO Economist Margit Schratzenstaller on the Budgetary Aspects of the Crisis

WIFO budget expert Margit Schratzenstaller praised the 38 billion € aid for companies presented on Wednesday in Austria as a "very large stimulus package". She said it amounted to about 10 percent of Austria's economic output and was "without alternative". It is now important, however, to allocate the 15 billion € emergency aid for particularly hit companies as quickly as possible, Schratzenstaller said on Thursday in the Ö1 Radio morning news.

"For many small businesses and for many one-person companies, it is indeed a matter of a few days" to cover their expenses, pay rents and salaries. That's why clear guidelines and criteria as well as very unbureaucratic processing are needed quickly.

Schratzenstaller considers it "not unlikely that Austria will now exceed the 3 percent Maastricht limit". But that would be no exception. During the financial crisis of 2009-10, the deficit was 4 and 5 percent respectively. And in 1995 it was 6 percent. Austria currently has "extremely favourable conditions on the financial markets and is borrowing at virtually no interest rate". The starting position is also better compared to the financial crisis because Austria now has "relatively high surpluses" despite a debt level similar to that in 2009-10.

The expert was confident: "We will manage this. There is really no alternative to the whole thing", she stressed, "it is important to simply throw the fiscal rules overboard for a short time". The national debt could be reduced again in the following years. Even after the financial crisis, Austria, with a national debt ratio of 85 percent, had managed to get back to 67 percent within five years.

The expert estimated the risk of default on loans to be in the double-digit percentage range: this would be spread over time and would not be immediately effective. The announced tax deferrals would take effect immediately. The social security contribution payments, on the other hand, would only be cancelled when the companies would actually be unable to pay more. This would therefore only have a partial effect on this year's budget.

The full interview (in German) can be listened to here.