When “saving” actually means “additional burdens” – Europe’s economic policy blind flight at the expense of businesses and citizens

Europe’s political communication has given rise to a new paradox: today, “saving” does not mean making the state apparatus more efficient, but in practice the exact opposite: a constant additional burden on businesses and citizens. This phenomenon is particularly striking in Austria, one of the countries with the highest tax rates in the world. The state levies more than half of the income generated – and the trend is rising. But instead of questioning this apparatus or streamlining administrative structures, politicians are shifting responsibility to the private sector and even calling the whole thing “necessary savings”.

1. The rhetorical trick of politics: saving without saving

When European governments talk about austerity measures today, they rarely mean internal restructuring or reducing inefficient government spending. What they really mean is:

• Increases in fees for rubbish collection, water, parking or administrative services
• Increasing taxes and levies, for example through indirect tax adjustments
• Shifting services to private responsibility (e.g. care costs, health contributions)
• Inflation-related bracket creep, where the tax burden automatically increases even without legal adjustments.

According to the OECD (2023), the tax ratio in Austria is 43.1% of gross domestic product. By comparison, the OECD average is around 34%. In France, the ratio is 45%, and in Germany around 38%. This means that in these countries, almost half of economic output flows into government systems.

Despite this high ratio, there is a lack of political will to increase efficiency. The language of politics uses the vocabulary of budgetary discipline, but in fact redistributes responsibility and costs to the private sector and entrepreneurship.

2. Fee increases as a hidden tax policy

The German Economic Institute (IW) points out that municipal fee adjustments in particular are an often overlooked component of the tax reality. These are easier to communicate politically because they are not formally taxes. The Austrian Federal Economic Chamber (WKO) has been complaining for years about the “fee salami tactics” of many municipalities: from sewerage fee increases and water meter charges to flat-rate infrastructure levies for commercial properties.

The Austrian Association of Municipalities justifies these increases with rising personnel costs and new legal requirements. This may be true in individual cases. However, the structural problem remains: instead of putting pressure on the administration to reform, the budget is being restructured through new burdens – a fiscal policy misrepresentation.

3. Innovation policy: demands without support

A key failure of European economic policy lies in its innovation-hostile regulatory and fiscal architecture. Not only are companies expected to develop innovations under increasingly restrictive licensing conditions, they are also prohibited from exploiting them commercially to their full potential.

One example: the European Strategy for Data (COM(2020) 66 final) imposes far-reaching obligations on companies to make certain public data sets available free of charge. The idea of data altruism is well-intentioned, but in practice it leads to distortions of competition.

There are also trends towards “forced solidarity” in the area of intellectual property and technology transfer: under EU funding programmes such as Horizon Europe, companies are increasingly being encouraged to open up their innovations to the “public interest”. Financial compensation is often not provided.

The result is a climate of demotivation. Who will invest in groundbreaking technologies if the return on investment cannot be planned? US corporations operate in an environment that rewards proprietary innovation. China, on the other hand, strategically supports its champions. Meanwhile, Europe is losing its capital of ideas to other regions of the world.

4. The European administrative state: refusal to reform as the status quo

Despite decades of digitisation projects, European administration remains analogue, fragmented and inefficient in many places. In Austria, for example, according to the Court of Auditors (report 2023), numerous federal IT systems are not compatible with each other. Of the approximately 1,300 federal IT applications, only a fraction are interoperable. This leads to extra work, interface problems and duplicate structures.

Examples

• The digital business application form is designed differently in Vienna than in Tyrol, even though both are based on federal law.
• The electronic health record ELGA is hardly used by many registered doctors because there are no interfaces to the practice management software.
• Internal approval processes in ministries often take months because decision-making processes are not automated.

Another problem is the excessive federal structure in countries such as Austria and Germany. According to a study by WIFO (2022), administrative reform in the education, health and construction sectors could save up to €4 billion annually while improving service quality.

5. How companies are specifically affected

A look at the reality of companies illustrates the effects of political failures (using two fictitious examples):

• Case 1: Manufacturing company in Styria A medium-sized metalworking company with 180 employees has to cope with additional costs of €120,000 per year due to new energy taxes, increased CO2 pricing and regional municipal taxes. At the same time, regional economic development funding from the province of Styria has been cut due to budget constraints. Investments in new equipment are being postponed, increasing the risk of innovation and making the location less attractive.
• Case 2: IT start-up in Vienna A young company is developing specialised cloud software for energy monitoring. It loses a federal tender to a large European system house that promises to provide its services with open source components. The smaller providers cannot compete – neither financially nor in terms of licensing rights. Frustration over the market distortion is high, and the team is considering relocating to Tallinn or Lisbon.

6. A new economic policy approach is needed

Europe needs to rethink its approach. The continent’s future viability will not be secured by piecemeal debates on distribution, but by entrepreneurial vitality and innovative strength. The following areas for action are key:

• Government efficiency instead of expansion: The public sector must become leaner, more digital and more responsive. This requires far-reaching administrative reform and benchmarking initiatives at EU level.
• Genuine tax relief for the productive middle class: Companies, especially SMEs, need predictable relief on non-wage labour costs, energy taxes and capital taxation. Austria’s non-wage labour costs are among the highest in the EU (source: Eurostat, 2023).
• Reward innovation instead of socialising it: A clear market-based innovation system must be created. Companies that create intellectual property must not be forced to give it away for free. Instead, they should be strategically promoted and kept internationally competitive.
• Return-oriented investment in education and research: Government R&D spending should be focused on projects with high scalability, export potential and industrial connectivity.

Conclusion: structure instead of symbolic politics

European politicians must leave their comfort zone of vague rhetoric. Those who talk about “austerity” must also start saving in the public sector. Fee increases and innovation requirements for companies are not a viable response to structural deficits. Europe needs a new seriousness in economic policy – one based on appreciation, not on burdens. Companies are not the problem, but part of the solution. It is time for politicians to finally have the courage to say so and act accordingly.

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• EU Green Deal Regulation
• The new corporate minimum tax
• 7 Reasons Why Businesses Need Structure (In The Home Office)