Austria's Bold Move: Renegotiating Pay to Curb Inflation

Austria's government has renegotiated civil servants' annual pay raise, expected to save 310 million euros ($361 million) in the coming year. This step comes amid efforts to tackle a budget deficit beyond the EU limit and to address Austria's status as having the highest inflation in Western Europe.

The three-party coalition government, in office since March, reopened a previously settled pay deal by threatening trade unions with a future wage freeze if no compromise was achieved. Austria is on the verge of narrowly avoiding a third consecutive year of recession. The government defended the renegotiation as essential due to budget constraints.

Finance Minister Markus Marterbauer emphasized the success of Austria's consensus-driven model in ensuring economic prosperity, while Chancellor Christian Stocker highlighted the agreement's role in breaking the wage-price spiral and achieving the goal of reducing inflation to 2% next year.

(With inputs from agencies.)