Austria’s €500 state-funded child investment account sounds good, but cannot be afforded

A proposal to give every newborn in Austria a €500 state-funded investment account may sound attractive, but the money could be used elsewhere, commentator András Szigetvari argues.

Chancellor Christian Stocker of the Austrian People’s Party has suggested creating a “future account” for children. Families who invest in securities through the account would pay no capital gains tax on profits, at least until the child turns 18. The state would also provide €500 at birth.

But Austria’s deficit currently exceeds 4% a year. The target is to reduce it to 3% by 2028. The state could instead use the money to cut debt and reduce interest payments, the commentary says.

Rather than reducing borrowing costs, the plan would subsidize private investment in capital markets. The proposal therefore combines an appealing idea for families with a public-finance burden that Austria is already struggling to contain.