Austria: States Agree to Fund Family Support Package

Austria's federal government and its states have reached a crucial agreement on financing the planned reduction of employer contributions to the Family Equalization Fund (FLAF). The deal, struck after negotiations at the Finance Ministry, will see the federal states cover one-third of the funding gap, amounting to 200 million euros.

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States and municipalities will participate in the financing of the Family Equalization Fund (FLAF).

This agreement is set to pave the way for a one-percentage-point reduction in employer contributions to the FLAF, a measure intended to lower ancillary wage costs. Finance Minister Markus Marterbauer confirmed the states' commitment, stating that the 600 million euro shortfall would be filled. While the exact benefits for the states in return for their consent were not immediately disclosed, it is understood that funds from the EU Resilience and Recovery Fund may be part of the package.

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The gap of the missing 600 million euros in the FLAF is filled, one third will be covered by the federal states.

State Governor Anton Mattle expressed satisfaction with the outcome, emphasizing that the states' co-financing would be limited to 2028. The financing will be comprehensively addressed in future negotiations for the new financial equalization starting in 2029. The agreement resolves a point of contention, as the states had initially resisted contributing to a measure they viewed as a federal responsibility, despite the government's argument that states also benefit from increased tax revenues.

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The states bear the reduction of ancillary wage costs and were able to conclude further open points in favor of the states and municipalities in the negotiations.