Graz Faces Insolvency Risk as Communists Impose Spending Freeze

Graz’s popular communist mayor, Elke Kahr, has just been confirmed for another term, but the city’s finances have forced her government to pull the emergency brake. Finance councillor Manfred Eber imposed a budget freeze on Wednesday, only a week after the new city government took office.

For at least one week, Graz cannot place new orders or conclude new subsidy agreements. After that, spending will resume only where it covers the city’s legal duties or indispensable costs needed to keep the administration operating. The city says it will continue meeting all existing obligations.

The measure comes after years in which the Communist Party, or KPÖ, introduced or expanded social benefits even as the municipal budget was already badly strained. Graz now carries the highest per-capita debt of any Austrian city. The article notes that the Communists are not solely responsible for that position, but they must now make sharp savings.

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short-term liquidity squeeze

The KPÖ rejects the blunt claim that Graz is bankrupt. Eber’s office described the situation to Austrian broadcaster ORF as a “short-term liquidity squeeze.” It said the main cause was Styria’s disability law, which created 32 million euros in unforeseen additional expenditure. The freeze, officials said, is intended to protect the city’s ability to pay.

Kahr remains highly popular. The KPÖ won almost 36 percent in the city election at the end of June and now governs with the Greens, without needing the Social Democrats’ support. The party’s local appeal also rests on its image as a tenants’ party. Kahr keeps 2,300 euros of her monthly salary and donates the rest, continuing a practice associated with her predecessor Ernest Kaltenegger. According to the party, she has given away 1.3 million euros since entering the city government more than 20 years ago.

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for legal duties of the city and indispensable expenses to maintain the internal administration