In the total clientele of the debt advice centers, the average debt in 2022 is 61,430 euros, as the current report shows. The amount is significantly increased by cases of failed former self-employed people.
In these cases, the average over-indebtedness amounts to around 111,000 euros. The central issue is personal liability for company debts, as ASB Managing Director Clemens Mitterlehner told ORF.at. Interest and reminder fees would also drive up the sums significantly.
increasingly broad clientele
But the cases of those who come into contact with debt counseling are becoming increasingly widespread: “People are saying more and more often: ‘I didn’t actually make a mistake and I’m still in debt counseling,'” said Mitterlehner at the presentation of the report. According to him, the number of initial consultations in the first quarter of 2023 far exceeded the level in the past year.
“Due to the increased costs and higher interest rates on loans, things can now become financially tight even for those who have previously been able to afford life well,” emphasized Mitterlehner. The main cause of over-indebtedness is unemployment or reduced income. In the event of a job loss, incomes are reduced “in one fell swoop to 55 percent” and clients have no reserves to which they can access.
Also more private bankruptcies in 2022
According to the debt report, the number of private bankruptcies opened in 2022 rose by 13.5 percent year-on-year to 8,176, with debt counseling accompanying 71 percent of them. The trend in payment defaults continues to rise. “An initial increase can already be seen; in some cases, debt counseling at the beginning of 2023 doubled the number of initial consultations compared to the beginning of 2022,” reported Mitterlehner.
The risk of over-indebtedness and poverty is increasing – the situation of over-indebted people is further aggravated by inflation. “Experience has shown that the massive price increases will only really be felt in debt counseling with a time lag,” stated the ASB boss. It becomes particularly problematic when people can no longer afford to file for personal bankruptcy. Because for this, all expenses must be covered by the income and no new debts must be incurred.
Plea for raising the net replacement rate
On behalf of the umbrella organization of state-recognized debt counseling, Mitterlehner pleaded for an increase in the net replacement rate in the event of unemployment to 70 percent. Overall, unemployment in Austria is currently relatively low – but there are five times more unemployed people in counseling than in the general population.
In addition to an increase in the net replacement rate in the event of unemployment, according to the ASB boss, it would be necessary “to raise the subsistence level at least to the poverty risk threshold of 1,371 euros per month most recently.” In 2022, the subsistence level was 1,030 euros per month. “This amount was far too low even before inflation,” says the current debt report.
Around 56,000 people in debt counseling
According to the debt report, people who come to debt counseling have an average of 1,400 euros a month at their disposal. For almost half, compulsory school is the highest completed education. In the past year, around 56,000 people received support from one of the ten state-approved debt counseling services in Austria.
Mitterlehner also advocated maintaining the possibility of debt relief within three years for private individuals. There is a risk of an increase to five years. For entrepreneurs, it remains at three years. “We are in talks – it cannot be that entrepreneurs are better off than private debtors,” said Social Minister Johannes Rauch from the Greens.
Government defends measures taken
At the same time, Rauch defends the measures taken by the federal government to cushion the extremely high inflation. “It was about acting quickly,” he countered the criticism that various one-off payments to all households according to the watering can principle had not been “socially accurate” enough. A total of 30 billion euros have been spent on this so far. “If we hadn’t done that, the social situation would have been significantly different,” said the minister.
According to Rauch, people with low incomes spend the majority of their household income on housing, energy and food. It is precisely in these areas that prices have risen particularly sharply – often much faster than inflation. In March, for example, general inflation was 9.2 percent, but groceries rose by 14.5 percent. The Minister of Social Affairs wants to take a closer look at this.
“Food Summit” announced again
At this point he referred to the announcement of a “food summit” – this should be convened to determine how the situation is, said Rauch. He would “not use the media to direct his ideas,” he said when asked by APA about concrete details. “The aim must be for prices to reach a level that can be represented.”
On May 8th, representatives of the food chains and agriculture as well as social partners and economic researchers are invited to a meeting in which the high prices will be discussed.
Statistics Austria: Inflation increased in April
The high prices are also confirmed by inflation, which according to a quick estimate by Statistics Austria is likely to be 9.8 percent in April, compared to 9.2 percent in March. According to Tobias Thomas, Director General of Statistics Austria, inflation is picking up speed in the areas of leisure, travel and services in particular.
The Economic Research Institute (WIFO) was surprised by the increase. “We expected inflation to decline,” said WIFO inflation expert Josef Baumgartner to APA. It is not yet clear in detail where the increase is coming from. You would have to wait around two weeks until the detailed figures are published.
His “first guess” would be that price increases in travel and flights have kicked in. “But of course it could also be an additional price shock that we didn’t have on our radar,” says Baumgartner. However, one argument against such a development is that industry representatives would otherwise have pointed out unexpected cost increases.
