Interview with Austrian Central Bank Vice President Barbara Kolm: “It is crucial for EU governments to reduce debt levels”

The building of the Austrian Central Bank in Vienna

Dr. Barbara Kolm is the Vice President of the Austrian Central Bank, since 2018. She is also the Director of the Austrian Economics Center (AEC) and President of the Friedrich August von Hayek Institute. She founded the Free Market Road Show, an initiative whereby conferences dedicated to free market economics are held in dozens of cities across Europe and beyond each year. She also holds several positions in the executive management of private enterprises and NGOs, is a member of the university board of WU-Vienna University of Economics and Business, and also an Associate Professor of Austrian Economics at the University of Donja Gorica in Podgorica, Montenegro.

She’s interviewed exclusively for Brussels Report by Lorenzo Montanari, Executive Director of the Property Rights Alliance (PRA), as the third interview in a series of prominent European supporters of free market economics.


Lorenzo Montanari: “In terms of national economic reform, what’s the biggest challenge in Austria?”

Barbara Kolm: “It probably is the lack of awareness about certain problems. There are many important challenges to be tackled: high non-wage labor costs, hurdles for market entry, overregulation, as well as a high tax burden. These problems are not being addressed at all, or ineffectively.

The Austrian government thinks it is its role to steer the economy, instead of merely providing a framework to reduce burdens for individuals and enterprises. In addition, the government is being restrained by decisions taken years ago. More and more risk has been taken by the government for the sake of rescue measures in times of crisis. Meanwhile, market corrections were not allowed to happen. To have allowed this, would have made it obvious that risks would have been taken over, something which would end in big losses.

The consequence of all this is that there are structural problems as well as ever-increasing risk that has been taken on. Many more challenges have also not been addressed or only insufficiently, which includes: the lack of productivity, the aging of the population and the creative transformation of the economy. The latter is even more relevant today than before the pandemic.”

Lorenzo Montanari: “What do you think should be the priority of the Austrian government in terms of EU policy?”

Barbara Kolm: “Countries are very vulnerable now because of the toxic mix of economic uncertainty, rising inflation rates and low interest rates, as well as very big economic and (geo)political risks. It is now crucial for governments to mitigate these risks, by reducing debt levels. At the same time, they should take action to reduce economic uncertainty and to address the reduction of CO2 emissions.

Therefore, it should be a top priority for EU countries to get their finances in order and to make sure they are prepared for potential new crises. This is certainly needed considering the debt levels of France, Italy and Spain as well as the inevitable collapse of certain zombie companies, in combination with the structural damage done during the pandemic.

Lorenzo Montanari: “Where do you think the European Union offers the most value for Austria and where is it failing to provide value?”

Barbara Kolm: “The European Union is mostly helpful when it comes to pushing for reasonable reform in many areas, e.g. pensions, education, health care and market liberalization.

When it comes to lowering taxes, however, the EU’s ‘harmonization drive“ fails to provide value, given how tax harmonization hurts competition. Competition is very important to keep taxes in check and to provide a certain level of quality of government services that is justified by the tax burden.”

Lorenzo Montanari: “What’s your most recent research project, at the Austrian Economics Center, and could you tell us a bit about it?

Barbara Kolm: “A lot of research has delivered the book „Green Market Revolution“, which discusses market strategies to tackle climate change. It provides a good counterbalance to the solutions that are mostly publically discussed to combat climate change, which often recommend government intervention and central planning.

Another focus has been on looking at how to best deal with the pandemic, with most of our research proving that strictly enforced governmental interventions may not be the best way to go about it all. This is also what is shown by an increasing number of studies, and the example of Sweden demonstrates how it is also possible to deal with a pandemic reasonably, through only moderate measures.

The third focus has been on the organisation of the 10th Austrian Economics Conference, hosted at the Central Bank in Vienna. Despite the restrictive Covid measures, we managed to gather scholars from around the world to discuss the hot topics of today.  

Lorenzo Montanari: “What book would you recommend?”

Barbara Kolm: “Apart from „Green Market Revolution”, which I already mentioned, there’s “The Righteous Mind“ by Jonathan Haidt. I consider this to be a very important book at this very moment. It makes a good case that people differ in our moral preferences, without therefore demonizing any set of morals. This helps to understand other people’s opinions.

Our societies are currently divided, and fanaticism as well as radicalism are growing at an alarming rate. Therefore, it is important to take a step back, rethink why other people see the world differently and try to understand them without condemning them. This is the only way to return to sensible, civil interactions in society.

Please also read the first and second interview of Brussels Report’s interview series of prominent European supporters of free market economics.