Each year, within the scope of the European Semesters, the European Commission publishes its country specific reports, in which it reviews the economic situation of a Member State and its implementation of economic reforms, based on the recommendations of the previous year. In addition, the report establishes whether any discrepancies included therein require further analyses and reviews. The published Annual Growth Report 2016 determines the respective priorities for the individual Member States: investments, structural reforms to modernise economies and consolidated budgets. Hence, the question remains, to which extent an economic policy oriented towards austerity is able to promote investment and growth.

Country Report Austria 2016

Labour market

In 2016 and 2017, Austria's economy should be on course to achieve a moderate growth of 1.5 percent, which will mainly be composed of private consumption and investments in residential property. The tax reform, which came into force on 1.01.2016 and the relief on the working income of low income earners associated with it is significant in the Commission’s opinion; however, further reductions have been demanded to enable the creation of a higher level of consumption and incentives to find or stay in work. In spite of light growth and positive impulses due to higher levels of net income, the situation in the labour market remains tense. Even though employment figures were slightly up during the third quarter of the previous year, thereby rising to 75 percent, at 6 percent, the unemployment rate remained high. This affects in particular older and low-qualified people and women and men with migration background (whilst people from other EEA States, Switzerland and countries, who joined the EU from 2004, record a high level of employment, the labour participation of people from other third countries stood at 55%). This means that these groups are especially exposed to the danger of long-term unemployment and therefore most badly affected by poverty. Even though the rate of persons at risk from poverty or social exclusion fell to the level of 2011 (to 19.2 percent) and thereby remained below EU average, the poverty of further 145,000 people affected has to be reduced in the coming four years to ensure that the set Europe 2020 Agenda target will be achieved. From the point of the Commission, the hurdles in the service sector are too high and that is why further liberalisations would contribute to creating jobs.

Pension system

With regard to the pension system, the Commission criticises the fact that the pensionable age had not been increased and that relating to this no equalization between man and woman taken place. In failing to do so, the expenditure for the pension system would increase by 0.5 percent of the GDP in the long-term. However, if one looks at the situation of employees aged over 50, one notices a high increase in unemployment (+ 5.9 percentage points compared to the previous year). Apart from that, some measures have already been taken to limit access to early retirement regulations and disability pensions for people under 50. In future, an appropriate bonus-malus system and the employment initiative 50+ shall contribute to the rise in the employment of older employees.

Banking system

Even though Austria’s banking system is characterised by its resilience, risks with regard to lower profitability on the domestic market, to the increased reserve requirements and the comprehensive commitment of the banks in Central, Eastern and Southern Europe remain nevertheless. Hence, the Commission therefore recommends that credit and currency risks are reduced abroad and that capital buffers will be created.

Further information:

Austria – Country Report 2016

Country-specific recommendations

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