Based on its Spring Forecast 2019, the European Commission presented its forecast for the economic development of the EU and its individual Member States on May 7th. In doing so, it forecast a weakening of the economic growth in the European Union. Hence, it is necessary for Member States to take action, which promotes sustainable development.
Based on its data of the Spring Forecast 2019, the Commission demonstrates the economic developments for the EU and its Member States, whilst at the same time identifying impending risks. The outlook forecasts an overall lower growth for the EU area, which is in particular attributed to “global uncertainties” (trade conflicts, Brexit, etc.). For example, the Gross Domestic Product (GDP) in the EU is supposed to grow by 1.4 % in 2019 - in comparison, GDP growth in 2018 was at 2.0 %.
In contrast, the Commission describes the development of the labour market situation in Europe as positive. Even though in some countries unemployment is still very high - especially in Greece (acc. to forecast for 2019 18.2 %), Spain (13.5 %) and Italy (10.9 %) - for 2019, an unemployment rate of 6.5 % is to be expected in the entire EU area, which means that the constant fall of the past years will presumably be continued. For Austria, the forecast for the current year lies at 4.7 % (in comparison, 2018: 4.9 %, 2017: 5.5 %).
Even though growth continues and labour market data indicate positive developments, the Commission points towards strong downside risks - these include trade disputes and protectionism, a possible no-deal Brexit or a decline in private investments due to increasing political uncertainty.
Different development in Member States
Compared to other countries, regarding the economic forecast, some western countries currently come off worse than others, for example Italy, where domestic trade has weakened, or Germany, where in particular the automobile sector and the manufacturing industry have lost some of their strength. However, some eastern countries are able to cut loose from this dynamic and should be able to record significant stronger growth than other EU countries (e.g. Poland, Bulgaria, Rumania or Slovakia). The forecast for Austria is a slowing down of the GDP growth for 2019 to 1.5 % - in the previous year it was at 2.7 %. Based on the increase in employment and wages, private consumption is regarded as the most important economic driver, whereas foreign trade will contribute less to the Gross Domestic Product than in the year before.
Country-Specific Recommendations follow in June
In view of these prognoses it is important for the European Union to take the right measures to ensure fair and sustainable growth. The Commission - in the course of the so-called European Semester - will publish on 5th June the Country-Specific Recommendations for all EU countries on the basis of the Country Reports 2019, which were made available in February. In its Position Paper on the Country Report Austria 2019, AK EUROPA shows those measures, which would be necessary to ensure an economic development in Austria, which rests on a socially just and sustainable basis.
Criticism at the pension system not justified
In its Country Report, the EU Commission recommends to Austria to lower future pension expenditure by raising the statutory pensionable age in order to counteract a risk to financial sustainability. From the AK’s point of view, such an adjustment is currently not justified: The long-term calculations of the Commission’ own Ageing Reports 2018 confirm that in spite of massive shifts in the age structure, only a moderate increase in public pension expenditure, measured by GDP, is to be expected. Austria has already taken measures for the long-term funding of the pension systems, to continuously raise the actual pensionable age. In doing so, one wants to achieve the accession of the actual to the statutory pensionable age.
Taxes: inequitable distribution and factor labour heavily taxed
The Commission’s taking stock with regard to taxes equals in many areas the AK’s tax-policy demands. For example, the report shows the requirement of a structural tax reform in Austria, which requires a lowering of taxes on labour whilst at the same time increasing taxes on capital and assets. In the European Union, Austria - taxing the factor labour at 55.3 % - is currently in third place; in contrast, corporations currently contribute little to the tax revenue. Lowering corporation tax, which has been provided for by the Austrian Government in the course of its tax reform 2020, does further reinforce the imbalance.
Housing: Measures urgently required
In the course of the Country Report, the Commission has also scrutinised the housing market: apart from purchase prices, rents have also risen above average, above all in Vienna, where rents have risen by 50 % since 2005. Hence, more and more people are faced with the problem to secure affordable housing in Austria and the EU. Effective measures are urgently required to secure affordable housing for the population at large. A current feature is the European Citizens’ Initiative “Housing for All”, also supported by the Chamber of Labour, in which European legislators are urged to improve the framework conditions for social and affordable housing. The Initiative can be supported here.