About
Austria

Economy of Austria

Austria has a well-developed social market economy with a high standard of living and close ties to other EU economies, especially Germany's.

Until the late 1980s, the government and its state-owned industry conglomerates played a key role in the Austrian economy. However, state-owned firms began to operate largely as private businesses starting in the early 1990s--a trend which accelerated between 2000 and 2006, as the government wholly or partially privatized many of these firms. Since 2006, "grand coalition" governments have not reversed privatizations but have also not undertaken further privatization measures.

The international financial crisis and global economic downturn in 2008 led to a deep recession that persisted until the third quarter of 2009. Austrian GDP contracted by 3.9% in 2009, partially recovering in 2010 with growth of 2.1%. The unemployment rate of 4.4% in 2010 was the lowest in the EU-27 (EU-27 average: 9.6%). Crisis measures and an income tax reform pushed the budget deficit from about 0.4% of GDP before the financial crisis to 4.6% of GDP in 2010. The consolidated public sector debt rose from 62.5% of GDP in 2008 to 72.3% in 2010, due primarily to new methods of accounting for publicly-guaranteed debt. The government’s 2012-2015 medium-term budget framework stipulates legally binding spending limits to reduce the total public sector deficit from about 3.9% of GDP in 2011 to 2.0% of GDP in 2015. Organization for Economic Cooperation and Development (OECD) and International Monetary Fund (IMF) experts have called for structural reforms in areas such as sustainability of pensions, ensuring long-term care for Austria’s aging population, restructuring public sector salaries, streamlining administration, and improving the K-12 and university education systems.

Austria’s economy benefited greatly from its entry into the EU in 1995, the introduction of the Euro in 2002, and its growing commercial relations--especially in the banking and insurance sectors--in central, eastern, and southeastern Europe. However, this interdependency has made Austria vulnerable to financial instability in the region. Some of Austria's largest banks have required government support--including in two instances, nationalization--to avoid potential insolvency and wider regional contagion. Several banks have, however, applied for early repayment of the government funds. In the medium term, Austrian banks will need additional capital to meet the terms of the Basel III accord. Even with an improved economic outlook, Austria will need to continue restructuring, emphasizing knowledge-based sectors of the economy while encouraging greater labor flexibility and greater labor participation to offset such problems as structural unemployment, an aging population, and a low fertility rate.

Austria has a strong but slightly shrinking labor movement. The Austrian Trade Union Federation (OGB) comprises constituent unions with a total membership of about 1.2 million--about 35% of the country's wage and salary earners. The OGB has always pursued a moderate, consensus-oriented wage policy, cooperating with industry, agriculture, and the government on a broad range of social and economic issues in what is known as Austria's "social partnership." A 2006 scandal involving an OGB-owned bank caused the OGB to lose much of its political influence and it is still trying to recover.

Austrian farms, like those of other west European mountainous countries, are small and fragmented, and production is relatively expensive. Since Austria joined the EU in 1995, the Austrian agricultural sector has been undergoing substantial reform under the EU's common agricultural policy (CAP). Although Austrian farmers provide about 85% of domestic food requirements, the contribution of agriculture, forestry, and fisheries to gross domestic product (GDP) has consistently declined over the last decades to just 1.5% (2010).

Trade with other EU-27 countries accounts for almost 72% of Austrian imports and exports (2010). Expanding trade and investment in the new EU members of central and eastern Europe represent a major pillar of Austrian economic policy. Austrian firms have sizable investments there and continue to move labor-intensive, low-tech production to these countries. About one-half of Austria's foreign direct investment (FDI) is concentrated in the countries of central, eastern, and southeastern Europe. Many western European and international companies have located their central/eastern European headquarters in Austria.

Total trade with the United States in 2010 reached $10.9 billion. Exports from the United States to Austria amounted to $4.3 billion. U.S. imports from Austria in 2010 were $6.6 billion. The United States is Austria's sixth-largest trading partner worldwide. Approximately 330 U.S. firms hold investments in Austria. The stock of U.S. foreign direct investment in Austria is an estimated $15.4 billion (2009), which represents about 10.4% of FDI in Austria and makes the U.S. the third-largest foreign investor in Austria.

GDP (2010): $376.1 billion.

Real GDP growth rate (2010): 2.1%.

Per capita income (2010): $44,830.

Natural resources: Iron ore, crude oil, natural gas, timber, tungsten, magnesite, lignite, cement.

Agriculture (1.5% of 2010 GDP): Products--livestock, forest products, grains, wine, sugarbeets, potatoes.

Industry (29.2% of 2010 GDP): Types--iron and steel, chemicals, capital equipment, consumer goods.

Services: 69.3% of 2010 GDP.

Trade (2010): Exports--$144.8 billion: iron and steel products, timber, paper, electrotechnical machinery, chemical products, foodstuffs. Imports--$150.4 billion: machinery, vehicles, chemicals, iron and steel, metal goods, fuels, raw materials, foodstuffs. Principal trade partners--European Union, Switzerland, China, and the United States.

Geography of Austria

Government of Austria

The Austrian president convenes and concludes parliamentary sessions and under certain conditions can dissolve Parliament. However, no Austrian president has dissolved Parliament in the Second Republic. The custom is for Parliament to call for new elections, if needed. The president requests a party leader, usually the leader of the strongest party, to form a government. Upon the recommendation of the Federal Chancellor, the president also appoints cabinet ministers.

The Federal Assembly (Parliament) consists of two houses--the National Council (Nationalrat), or lower house, and the Federal Council (Bundesrat), or upper house. Legislative authority resides in the National Council. Its 183 members serve for a maximum term of 4 years in a three-tiered system, on the basis of proportional representation. The National Council may dissolve itself by a simple majority vote or the president may dissolve it on the recommendation of the Chancellor. The nine state legislatures elect the 62 members of the Federal Council for 5- to 6-year terms. The Federal Council only reviews legislation passed by the National Council and can delay but not veto its enactment.

The highest courts of Austria's independent judiciary are the Constitutional Court; the Administrative Court, which handles bureaucratic disputes; and the Supreme Court, for civil and criminal cases. While the Supreme Court is the court of highest instance for the judiciary, the Administrative Court acts as the supervisory body over government administrative acts of the executive branch, and the Constitutional Court presides over constitutional issues. The Federal President appoints the justices of the three courts for specific terms.

The legislatures of Austria's nine Bundeslaender (states) elect the governors. Although most authority, including that of the police, rests with the federal government, the states have considerable responsibility for welfare matters and local administration. Strong state and local loyalties have roots in tradition and history.

Since 1955, Austria has enjoyed political stability. A Socialist elder statesman, Dr. Karl Renner, organized an Austrian administration in the aftermath of the war, and the country held general elections in November 1945. All three major parties--the conservative People's Party (OVP), the Socialists (later Social Democratic Party or SPO), and Communists--governed until 1947, when the Communists left the government. The OVP then led a governing coalition with the SPO that governed until 1966.

Between 1970 and 1999, the SPO governed the country either alone or with junior coalition partners. In 1999, the OVP formed a coalition with the right-wing, populist Freedom Party (FPO). The SPO, which was the strongest party in the 1999 elections, and the Greens formed the opposition. The FPO had gained support because of populist tactics, and many feared it would represent right-wing extremism. As a result, the European Union (EU) imposed a series of sanctions on Austria. The U.S. did not join the sanctions formally, but together with Israel, as well as various other countries, also reduced contacts with the Austrian Government. After a 6-month period of close observation, the EU lifted sanctions, and the U.S. revised its contacts policy. In the 2002 elections, the OVP became the largest party, and the FPO's strength declined by more than half. Nevertheless, the OVP renewed its coalition with the FPO in February 2003. In national elections in October 2006, the SPO became the largest party, edging out the OVP. On January 11, 2007, an SPO-led “grand coalition” took office, with the OVP as junior partner. In July 2008, following months of dispute between the ruling parties, the coalition collapsed when Vice Chancellor Wilhelm Molterer (OVP) called for early elections. New elections were held on September 28, 2008, and resulted in the formation of another “grand coalition” between the SPO and OVP.

The Social Democratic Party traditionally draws its constituency from blue- and white-collar workers. Accordingly, much of its strength lies in urban and industrialized areas. In the 2008 national elections, it garnered 29.7% of the vote. In the past, the SPO advocated state involvement in Austria's key industries, the extension of social security benefits, and a full-employment policy. Beginning in the mid-1980s, it shifted its focus to free market-oriented economic policies, balancing the federal budget, and European Union membership. Following the 2008 financial crisis, the SPO began advocating a tax on global financial transactions and a solidarity tax from Austrian banks that had been bailed out by the government during the crisis.

The People's Party advocates conservative financial policies and privatization of much of Austria's nationalized industry. It finds support from farmers, large and small business owners, and some lay Catholic groups, mostly in the rural regions of Austria. In 2008, it received 25.6% of the vote. The Greens won 9.8% of the vote in 2008, losing ground to become the smallest party in parliament.

Austria’s rightist Freedom Party (FPO) has seen its popularity grow in a series of national and state elections since 2006. In the 2008 elections, the FPO earned 18% of the vote, up from 11% in 2006. The late Joerg Haider, the former leader of the FPO, split from the party in 2005 to form the Alliance-Future-Austria (BZO). While the BZO barely managed to enter parliament in 2006 with 4.1% of the vote, Haider led his new party to a surprising 10.7% in national elections in 2008. Shortly afterwards Haider died in a car crash, and the BZO subsequently saw some of its deputies return to the FPO as the party’s political fortunes declined again.

Federal President Heinz Fischer was reelected for a second term on April 25, 2010.

Type: Federal Parliamentary democracy.

Constitution: 1920; revised 1929 (reinstated May 1, 1945).

Branches: Executive--federal president (chief of state), chancellor (head of government), cabinet. Legislative--bicameral Federal Assembly (Parliament). Judicial--Constitutional Court, Administrative Court, Supreme Court.

Political parties: Social Democratic Party, People's Party, Freedom Party, Greens, Alliance--Future-Austria.

Suffrage: Universal over 18.

Administrative subdivisions: Nine Bundeslander (federal states).

Defense (2007): 0.8% of GDP.

Federal President--Heinz Fischer

Federal Chancellor--Werner Faymann

Vice Chancellor--Josef Proell

Foreign Minister--Michael Spindelegger

Ambassador to the United States--Christian Prosl

Ambassador to the United Nations--Thomas Mayr-Harting

Austria maintains an embassy in the United States at 3524 International Court, NW, Washington, DC 20008 (tel. 202-895-6700).

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History of Austria

The Austrian Empire played a decisive role in Central European history. It occupied a strategic position astride the southeastern approaches to Western Europe and the north-south routes between Germany and Italy. Although present-day Austria is only a tiny remnant of the old empire, it still occupies this strategic position.

Soon after the Republic of Austria was established at the end of World War I, it not only had to redesign a government meant to rule a great empire into one that would govern only 6 million citizens but also faced catastrophic inflation. In the early 1930s, worldwide depression and unemployment added to these strains and shattered traditional Austrian society. These economic and political conditions led in 1933 to a dictatorship under Engelbert Dollfuss. In February 1934, civil war broke out, and the Social Democratic Party was suppressed. In July, the National Socialists attempted unsuccessfully to seize power and assassinated Dollfuss. In March 1938, Austria was incorporated into the German Reich through the Anschluss.

At the Moscow conference in 1943, the Allies declared their intention to liberate Austria and reconstitute it as a free and independent state. In April 1945, both East and West forces liberated the country.

Subsequently, Austria was divided into zones of occupation similar to Germany's. A Socialist elder statesman, Dr. Karl Renner, successfully organized an Austrian administration.

General elections were held in November 1945, and the conservative People's Party obtained 50% of the vote and 85 seats in the National Council (lower house of the parliament). The Socialists won 45% and 76 seats, and the Communists won 5% and 4 seats. The ensuing three-party government held office until 1947, when the Communists left the government. During that year, the People's Party and the Socialists formed a coalition that governed until 1966.

Under the 1945 Potsdam agreements, the Soviets took control of German assets in their zone of occupation. These included manufacturing plants, constituting 7% of all Austrian industry; oil resources, which accounted for 95% of the nation's oil production; and refineries, which accounted for about 80% of Austria's refinery capacity. These properties were returned to Austria under the Austrian State Treaty, signed at Vienna on May 15, 1955. The treaty came into effect on July 27 of that year.

Under its provisions, all occupation forces were withdrawn by October 25, 1955. Austria became free and independent for the first time since 1938.

People of Austria

Austrians are relatively homogeneous; about 90% speak German as their everyday language. However, there has been a significant amount of immigration, particularly from former Yugoslavia and Turkey, over the past 2 decades. Only two numerically significant autochthonous minority groups exist--18,000 Slovenes in Carinthia (south central Austria) and about 19,400 Croats in Burgenland (on the Hungarian border). Slovene and Croat minority rights are protected under Austria’s 1955 State Treaty and in related national law. In the 2001 census, 74% of Austrians identified themselves as Roman Catholic. According to the Catholic Church, this proportion was expected to drop by the 2011 census. The church abstains from political activity. Immigration has increased the proportion of Muslims and Orthodox in Austria. Small Lutheran minorities are located mainly in Vienna, Carinthia, and Burgenland. There are some Islamic communities, concentrated in Vienna and Vorarlberg.

Nationality: Noun and adjective--Austrian(s).

Population (2009): 8,364,000.

Annual population growth rate (2009): 0.4%.

Ethnic groups: Germans, Turks, Serbs, Croats, Slovenes, and Bosnians; other recognized minorities include Hungarians, Czechs, Slovaks, and Roma.

Religions (2001 census): Roman Catholic 73.6%, Lutheran 4.7%, Muslim 4.2%, other 5.5%, no confession 12.0%.

Language: German about 90%.

Education: Years compulsory--9. Attendance--99%. Literacy--98%.

Health (2009): Infant mortality rate--3.6 deaths/1,000. Life expectancy--men 77.4 years, women 82.9 years.

Work force (2009, 4.2 million): Services--67%; agriculture and forestry--5%, industry--28%.