Country Report Austria May 2009

Outlook for 2009-10

• The Economist Intelligence Unit believes that the current "grand coalition" between the Social Democratic Party (SPO) and the Austrian People's Party (OVP) will be characterised by more co-operation than the previous one.
• The return of social partners to the government indicates a move back towards the traditional consensual approach that dominated politics in Austria up until 2000.
• Support for the Alliance for the Future of Austria (BZO) will continue to fall throughout the forecast period. However, it is unlikely that the Freedom Party (FPO) and BZO will join forces, with their leaders rejecting a reunification.
• The government will implement two packages aimed at boosting consumer purchasing power and will focus on taking measures to shore up liquidity in the banking sector.
• We expect the government to promote an initiative to create a rescue package for central and eastern Europe in co-operation with those countries most exposed to the region and several international institutions.
• After growing by 1.6% in 2008, GDP will contract by 4.3% in 2009, before contracting a little further, by 0.8%, in 2010.

Monthly review

• The Ministry for Education and teacher trade unions reached an agreement on education reform on April 20th.
• On April 16th the BZO executive committee unanimously elected Josef Bucher to succeed Herbert Scheibner as the party's new leader.
• The OECD included Austria on a "grey" list of tax oases, signifying that Austria had agreed to comply with the OECD's guidelines, but had yet actually to do so.
• Josef Proll presented draft budgets for 2009 and 2010 to parliament on April 22nd, forecasting a general government deficit of 3.5% in 2009 and of 4.7% in 2010. We expect the deficit to reach 4.6% in 2009 and 4.9% in 2010.
• In an interview on April 13th, US economist, Paul Krugman, declared that, among developed countries, Austria is the third most likely to face state bankruptcy after Iceland and Ireland. This view was met by strong opposition.
• On March 30th Austrian oil and gas group, OMV, sold its stake in Hungarian energy provider, MOL, to Russia's Surgutneftegaz. OMV's chief executive officer is being investigated for alleged share manipulation and insider trading.
• Bank Austria's Purchasing Manager's Index rose in April, but remains well below 50, indicating a contraction compared with the previous month.

This report covers the following industry codes:
SIC Code: 49;60;39;37
NAICS Code: 22;52;31;336