Country Report Austria February 2009

Summary

The Economist Intelligence Unit believes that the new "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.
The government is expected to encourage research and development (R&D) and innovation to shift from a traditional to a high-tech, knowledge-based economy with companies excelling in highly specialised, niche areas.
After growing by an estimated 1.6% in 2008, GDP will contract by 1.6% in 2009, before expanding moderately by 0.6% in 2010.

At the Greens' congress on January 17th 2009, 97.4% of the party elected Eva Glawischnig as leader, a surprisingly high percentage as Ms Glawischnig has been criticised by some in the party for her EU-sceptic stance.
Although the gas crisis that halted transmission of Russian gas to Austria ended in mid-January, it raised concerns in Austria about potential plans to restart a decommissioned nuclear reactor in Slovakia.
In a summit meeting on January 22nd, the government launched an initiative to support the banking sector in central and eastern Europe. Austrian banks have outstanding loans equal to about 70% of Austria's GDP in the region.
According to preliminary figures published by the minister of finance, the budget deficit for 2008 could be lower than expected. However, this announcement was made before fourth-quarter data were available.
With new-car registrations plummeting, the government introduced a new scrapping premium to boost the automotive industry and encourage car owners to replace their old cars with more environmentally friendly ones.
The European Commission called on Austria to reform its banking regulations to prevent foreigners from holding anonymous bank accounts in Austria.
Employment growth slowed to 0.8% in December and 0.2% in January 2009.

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