Country Report Austria July 2009

Outlook for 2009-10

• The current "grand coalition" between the Social Democratic Party (SPO) and the Austrian People's Party (OVP) has been and should continue to 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 continue to focus on taking measures to shore up the banking sector.
• The Economist Intelligence Unit expects the government to promote EU co-operation with the IMF in supporting crisis-hit countries in central and eastern Europe, where Austrian banks are heavily exposed.
• After growing by 1.7% in 2008, GDP will contract by 3.9% in 2009 and 0.9%, in 2010. Any recovery will probably have to be linked to one in Germany, which is not expected until late 2010.

Monthly review

• The results of the European Parliament elections in June have weakened the chancellor, Werner Faymann, and strengthened the vice-chancellor, Josef Proll.
• Hans Dichand, editor of the Kronen Zeitung newspaper, has given his backing to Josef Proll. Mr Dichand has also extended his support to Erwin Proll as a presidential candidate in the forthcoming elections in early 2010.
• The European Commission indicated in late June that it will initiate the excessive-deficit procedure (EDP) against Austria in late 2009.
• Mr Faymann formed a team to investigate ways to increase tax revenue through higher income taxes.
• Given the continued reluctance of banks to grant corporate loans, the government agreed on June 16th to provide medium-sized and large companies with special loan guarantees of up to ???300m.
• Parliament passed a labour market package designed to create or safeguard 34,500 jobs, largely by enabling companies to employ people on short-working hours for up to 24 months.
• Consumer confidence rose marginally in May, but remained clearly negative.

This report covers the following industry codes:
SIC Code: 39
NAICS Code: 31