Country Report Austria June 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, before contracting a little further, by 0.8%, in 2010. Any recovery will probably have to be linked to one in Germany, which is not expected until late 2010.

Monthly review

• The far-right Austrian Freedom Party (FPO) has attracted much of the news coverage in the European Parliament election, notably by staking a claim as defenders of Christian culture against Muslims.
• The FPO also stated opposition to Israel joining the EU. As this is not on the agenda it was interpreted as vying for anti-Semitic votes and led to a sharp exchange with Ariel Muzicant, the leader of Vienna's Jewish community.
• Austrian politicians played a role in the takeover of GM's former European subsidiary, Opel, by Magna, a partly Austrian company.
• While some of the 15bn set aside for investment in troubled banks has been taken up, Austria's largest bank, Bank Austria, has not yet done so owing to a dispute with UniCredit, the Italian-based bank that owns Bank Austria.
• GDP fell by 2.9% in the first quarter of 2009 against the previous quarter, following growth of 0.4% in the fourth quarter 2008. Investment and exports led the decline, both falling by 4.4%. Manufacturing output fell by 8.8%.
• Employment fell by 1.1% in the year to April. Inflation was down by 0.5% in April and will probably turn negative.

Source: Country Report

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