Country Report Austria March 2009

Outlook for 2009-10

• 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.
• 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 an estimated 1.6% in 2008, GDP will contract by 2.4% in 2009, before contracting marginally further by 0.3% in 2010.

Monthly review

• The BZO won a landslide victory in the Carinthia provincial election on March 1st, largely owing to the legacy of the party's popular former leader, Jorg Haider, who passed away last October.
• The SPO emerged victorious in the Salzburg provincial election on March 1st, with 39.5% of the vote compared with 36.4% for the OVP.
• Trust in the federal government has risen since the September 2008 general election. According to a recent opinion poll, 50% of those surveyed claimed to trust the government to lead them through the current economic recession.
• The European Commission has expressed concern over the Austrian government assuming 500m of Austrian Airlines Group (AUA)'s debt as part of a proposed takeover of AUA by the German airline Lufthansa.
• Several companies in the automotive industry have forced employees onto part-time contracts.
• Given Austria's high degree of involvement in the rapidly deteriorating economies in central and eastern Europe, the Austrian government has continued to promote an initiative to help this region.
• GDP growth grew by 0.1% quarter on quarter in the third quarter of 2008, but contracted by 0.2% in the fourth quarter.

This report covers the following industry codes:
SIC Code: 80;60;37
NAICS Code: 62;52;336