Austria

Politics:

• Analysis

  Austria politics: Pirate Party has ambitious plans to enter parliament in 2

  Motivated by recent success in local elections, the pro-Internet freedom Austrian Pirate Party (PPÖ) will attempt to enter parliament at the upcoming general election in September 2013 and intends to field candidates in state-level elections. Although it is sure to capture a portion of the protest vote, the party is likely to struggle to pass the 4% threshold required to enter parliament unless it overcomes some of its structural challenges.

  The PPÖ made national headlines when its candidate won a seat on the city council of Graz at the local election in late November. Philip Pacanda, a former business consultant, is the first ever Pirate representative in Graz, Austria's second-largest city. This was the second time that a Pirate candidate secured a council seat in one of Austria's major cities-Alexander Ofer in Innsbruck being the first.

  However, cohesion in the party is fragile. After internal disputes between Mr Ofer and the national party about his perceived authoritarian style, which was seen to conflict with the party's core belief in increasing freedom of opinion, Mr Ofer split his so-called Tyrolean Pirates from the national party. Although the Tyrolean Pirate Party remains separate from the PPÖ, the national party recently announced that the two had reconciled their differences. The recent electoral success in Graz has brought renewed optimism to the party leadership in preparation for both state elections and the general election in 2013.

  Policy programme stresses EU unity and direct democracy

  Originally a single-issue platform modelled on the Swedish Pirate Party, the Austrian party programme calls for increasing citizen participation in the political process and focuses on issues such as data privacy, copyright and patent laws, and Internet freedom. However, the party has widened its programme to cover additional policy areas. On EU policy, it is promoting the idea of a unified Europe through a common constitution that establishes a democratic, federal European state. The Pirates would support transferring the full right to initiate legislation to the European Parliament in order to establish a clear separation of powers. Although the party generally supports EU-level measures to strengthen the regional economy, it does not endorse the European Stability Mechanism (ESM, the euro zone bail-out fund) and the fiscal pact as the best instruments to reach that objective. In national politics, the Pirates are developing a growing portfolio of proposals for administrative reform, including a reduction of the terms of the national council, state parliaments and municipal councils from five to four years. The PPÖ would like to strengthen direct democracy by giving voters the opportunity to take the legislative and constitutional initiative, as well as to veto. Following the Swiss model, the party envisages such initiatives to be bundled and held four times per year. Other policy goals include the direct election of mayors and holding both national and local elections on the same date to reduce the frequency of election campaigns.

  On social and education policy, the PPÖ's objectives include free day care for children, a unified model to train and pay teachers and native-language tuition for students whose first language is not German. In addition, the PPÖ intends to strengthen tertiary education by allocating at least 2% of GDP to universities and abolishing any general admission restrictions. In line with its principles of increasing personal freedom, the party has also formulated drug policy goals that would legalise cannabis in combination with additional drug education in schools. The PPÖ's energy policy rejects nuclear power and advocates greater use of hydroelectric power plants in Austria. The party also rejects carbon capture and storage (CCS) as it claims that this fails to solve underlying problems of pollution.

  Organisational challenges to meet representational threshold in 2013

  Although the party now strives to field candidates across Austria in both state and local elections, it has become apparent that organisational structures are its Achilles heel. The party's limited organisational density across the country and internal quarrels have been its largest structural obstacles. Furthermore, with two local exceptions, the party does not yet boast well-known faces who could act as familiar electoral candidates. However, efforts to improve these structures and to give the party a face at the national level are under way. At its general convention in October, the party elected a new executive and management board. It intends to announce a lead candidate for the national election in September 2013 by February. According to board member Daniel Klausner, this front runner may also be substituted with a team of four candidates to underscore the party's emphasis on inclusive democratic principles.

  Mr Klausner has also formulated electoral goals, expecting the Pirates to achieve an ambitious 4-7% of the vote at the general election. Recent poll data by Market Institut, a research company, paint a less optimistic picture, however. The data suggest that the Pirates would have received no more than 3% of the vote if an election had been held in late 2012. It therefore remains doubtful whether the party will gain enough votes to pass the 4% threshold to enter parliament in 2013. Furthermore, the leadership has ruled out any strategic coalitions with other small parties, which could help it to establish a wider electoral base.

  December 06, 2012

• Background

  Austria: Key figures

  Werner Faymann (SPÖ)

  The federal chancellor and leader of the Social Democratic Party (SPÖ), Mr Faymann moved up through the ranks of the party in Vienna. Unlike his predecessor, Alfred Gusenbauer, Mr Faymann is widely considered to be a charismatic leader. He enjoys the support of Michael Häupl, the powerful mayor of Vienna, and of the trade unions, as he has worked towards strengthening the role of the social partners in the government and party. Mr Faymann also enjoys the long-standing support of the Kronenzeitung, Austria's most widely circulated daily paper. He is expected to lead the SPÖ at the next general election in 2013.

  Michael Spindelegger (ÖVP)

  Mr Spindelegger has served as minister of foreign affairs since December 2008 and succeeded Josef Pröll as vice-chancellor and leader of the Austrian People's Party (ÖVP) in May 2011. At 42 years of age, Mr Spindelegger is considered a consensus-oriented, moderate conservative. He enjoys the support of Erwin Pröll, the powerful governor of Lower Austria who is widely considered a "kingmaker" in the ÖVP. He also has the backing of the Austrian Workers and Employees Federation (ÖAAB), which is historically close to the ÖVP. The Economist Intelligence Unit expects Mr Spindelegger to lead the party into the next general election as the ÖVP candidate for chancellor.

  Heinz-Christian Strache (FPÖ)

  The charismatic leader of the right-wing Freedom Party (FPÖ), Mr Strache has positioned his party as a more radical opposition than before he took over the leadership in 2005. He has focused the party's agenda on a firm anti-EU, anti-immigration, and law and order stance. The FPÖ is currently the largest political party in Austria by voter support-29% in opinion polls in May 2012-and has thus for the first time overtaken the SPÖ and ÖVP. We expect the FPÖ to remain the leading opposition party in the forecast period and to position itself as a serious challenger to the grand coalition parties at the general election in 2013. However, because of the FPÖ's often radical right-wing views, the major parties are unlikely to agree to form an official government coalition with it after the next election.

  Eva Glawischnig (Greens)

  Ms Glawischnig has been the leader of the Greens since October 2008 and has struggled with both her party's performance at the polls and internal disagreements. Some have accused Ms Glawischnig of being too feminist in her leadership, for example by nominating female candidates for office at the expense of experienced and popular male colleagues, which hurt the party at polls. The Greens have been going through a difficult period and we do not expect significant gains during the forecast period. The party's environmental agenda has received less attention during the recession in 2009 and the current economic uncertainty coming from the euro zone crisis. The party has managed, however, to enter coalitions with the SPÖ as junior partner, such as in the municipal government in Vienna.

  June 26, 2012

• Structure

  Austria: Political structure

  Official name

  Republic of Austria

  Form of state

  Federal republic of nine states

  Legal system

  Based on constitution of 1920 as amended in 1929

  National legislature

  Bicameral; National Council (Nationalrat) of 183 members elected for a four-year term, with seats distributed first among 43 constituencies, then among the nine states and the remaining seats at federal level; this guarantees both fair regional and fully proportional representation. Federal Council (Bundesrat) of 62 members elected by provincial parliaments

  Electoral system

  Universal direct suffrage over the age of 16 since 2007 (down from 18)

  National elections

  Last election on September 28th 2008; next election due by September 2013

  Head of state

  President, directly elected for a maximum of two six-year terms, with no executive powers in peacetime. Heinz Fischer was elected for a second term in April 2010. He succeeded Thomas Klestil, who had served as president between 1992 and 2004.

  State legislatures

  Nine provincial parliaments, each of which appoints its own provincial governor

  National government

  Council of Ministers headed by a federal chancellor appointed by the president. Currently, a coalition government comprising the Social Democratic Party and the Austrian People's Party

  Main political parties

  Social Democratic Party (SPÖ; 57 seats); Austrian People's Party (ÖVP; 51 seats); Freedom Party (FPÖ; 34 seats); Alliance for the Future of Austria (BZÖ; 21 seats); Greens (20 seats). Not represented in federal parliament, but at the local level: Liberal Forum (LIF), Communists (KPÖ) and Pirate Party

  Council of ministers

  Federal chancellor: Werner Faymann (SPÖ)

  Vice-chancellor & foreign affairs: Michael Spindelegger (ÖVP)

  Key ministers

  Agriculture, forestry & environment: Nikolaus Berlakovich (ÖVP)

  Defence & sports: Norbert Darabos (SPÖ)

  Economy, family & youth: Reinhold Mitterlehner (ÖVP)

  Education & culture: Claudia Schmied (SPÖ)

  Finance: Maria Fekter (ÖVP)

  Health: Alois Stöger (SPÖ)

  Interior: Johanna Mikl-Leitner (ÖVP)

  Justice: Beatrix Karl (ÖVP)

  Labour, social affairs & consumer protection: Rudolf Hundstorfer (SPÖ)

  Science & research: Karlheinz Töchterle (ÖVP)

  Transport, innovation & technology: Doris Bures (SPÖ)

  Women & equal opportunities: Gabriele Heinisch-Hosek (SPÖ)

  Central bank president

  Claus J Raidl

  December 01, 2012

• Outlook

  Austria: Key developments

  Outlook for 2013-17

  • The coalition of the Austrian People's Party (ÖVP) and the Social Democratic Party (SPÖ) is likely to continue until the next election in 2013, but it might need to include the Greens in order to remain in government thereafter.
  • The long-term effects on the political system of having the two main parties in coalition are a cause for concern, but the extremism of the Freedom Party (FPÖ), the main opposition party, makes it unsuitable as a coalition partner.
  • The party system is expanding to include two new parties, the anti-euro, liberal party founded by billionaire Frank Stronach, and the Pirate Party.
  • Economic policy will aim to bring down the fiscal deficit, estimated at 2.5% of GDP in 2012, and to reduce the overall debt burden from around 74% of GDP currently to less than 60% of GDP over the next decade.
  • The Economist Intelligence Unit expects 0.5% growth in 2012 and 0.9% in 2013, owing to weak external demand from major European export markets and lower consumer confidence amid the uncertainty of the euro zone crisis.
  • Our central forecast is that this will be followed by a gradual return to growth averaging 1.8% per year in 2014-17, but there is a significant risk that the crisis in the euro zone will lead to a new recession.
  • Inflation (EU harmonised measure) is forecast to be level at 2.5% in 2012 and 2013, and to rise to 2.6% in 2014 as economic activity accelerates.

  Review

  • A new political party, Neos (Neues Österreich, New Austria), was formed in Vienna. Policy specifics and its ideological position are still evolving.
  • Team Stronach, the new economically liberal and Eurosceptic party under businessman Frank Stronach, won over a fifth member of parliament (MP), allowing the party to be officially recognised as a parliamentary group.
  • At its autumn conclave, the government agreed measures to improve the competitiveness of companies, including greater support for entrepreneurship and improving the skills level of the workforce.
  • The annual rate of inflation rose by 0.1 percentage points in October, to 2.9%, from 2.8% in September and 2.3% in August (EU harmonised measure).
  • According to preliminary data from Statistics Austria, total imports amounted to EUR87.2bn (US$110.8bn, up 1.4% year on year) and total exports to EUR81.8bn (up 2.3% year on year) in January-August 2012. The trade deficit stood at EUR5.4bn.
  • Whereas retail trade was stagnant in real terms year on year during January-September, the manufacturing production index improved by 1.8% year on year in January-August.

  December 01, 2012

Economy:

• Background

  Austria: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	8.4	Population growth	0.3
  GDP (US$ bn; market exchange rate)	418.8b	Real GDP growth	0.5
  GDP (US$ bn; purchasing power parity)	354.9b	Real domestic demand growth	0.9
  GDP per head (US$; market exchange rate)	49,581	Inflation	1.8
  GDP per head (US$; purchasing power parity)	42,012	Current-account balance (% of GDP)	3.2
  Exchange rate (av) €:US$	0.72b	FDI inflows ( of GDP)	3.7
  a Economist Intelligence Unit estimates. b Actual.

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  Background: Austria became an important force in central Europe with the formation of the Habsburg empire in the 15th century and remained so until the disintegration of the Austro-Hungarian empire at the end of the first world war. The Republic of Austria emerged in 1918. In 1938 Austria was incorporated into the German Third Reich. With the departure of the victorious Allied forces in 1955, it regained independence as a neutral country. Austria took great strides in the post-war period to catch up economically with the rest of the developed world and is now one of the most advanced nations. It is a member of the EU and a participant in economic and monetary union (EMU).

  Political structure: Austria is a federal republic; the head of state is the federal president. The government is led by the federal chancellor. The national parliament has two houses: the Bundesrat (upper house) of 64 members, appointed by state parliaments, and the Nationalrat (lower house), which has 183 members elected by proportional representation. The Nationalrat may be reduced to 165 members. The last general election was held in 2008, and the next is due in late 2013.

  Policy issues: The government's priorities are to cut the deficit; maintain low unemployment; raise labour force participation; increase expenditure on research and development; and raise educational standards. The main parties have agreed to fund the budget deficit reduction through expenditure cuts (around 70%) and tax increases (around 30%). The central bank has required banks to raise capital ratios as a defence against a further deterioration of the euro zone crisis.

  Taxation: The top marginal personal income tax rate is 50%. Social security contributions, shared between employers and employees, are high. Corporation tax is levied at a rate of 25%. Dividend and investment income is subject to a withholding tax of 25%. Value-added tax is levied at a standard rate of 20%. A reduced rate of 10% applies for certain goods and services.

  Foreign trade: The value of exported goods rose to EUR124.8bn (US$173.6bn) in 2011, and the goods import bill to EUR131.7bn, leading to a slight trade deficit of EUR6.9bn. The services balance, boosted by tourism receipts, showed a large surplus of EUR13.9bn, offsetting the deficit of EUR2.1bn on current transfers. The income account was roughly balanced, at EUR850m, yielding an overall current-account surplus of 1.9% of GDP (EUR5.7bn).

  Major exports (2011)	€ bn	Major imports (2011)	€ bn
  Consumer goods	52.7	Consumer goods	50.7
  Investment goods	32.2	Investment goods	27.2
  Intermediate goods	19.9	Raw materials incl fuels	24.6
  Raw materials incl fuels	8.9	Intermediate goods	20.1
  Food & beverages	7.9	Food & beverages	8.3
  Leading markets (2011)	% of total	Leading suppliers (2011)	% of total
  Germany	32.7	Germany	44.2
  Italy	7.9	Italy	7.0
  Switzerland	4.5	Switzerland	5.7
  France	4.3	Netherlands	4.2
  EU27	69.7	EU27	71.3

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  December 01, 2012

• Structure

  Austria: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 01, 2012

• Outlook

  Austria: Country outlook

  Austria: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The Economist Intelligence Unit expects the grand coalition of the Social Democratic Party (SPÖ) and the Austrian People's Party (ÖVP) to serve its full term until 2013. The previous SPÖ-ÖVP coalition in 2007-08 was characterised by tense relations between the parties, but the current one has seen more co-operation. The ÖVP and SPÖ successfully agreed a programme of fiscal consolidation involving expenditure cuts and tax rises, and passed details of the austerity package and an anti-corruption bill earlier this year. Our central forecast is that the coalition parties will continue their co-operation in the face of the economic challenges from the euro zone crisis. However, the government may be distracted by ongoing investigations into corruption that involve all the main political parties.

  ELECTION WATCH: We expect the SPÖ-ÖVP coalition to continue until the next general election in September 2013, as co-operation is working well. There is significant fluctuation in voter support among the three largest parties, the SPÖ, ÖVP and the Freedom Party (FPÖ). The ÖVP had 30% support in early 2011, which has now fallen to just above 20%. The FPÖ overtook both governing parties in terms of support at nearly 30% in the first half of 2012, but has fallen back to just above 20%, while the SPÖ has become the largest party with just below 30% of the vote. However, overall these parties are losing support as they have been most affected by the ongoing revelations of corruption scandals and, more recently, debate about ending prematurely the activities of a parliamentary committee of inquiry into corruption issues.

  INTERNATIONAL RELATIONS: The government is expected to remain moderately pro-EU, despite a significant strand of Euroscepticism among the electorate. Austria contributes around 2.8% of the European Financial Stability Facility (EFSF) and will contribute 3.9% or EUR19.5bn (US$24bn) of the European Stability Mechanism (ESM). We expect the government to continue working with its EU partners to manage the euro zone crisis, and to accept whatever Germany agrees to in future negotiations. Nonetheless, there is a risk that a new government from 2013 would be strongly influenced by a shift in debate to Team Stronach's Eurosceptic agenda. This could lead to Austria taking a less supportive position regarding its euro zone neighbours and to less co-operation with Germany on finding a solution to the crisis. Foreign policy is also strongly directed towards central and eastern Europe: Austria has been eager for more countries to gain EU membership, given its strong economic ties with the region.

  POLICY TRENDS: During the forecast period, economic policy will be characterised by efforts to stabilise the public finances and support the competitiveness of the Austrian economy, to counter weaker export demand from its European neighbours. The government has announced measures to support entrepreneurship and up-skill the workforce, which are set to be passed before the next general election.

  ECONOMIC GROWTH: Real GDP has decelerated to an estimated 0.5% in 2012. In 2013 we expect a slight recovery to 0.9%, as the global economy improves slightly, followed by robust growth averaging 1.8% during 2014-17.

  INFLATION: Consumer price inflation (EU harmonised measure) was on a trend fall until July but has risen back to 2.9% in October. We have adjusted up our 2012 estimate to 2.5% and forecast that inflation will remain at that level in 2013. In 2014 inflation may expand further to 2.6% as economic growth picks up, and then fall back to closer to the 2% target. Real wages continue to rise as negotiated nominal wage rises of around 3% in 2012--agreed on the basis of a strong economic recovery in 2011--are significantly above inflation. Real wages are expected to stagnate in 2013, as new deals should be less ambitious, and accelerate to average growth of 0.5% in 2014-17.

  EXCHANGE RATES: Although not our central forecast, there is a high risk that several countries will exit the euro zone during the next two years. Such fears have contributed to a flight from euro assets and partly explain the volatility of the currency, which has fluctuated between US$1.20:EUR1 and US$1.35:EUR1 in 2012. The euro strengthened moderately in September-October in response to central bank intervention and stood at US$1.27:EUR1 in mid-November. Even assuming it survives in its present form, the euro will remain volatile because of shifting risk appetite, protracted economic weakness and lower reserve accumulation by China. We forecast average exchange rates of US$1.26:EUR1 in 2013 and US$1.25:EUR1 in 2014-17, but sharp movements in either direction remain a significant risk.

  EXTERNAL SECTOR: We expect the current-account surplus to average 1.2% of GDP in 2012-17, below the previous decade's average of 2.4%, as export demand from European countries is weaker than in the pre-crisis period and some of Austria's main trading partners such as Italy are likely to reduce their current-account deficits.

  December 01, 2012

• Forecast

  Austria: Country forecast summary

  Country forecast overview: Highlights

  • The Economist Intelligence Unit's central forecast is that the grand coalition between the Social Democratic Party (SPÖ) and the Austrian People's Party (ÖVP) will serve its full term until 2013. Voter support has fluctuated significantly among the largest three parties (the SPÖ, ÖVP and Freedom Party, FPÖ), and the emergence of new parties such as Team Stronach and the Pirate Party makes the 2013 election outcome highly uncertain. The way in which the next government deals with the euro zone crisis and its relationship with struggling member states will be a key theme of the election campaign.
  • The austerity measures introduced by the government have narrowed the budget deficit to an estimated 2.5% in 2012. The fiscal situation is better than in most EU states and the government is expected to continue implementing measures for fiscal consolidation throughout the forecast period. We forecast that the fiscal deficit will contract to around 0.4% of GDP in 2017, and general government debt will fall to around 68% of GDP, from an estimated 74% currently.
  • The government will also seek to enhance Austrian business competitiveness by supporting entrepreneurship and education. A longer-term goal is to encourage research and development (R&D) and innovation to reduce Austria's reliance on manufacturing and develop a high-tech, knowledge-based economy.
  • Real GDP growth has decelerated during 2012 to an estimated 0.5% for the year as a whole. We forecast low growth of 0.9% in 2013, as the euro zone crisis will continue to dampen demand for Austrian exports, bank lending will be constrained by tighter capital requirements and consumer confidence is weak. Nonetheless, Austria's performance will be well above the euro zone average. Growth in Austria should pick up to average 1.8% during 2014-17.
  • Austria's prudent economic policies and some continued export demand from its central and east European neighbours will allow the unemployment rate to remain among the lowest in the euro zone. We expect it to average 4.4% in 2012 and to fall during the rest of the forecast period.
  • Our forecast is subject to a downside risk of euro zone break-up, which would lead to a deeper recession in Europe and cause a contraction in Austria over the near term. The government would be expected to bail out its banking sector should banks experience large losses in the country's central and east European neighbours such as Hungary, but we do not think major intervention will be necessary unless the crisis deteriorates sharply.

  

  December 01, 2012

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Country Briefing

Land area

83,871 sq km

Population

8,315,400 (2007)

Main towns

Population in '000 (2001 census)

Vienna (capital): 1,550

Graz: 226

Linz: 184

Salzburg: 143

Klagenfurt: 92

Climate

Temperate

Weather in Vienna (altitude 200 metres)

Hottest months, July/August, average 18-24°C in 2006 (minimum 10°C, maximum 35°C); coldest months, December/January, average -1 to -4°C (minimum -16°C, maximum 11°C); driest month (2006), October, 15 mm (average monthly rainfall); wettest month (2006), August, 207 mm

Language

German

Weights and measures

Metric system

Currency

Euro (€) = 100 cents

Time

1 hour ahead of GMT

Public holidays

January 1st (New Year's Day), January 6th (Epiphany), Easter Monday, May 1st (Labour Day), Ascension, Whit Monday, Corpus Christi, Assumption of the Blessed Virgin Mary, October 26th (National Day), November 1st (All Saints Day), December 8th (Immaculate Conception), December 25th and December 26th (Christmas)

March 12, 2012