Event
The Austrian minister of defence, Norbert Darabos, stepped down from his post on March 5th to become general manager of the Social Democratic Party (SPÖ).
Analysis
Mr Darabos' resignation comes at the request of the federal chancellor and SPÖ party chairman, Werner Faymann, who is seeking to strengthen his party's position in the run-up to the September general election. Mr Darabos is regarded as a capable campaign manager who has successfully engineered previous national campaigns, including Heinz Fischer's successful bid for the Austrian presidency. Mr Darabos' position as defence minister had weakened in recent months, after the Social Democrats' proposal to reform the Austrian armed forces from a conscription service to a professional force failed at a referendum in January. In his new position at the SPÖ headquarters, Mr Darabos will share his responsibilities as general manager with Laura Rudas. Mr Darabos' predecessor in the role, Günther Kräuter, will assume duties with the Austrian ombudsman. Gerald Klug (SPÖ), a less-known member of the Federal Council (the upper house of parliament representing the states) from Styria, will succeed Mr Darabos in leading the Ministry of Defence.
Although Mr Faymann's personnel decisions were largely unopposed in his party, the timing of the change has been criticised because of concern that publicity on the issue distracts from the SPÖ's recent success at the state election in Carinthia, where it came in as the strongest party. We expect the SPÖ to continue battling with a trend loss of support to smaller and new parties, especially the Greens. However, this trend affects all three of the large established parties-the SPÖ, the Austrian People's Party (ÖVP) and the Freedom Party (FPÖ)-with the ÖVP and FPÖ losing to the new anti-euro party Team Stronach. The SPÖ's recent successes and the impact of the personnel change may therefore allow it to come in relatively stronger than the ÖVP and FPÖ at the September general election.
March 07, 2013
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
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), Austrian Communist Party (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: Gerald Klug (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
March 12, 2013
Outlook for 2013-17
Review
March 12, 2013
Fact sheet
| Annual data | 2011 | Historical averages (%) | 2007-11 |
| Population (m) | 8.4 | Population growth | 0.3 |
| GDP (US$ bn; market exchange rate) | 418.7 | Real GDP growth | 0.5 |
| GDP (US$ bn; purchasing power parity) | 354.8 | Real domestic demand growth | 0.8 |
| GDP per head (US$; market exchange rate) | 49,572 | Inflation | 1.8 |
| GDP per head (US$; purchasing power parity) | 42,004 | Current-account balance (% of GDP) | 3.2 |
| Exchange rate (av) €:US$ | 0.72 | FDI inflows ( of GDP) | 3.7 |
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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 the 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; the next is due in September 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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March 11, 2013
Data and charts: Annual trends charts
March 12, 2013
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 the next general election in September 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 in 2012. The coalition parties should continue their co-operation in the face of the economic challenges from the euro zone recession but may still be intermittently distracted by investigations into corruption that involve the large political parties.
ELECTION WATCH: Support for the three largest parties (the SPÖ, ÖVP and the Freedom Party, FPÖ) fluctuated significantly between around 20% and 30% in 2012; the SPÖ is now the largest party, with close to 30% of the vote, and the other two are closer to 20%. Together, the three parties as a group are losing support to the new Team Stronach and the Greens, which could mean that a grand coalition of the SPÖ and ÖVP is unable to win an absolute majority at the 2013 election and required to include a third coalition partner.
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, in order to counter weak export demand from its European neighbours. The government has announced measures to support entrepreneurship and to upskill the workforce, which are to be passed before the next election.
ECONOMIC GROWTH: Real GDP growth decelerated to 0.7% in 2012, from 2.7% in 2011. We forecast a gradual recovery to 1% growth in 2013, as the recession in Austria's main export market, the euro zone, is expected to abate and consumer confidence begins to improve. Subsequently we forecast average growth of 1.8% in 2014-17.
INFLATION: Consumer price inflation (EU harmonised measure) was relatively strong throughout 2012, coming in at 2.6% (or 2.4% on the national measure). We expect inflation to remain elevated in 2013, at 2.5% on average, although price growth is likely to mellow over the year because of some softening of commodity prices, further weak economic activity, a slowdown in wage growth and base effects. Inflation stood at 2.8% (EU harmonised measure) in January 2013, down from 2.9% in December 2012.
EXCHANGE RATES: The euro has strengthened since mid-2012 as the debt crisis in the single currency zone has eased and as global risk tolerance has increased. The euro reached US$1.37:EUR1 in late January before retreating to US$1.3:EUR1 in early March. The euro's appreciation will be capped by continuing weakness in euro zone economies, as well as stronger growth in the US. We expect the euro to average US$1.33:EUR1 in 2013 and US$1.28:EUR1 in 2014-17, although there is a significant risk of sharp movements either way. Over the medium term, the possibility of a break-up of the euro zone cannot be discounted.
EXTERNAL SECTOR: We expect the current-account surplus to average 2.1% of GDP in 2013-17. The trade deficit should fall from around EUR7bn in 2011-12 to EUR2.8bn-4bn in 2013-17, as export demand from European countries recovers, and the services surplus will remain wide (EUR10.4bn-12.9bn) throughout the forecast period.
March 05, 2013
Country forecast overview: Highlights
March 11, 2013
Land area
83,871 sq km
Population
8,404,252 (2011)
Main towns
Population in '000 (2011):
Vienna (capital): 1,714
Graz: 261
Linz: 189
Salzburg: 148
Innsbruck: 120
Klagenfurt: 94
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)
January 08, 2013