EUROPEAN COMMISSION Brussels, 21.6.2021 SWD(2021) 160 final COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan for Austria Accompanying the document Proposal for a Council Implementing Decision on the approval of the assessment of the recovery and resilience plan for Austria {COM(2021) 338 final}



Table of contents 1. Executive summary 2. Recovery and resilience challenges: scene-setter 2.1 Macroeconomic outlook and developments since the 2020 country report 2.2 Challenges related to sustainable growth, cohesion, resilience and policies for the next generation 2. 3 Challenges related to the green and digital transition 2.3.1 Green dimension 2.3.2 Digital dimension 3. Objectives, structure and governance of the plan 3.1 Overall strategy of the plan 3.2 Implementation aspects of the plan 4. Summary of the assessment of the plan 4.1 Comprehensive and adequately balanced response to the economic and social situation 4.2 Link with country-specific recommendations and the European Semester 4.3 Growth potential, job creation, economic, institutional and social resilience, European Pillar of Social Rights, mitigating the impact of the crisis, and social territorial cohesion and convergence 4.4 The principle of ‘do no significant harm’ 4.5 Green transition 4. 6 Digital transition

4.7 Lasting impact of the plan 4.8 Milestones, targets, monitoring and implementation 4.9 Costing 4.10 Controls and audit 4.11 Coherence References 1. Executive summary The Austria economy performed well in recent years but was strongly impacted by the COVID-19 crisis. In 2019, the gross domestic product (GDP) per capita of Austria was 143.7% of the EU average. Austria’s real GDP declined by 6.6% in 2020 and, according to the Commission’s 2021 Spring forecast, the economy is expected to be 3.4% smaller in 2021 compared to 2019, with a return to pre-pandemic levels expected by mid-2022. The significant fiscal response taken to mitigate the socio-economic effects of the COVID-19 pandemic and the related recession has resulted in a sharp rise of the public deficit and debt. In the Commission’s 2021 Spring forecast, the general government deficit is expected to narrow from 8.9% of GDP in 2020 to 7.6% of GDP in 2021 and 3% of GDP in 2022. Meanwhile, after having risen to 84% of GDP in 2020, public debt is projected to edge up to 87.2% of GDP in 2021, before decreasing to 85% of GDP in 2022. The COVID-19 crisis has also substantially affected the labour market, triggering a rise in unemployment despite the extensive use of short-term work. The unemployment rate increased by 0.9 percentage points to 5.4% in 2020. The Commission spring forecast projects the unemployment rate to gradually decrease again, reaching 5.0% in 2021 and 4.8% in 2022. Austria’s recovery and resilience plan has a total value EUR 4.5 billion (approximately 1.1% of 2019 GDP), which is above the non-repayable financial support available to Austria under the RRF Regulation of EUR 3.46 billion (approximately 0.87% of 2019 GDP). Austria is not asking for loans. The Austrian plan contains a balanced set of mutually reinforcing reforms and investments. It covers four broad areas of relevance to Austria: 1 Sustainable recovery, 2 Digital recovery, 3 Knowledge-based recovery, and 4 Just recovery. The focus of the plan is on the green and digital transition, combining reform measures with large investments into the green and digital transitions, complemented with measures easing the social burden of these transitions. The plan also covers challenges brought about by the COVID-19 pandemic. The measures in the plan contribute to addressing a significant subset of the country-specific recommendations identified in recent years in the context of the European Semester. Planned changes to the tax system will help reduce Austria’s greenhouse gas emissions, while also contributing to shifting taxes away from labour and taking account of ecological and social aspects. The full-time labour market participation of women may benefit from an improved offer of early childcare facilities. The long-recognised challenge related to the gender pension gap is also tackled through related measures. Investments in energy efficiency, renewables, decarbonisation of industry, biodiversity and circular economy, accompanied by related reforms, including the overhaul of the support framework for renewables and the phase-out of oil heating systems, contribute to promoting the green transition. Structural changes simplify the administrative burden for businesses by means of digital single access points, while investments provide for a large-scale increase in digital capacities of enterprises. The plan is also consistent with the challenges and priorities identified in the most recent euro area recommendations . The plan also addresses some of the social and economic challenges that have emerged or were exacerbated during the COVID-19 crisis. A series of active labour market policy measures will address the increased need for help to the low-skilled and raise the labour market opportunities of disadvantaged groups. Pupils will be provided with opportunities to participate in additional learning activities allowing them to catch up with learning gaps caused by school closures. The recovery and resilience plan represents to a large extent a comprehensive and adequately balanced response to the economic and social situation, thereby contributing appropriately to all six pillars referred to in Article 3 of Regulation (EU) 2021/241, taking the specific challenges and the financial allocation of the Member State concerned into account. The recovery and resilience plan is expected to ensure that no measure for the implementation of reforms and investment projects does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852. The assessment has been carried out in compliance with the methodology set out in the Commission’s Technical guidance on the application of ‘do no significant harm’ under the Recovery and Resilience Facility Regulation (2021/C 58/01). Overall, the recovery and resilience plan contributes to climate objectives through investments corresponding to 58.7% of the financial contribution by the Recovery and Resilience Facility of EUR 3.46 billion, therefore, the climate target of 37% is significantly surpassed. Half of the subcomponents of the Austrian plan include investments that contribute to climate objectives. The measures are in line with the challenges identified in the National Energy and Climate Plan and are expected to contribute to the 2030 energy and climate targets. In particular, the plan focuses on sustainable mobility and greening of buildings, which are among the two biggest greenhouse gas emitters in Austria. The plan will meet relevant environmental objectives through its actions to support biodiversity, the circular economy and climate adaptation. It will help meet the Union’s targets for environmental policy and contribute to protecting Austria’s richness in biodiversity, natural carbon sinks, and its Natura 2000 network. A dedicated strategy will improve biodiversity-related policies and actions while a new soil protection strategy aims to help reduce land use. Overall, the recovery and resilience plan contributes to digital objectives through investments corresponding to 52.8% of the financial contribution from the Recovery and Resilience Facility; therefore, the digital target of 20% is largely surpassed. The Austrian plan will contribute to the digitalisation of the country by supporting widespread deployment of Gigabit-capable access networks and by ensuring that currently underserved or disadvantaged and remote areas will be better connected. The measures in the plan are consistent with other Austrian frameworks setting out the digital targets for 2030 and 2050, such as the Broadband strategy 2030 (Breitbandstrategie 2030) or the Digital Action Plan Austria (Digitaler Aktionsplan Austria). Challenges that have been highlighted due to the COVID-19 pandemic include the difficulty to provide digital education to all students in times of lockdown. The Austrian plan is expected to ensure that pupils are equipped with relevant digital devices, and to also improve their digital skills allowing for better use of digital means and methods in teaching and learning settings. The plan includes a significant number of reforms and investments with the potential to have a lasting impact and support lasting structural changes. These include the reform of the health care system, giving more weight to primary health care, and the support to mother-child health care. Other measures included in the plan are furthermore expected to reduce the administrative burden of businesses and to contribute to the digitalisation of the public administration. The plan contains several investments that are expected to have a lasting impact in particular in relation to the green and digital transitions. The measures to increase the use of renewable energy sources include shifts to environment-friendly transport and heating systems. Building renovations will reduce their energy use and the related emissions. Investments in high-capacity broadband and other infrastructure measures will facilitate the uptake of digital technologies and support private households, the business sector, and the public administration in making best use of technological advancements. The overall implementation of the Austrian plan will be monitored by the Austrian Ministry of Finance. Appropriate arrangements have been put in place setting out which ministries and agencies will be in charge of the implementation, monitoring, and reporting of the measures. The milestones and targets of the Austrian plan constitute an appropriate system for monitoring the plan’s implementation. The monitoring indicators are sufficiently clear and comprehensive to ensure that their completion can be traced and verified. The milestones and targets generally represent the key elements of the measures and as such can be considered relevant for their implementation. They reflect adequately the overall level of ambition of the plan and appear realistic. The verification mechanisms, data collection, and responsibilities described by the Austrian authorities appear sufficiently robust to justify adequately the disbursement requests once the milestones and targets are completed. The number of milestones and targets appears commensurate to the size of the reform and investment package.

Based on the assessment of individual cost estimates and related supporting documents, the estimated total cost of the plan appears to be reasonable and plausible. At the level of individual cost estimates, reasonability is achieved if the calculations behind the cost estimate are comprehensible and based on sound underlying assumptions. In the Austrian plan, a majority of the individual cost estimates are assessed to be reasonable to a high extent. Plausibility is achieved if the cost estimates are substantiated by reference costs for the key cost drivers, which are in turn supported by clear evidence and in line with comparable reforms or investments. The majority of cost estimates in the Austrian plan is deemed plausible to a high extent. Overall, the amount of the estimated total cost of the plan is commensurate to the expected national economic and social impact and is in line with the principle of cost-efficiency. The plan includes adequate audit and control arrangements. The arrangements proposed in the recovery and resilience plan are adequate to prevent, detect and correct corruption, fraud and conflicts of interest when using the funds provided under that Regulation, and the arrangements are expected to be effective in avoiding double funding from other Union programmes. The Austrian plan includes a detailed description of the control system and the arrangements put in place to ensure the implementation of the measures in line with the applicable rules and regulations. The system is based on robust processes and structures, with the Ministry of Finance being the central coordinating body. Summary Assessment (1)

Balanced Response (2)

CSRs (3)

Growth, jobs… (4)

DNSH (5)

Green target (6)

Digital target (7)

Lasting impact (8)

M & T (9)

Costing (10)

Control Systems (11)

Coherence A A A A A A A A B A A 2. Recovery and resilience challenges: scene-setter 2.1 Macroeconomic outlook and developments since the 2020 country report The COVID-19 pandemic and related containment measures strongly affected Austria’s economy in 2020. Overall, GDP fell by 6.6% in 2020, the largest decline since 1945. In line with the stringency of containment measures, the sharp fall in GDP in the first half of 2020 was followed by a strong rebound in the third quarter. However, a resurgence in infections in autumn sparked another lockdown, which led to a 2.7% decline in GDP in the fourth quarter of 2020. The nationwide lockdown was eased as of April 2021 with further substantial easing of restrictions as of mid-May. Accordingly, after near stagnation in the first quarter, the economy is projected to resume its recovery in the second quarter of 2021 and to accelerate over the summer, as containment measures and travel restrictions continue to be relaxed and more Austrians get vaccinated. The Commission Spring forecast projects GDP to grow by 3.4% in 2021 and 4.3% in 2022. A return to pre-pandemic levels is expected by mid-2022. The macroeconomic and fiscal outlook continue to be affected by high uncertainty related to the COVID-19 pandemic and its economic consequences. Tourism-related services were strongly affected and on the demand side private consumption, equipment investment and the export of services saw the largest decline. The country’s large tourism industry, which contributed to 7.3% of GDP in 2019, was particularly affected, with a drop of 35.9% in nights spent in 2020 and an almost complete loss of the winter tourism season 2020-2021. This led to a strong fall in services exports (‑17%). Among the main economic sectors, the construction sector was the least affected, declining by 2.3% in 2020. On the demand side, private consumption dropped significantly (‑9.6%) due to restricted consumption possibilities due to the closure of non-essential shops, restaurants and personal services. This led to a strong increase in the savings rate, while investment in equipment plummeted (-11%). Headline inflation was subdued in 2020, at 1.4%. It is set to rise in 2021 to 1.8%, before easing somewhat to 1.6% in 2022. The significant fiscal response taken to mitigate the socio-economic effects of the COVID-19 pandemic and related recession has resulted in a sharp rise of public deficit and debt. The crisis brought an abrupt end to the period of improving public finances in Austria. From a surplus of 0.6% of GDP in 2019, the general government balance turned to a deficit of 8.9% of GDP in 2020, as a result of the major fiscal policy measures put in place to mitigate the socio-economic consequences of the pandemic. Based on the Commission Spring forecast, the general government deficit is expected to narrow to 7.6% of GDP in 2021 and 3% of GDP in 2022. Driven by these developments, public debt is projected to have increased to about 84% of GDP in 2020, to edge up to 87.2% of GDP in 2021, before decreasing to 85% of GDP in 2022. The COVID-19 crisis has substantially impacted the labour market, triggering elevated levels of unemployment despite the extensive use of short-term work. The Eurostat unemployment rate increased by 0.9 percentage points to 5.4% in 2020. Short-time work schemes helped mitigate the effect of the economic downturn on the labour market, leading instead to a strong drop in hours worked. At the same time, the proportion of the population classed as economically inactive also rose, especially in sectors that were closed by containment measures, making it not possible to search for work. In contrast, the national registered unemployment rate saw a strong rise, from 7.4% in 2019 to 9.9% in 2020, the highest yearly rate since the 1950s. The labour force and the number of employed persons decreased by 0.4% and 1.7% respectively in 2020. However, labour market utilisation fell at a much steeper pace: the quarterly change between Q4 2019 and Q1 2020 amounted to -7.9% in Austria compared to -4.6% at EU level. With a decline of 12.4%, Austria is among the countries where women were the most affected in terms of total actual working hours in Q4 2020 (compared with the pre-COVID situation in Q4 2019). Based on the Commission spring forecast, the unemployment rate is projected to gradually decrease, reaching 5.0% in 2021 and 4.8% in 2022. The macroeconomic scenario of the recovery and resilience plan is more cautious for 2021 and similar to the Commission Spring forecast for 2022. The macroeconomic scenario underpinning Austria’s Stability Programme and the plan’s projects domestic demand to be the main driver of the economic recovery. Growth is projected to improve from 1.5% in 2021 to 4.7% in 2022 and to gradually ease afterwards to 1.8% in 2024. Austria projects the unemployment rate at 5.1% in 2021 and 4.8% in 2022 with a further improvement to 4.5% in 2024. Inflation is expected to increase to 1.8% in 2021 and to remain around 1.7%-1.8% in 2022-2024. The recovery and resilience plan is based on a scenario that assumed strict containment measures for the whole of Austria in April 2021 and only a gradual relaxation afterwards. However, containment measures were eased in parts of the country in April. The forecast of the recovery and resilience plan was also produced before the government announced its relaxation plan. Both mainly explain the differences between the recovery and resilience plan and the Commission projections, with the recovery and resilience plan forecasting 1.5% growth in 2021 and the Commission 3.4%. The Commission projects stronger growth in both private consumption and investment in 2021, in line with the assumptions reflecting more recent information of a faster planned easing of containment measures. As regards the external environment, the recovery and resilience plan forecasts a lower contribution to growth from net exports in 2021 and a more positive contribution in 2022. On the labour market, the Commission projects a somewhat more favourable picture in 2021 while the recovery and resilience plan is more favourable for 2022. Inflation projections are similar for 2021 and lower in the Commission forecast for 2022. Overall, the programme's macroeconomic assumptions are cautious for 2021 and plausible thereafter. Along with the more modest economic recovery, the recovery and resilience plan and the Stability Programme project a less favourable development for budgetary developments compared to the Commission 2021 Spring forecast. According to the Stability Programme, the general government deficit is expected to narrow from 8.9% of GDP in 2020 to 8.4% and 4.3% of GDP in 2021 and 2022, respectively. The debt ratio is expected to increase from 83.9% of GDP in 2020 to 89.6% of GDP in 2021 before decreasing to 88.1% of GDP in 2022. Austria entered the COVID-19 crisis with no identified macroeconomic imbalances, but with vulnerabilities linked to the housing market. While private sector debt was declining before the crisis, it is expected to have increased again in 2020, due to the COVID-19 induced decline in GDP. However, the growth of credit to the domestic private sector decelerated compared to pre-crisis levels. Real house prices continued to grow and accelerated again in 2020, especially for single-family housing, reflecting changing preferences due to the increased reliance on homeworking. However, given the parallel decrease in disposable incomes, signs for overvaluation have increased. While warranting monitoring, the price increases do not appear to be credit-driven, as loans for house purchases decelerated in 2020. The banking sector proved resilient so far and helped mitigate the impact of the crisis. The Non-Performing-Loans (NPL) ratio dropped further in 2020 to 2%, as government measures helped support companies during the crisis. However, as the policy measures are expected to be gradually withdrawn on the back of the economic recovery, NPLs are expected to rise again. The COVID-19 pandemic is likely to increase the risk of social exclusion of vulnerable groups. Τhe overall social situation was improving until the outbreak of the COVID-19 pandemic, and policies to reduce poverty and social exclusion were generally effective. This is also reflected in the percentage of people at risk of poverty and social exclusion, which was at 13.3% in 2019 far below the EU average of 21.1%. Emergency policy measures taken by the Austrian government (e.g. short-time working scheme, one-off payments for unemployed and children) cushioned substantially against the income losses brought about by the COVID-19 crisis, especially for poor households. Overall, about 88% of the COVID-19-related income shock was absorbed by the Austrian tax-benefit system. However, the current crisis may deteriorate the situation of vulnerable groups such as atypical workers, foreign-born adults, long-term unemployed and families with three or more dependent children as well as single-parent families who risk falling behind. For example, the at-risk-of-poverty rate for children of low-skilled parents stood at 76.7% in 2019 (EU-27 average 61.8%) and reached 89.5% in 2020. The at-risk-of-poverty rate of unemployed stood at 43.3% in 2019 (EU-27 average 49 %) and increased substantially to 48% in 2020. Overall, the pandemic will put certain groups at greater risk of poverty and social exclusion than before, in particular the self-employed. Table 2.1: Comparison of macroeconomic developments and forecasts 2.2 Challenges related to sustainable growth, cohesion, resilience and policies for the next generation While the Austrian economy has performed relatively well in recent years, a number of challenges and structural obstacles to more sustainable and inclusive long-term growth remain and have become more pressing as a result of the pandemic and related recession. Austria’s policy response was effective in mitigating the socio-economic fallout of Covid-19 crisis. However, further efforts need to be made to put Austria on a path for more sustainable and inclusive growth. This will require tackling a number of country specific challenges and structural obstacles related to the twin transition. Austria faces challenges related to the green transition and digital transformation. Without taking further measures, Austria is unlikely to achieve its greenhouse gas emission targets and reach its government’s target of climate neutrality by 2040 (see Section 2.3.1). The weak uptake of digital technologies especially among SMEs, combined with further investment needs and digital skills shortages, represent further challenges (see Section 2.3.2).

Smart, sustainable and inclusive growth Austria’s scope for comprehensive tax reforms to boost fairness, inclusive growth and environmental sustainability could become a key element of the country’s policy agenda to drive post-crisis economic recovery. Despite recurring tax relief reforms (in 2005, 2010, 2015 and 2020), Austria remains a high-tax country whose tax structure is relatively detrimental to sustainable and inclusive growth in international comparison. The tax mix puts a high burden on labour, while the revenue potential especially of wealth-related and environmental taxes remains largely untapped. Consumption taxes could be made more efficient, e.g. by overhauling the system of reduced value-added tax rates and bringing taxes on tobacco and alcohol and environmental taxes more in line with EU averages. Additionally, increasing the level and efficiency of energy taxes by introducing a price for CO2 will be key to reducing emissions to achieve EU and national climate targets. The current labour market situation calls for appropriate measures to prevent a rise in structural unemployment, especially among vulnerable groups, facilitate good job matching, and improve female labour market participation. Employees in sectors directly affected by the containment measures, such as the tourism-sector and personal and other services, face higher unemployment risks, as do vulnerable groups (older workers, people with migrant background, labour market entrants and the low skilled). Appropriate measures to ease the labour market re-integration of people at risk of remaining unemployed for a longer time, including through developing digital skills will be crucial for an inclusive economic recovery. An increased offer of quality childcare would help women to combine working life with care responsibilities, a challenge that has aggravated during the crisis. Addressing this would have the potential to raise the labour market participation of women in particular. Tailored adult learning and reskilling measures may positively affect labour market attainment of older workers, workers with migrant background, refugees and low skilled. Expected shifts in the labour market will require generally more attention to reskilling and upskilling as well as related adaption in the education sector. Investments to support digitalisation and innovation, coupled with improved business regulation are Austria’s main levers for boosting productivity growth. Potential growth has been on a long-term downward trend in Austria in recent years. The slowdown has been largely driven by the declining trend in total factor productivity growth and the fall in hours worked, together with projected lower growth in the working-age population. Additionally, Austria needs to promote business digitalisation especially among SMEs in order to ensure long-term resilience. Austria’s future competitiveness also depends on turning R&D investments into proportional innovation outcomes. Austria’s research and development (R&D) intensity has been one of the highest in the EU but the country has lagged behind innovation leaders in terms of innovation outcomes, such as fast-growing enterprises or knowledge intensive exports. With many businesses’ research budgets now under pressure, it is even more important to translate Austria’s R&D efforts into cutting-edge innovation. Increased financial resources, in particular in environmental and energy research and innovation will be crucial to prepare Austria for the upcoming challenges related to the green transition. A high administrative and regulatory burden on firms discourages investment, in particular among SMEs and company growth needs more support. Lowering the administrative burden on businesses, including through efficient digital public services, would provide immediate, tangible relief without burdening the taxpayer. Reducing restrictive regulation in the services sector (e.g. restrictions on exercising certain professional services and operational restrictions in the retail sector) could boost investment and competition among service providers, which in turn could lower input costs for manufacturing firms. The insolvency framework should be geared towards insolvency prevention but also to speedy unwinding processes and allowing for a ‘second chance’. Austria has one of the lowest proportions of high growth firms active in innovation in the EU. In 2017 around 14% of high-growth firms in Austria were active in knowledge intensive services in Austria compared to 19% in the EU27. There is scope to further support entrepreneurship, including by fostering innovative technologies and access to capital for starting and scaling-up businesses. Venture capital investments declined considerably in the last five years (around 40% based) and there is evidence that the number of early and late-stage deals declined more than the number of seed deals. The capacity of the Austrian public administration to apply EU single market laws could be improved by strengthening the staffing of national SOLVIT centres, which provide solutions related to problems in the application of EU rights. Social and territorial cohesion Austria performs relatively well on the Social Scoreboard supporting the European Pillar of Social Rights, but the pandemic could exacerbate existing challenges. The social situation has been improving before the pandemic. Spending on social protection is among the highest in the EU and social transfers are effective in reducing income inequality and protecting people from poverty and social exclusion. However, vulnerable groups remain and while in 2019, the share of people at risk of poverty or social exclusion fell to 16.9%, it again increased to 17.5% in 2020 due to the pandemic. Although Austria has one of the highest coverage rates of unemployment benefits for the short-term unemployed, marginally employed people may suffer an increasing risk of poverty during pandemic. In addition, the social situation continues to vary significantly across regions. While the share of people at risk of poverty or social exclusion decreases in cities it has increased in rural areas. Safeguarding territorial cohesion in future will also imply to offer favourable perspectives to people in rural areas, including remote ones. Economic disparities between Austrian regions are among the smallest in the EU and have narrowed steadily, yet the impact of the crisis remains to be seen. Economic growth and labour market developments differ between the West of Austria, which shows a higher GDP per capita and lower unemployment rates, as compared to the East and South, with Vienna taking a special position. Nevertheless, economic disparities between Austrian regions are among the smallest in the EU and have narrowed steadily. However, significant regional disparities persist in R&D expenditure and broadband coverage in rural areas, increasing the divide in digitalisation and innovation capacities between regions. Health, and economic, social and institutional resilience The coverage provided by the Austrian healthcare system is high but public health care spending continues to pose a challenge for fiscal sustainability in the medium and long term. The Austrian healthcare system has so far dealt successfully with the COVID-19 pandemic, by making substantial funds available to purchase equipment and supplies, reinforcing laboratory capacity, and strengthening staffing capability. However, primary health care has come under exceptional pressure from an unprecedented increase in the need for teleconsultations, medical appointments and requests. Expanding primary and ambulatory care services with a focus on health promotion and disease prevention would therefore help further improve population health and help Austria master the pandemic. Moreover, further expanding primary care could also help cushion the impact of the expected wave of retirements of general practitioners and help improve efficiency and the fiscal sustainability of the health care system. According to the 2021 Ageing Report (AWG reference scenario), the share of GDP spent on public health care is projected to increase by 1.2 percentage points from 6.9% in 2019 to 8.1% in 2070, as compared to an EU average increase of 0.9 percentage points. The over-utilisation of hospital care has been identified as the key driver of this growth, which makes the timely implementation of existing reforms (e.g. the implementation of a 'target-based governance' system, the 2017 Primary Health Care Act, and the merger of social health insurance funds) all the more important. While risks of fiscal stress appear to be contained in the short and medium term, Austria continues to have a medium fiscal sustainability risk in the long term. This risk is due to the projected increase in public expenditure on pensions, healthcare and long-term care. Given the projected increase of public healthcare expenditure, the thorough implementation of ongoing structural reforms remains important provided the pandemic continues to be effectively dealt with. For long-term care, discussions on a comprehensive reform are ongoing. On pensions, the Austrian pension system compares well in terms of overall pension adequacy but public pension expenditure is high in comparison to the EU average. While adjusting the statutory retirement age has been repeatedly ruled out for the ongoing legislative period, there is still room to incentivise longer working lives by making early retirement less financially attractive. Austria’s fiscal federalism favours the perception of soft budget constraints at the subnational level, providing few incentives for efficient public spending. Instead of relying on tax autonomy, subnational budgets are fed by a complex system of tax sharing, intergovernmental transfers and cost bearing, especially at the level of the Länder. In 2018, some 83% of total tax revenue was shared across different levels of government (vertical equalisation) and across entities of the same level (horizontal equalisation). At each distributional level, a variety of allocation formulas is applied, the most important one being fixed percentages of historical revenue shares and weighted population shares. This makes the system highly complex and opaque and blurs the link between tax burden and expenditure, making it difficult for individuals to hold their subnational government accountable. As new priorities have emerged, spending reviews are a crucial tool for targeting public expenditure towards them. Public spending in the context of the COVID-19 pandemic and related recession should be aligned with and complemented by spending for the green and digital transition. To this end, revamping the process of spending reviews takes centre stage. This would require Austria to scrutinise expenditure allocations against the priorities mentioned above to generate further efficiency gains that could be redirected towards these more pressing spending needs. Given the ambition of the exercise, such reviews could be targeted to some specific sectors (health, energy, investment) or could be comprehensive but phased in over two to three years. In terms of financial stability, the banking sector has remained robust and weathered well the challenges posed by the pandemic. The Austrian banking sector has increased its resilience over the last couple of years, as it has managed to unwind past vulnerabilities and strengthened its capital buffers and liquidity position. Like other banking sectors in the EU, the Austrian banking sector has benefitted from the public measures supported by the authorities to support households and companies, in particular, loan moratoria and public guarantee schemes. Banking sector profitability has come under pressure due to the increase in loan-loss provisions and the pressures on net interest income. The current developments underscore the need for further banking sector consolidation to increase efficiency and maintain the profit generation capacity of banks, including in the current low-interest environment. The access of Austrian companies to non-bank financing has remained subdued and requires renewed impetus. Policies for the next generation, children and the youth, including education and skills Existing inequalities in the educational system linked to socio-economic and migrant backgrounds were exacerbated during the COVID-19 crisis especially during distance learning. To ensure equal access in education irrespective of the socio-economic background, the recovery strategy should improve access to inclusive, good-quality early childhood education and care as it helps reduce social disadvantages. Differences in conditions during home schooling and in access to digital equipment and education during the COVID-19 crisis led to further digital and educational inequalities, leaving disadvantaged groups in Austria further behind. There is a need for better support for disadvantaged pupils, be it during distance learning or at school, and linked to this more differentiated funding of schools. More generally, digital education needs to be improved at all levels of formal education, including through providing appropriate infrastructure and devices, digital equipment for disadvantaged learners, teacher training and digital learning content (see Section 2.3.2). 2.3 Challenges related to the green and digital transition An overarching objective of the Recovery and Resilience Facility is to support the twin transition . Austria’s greenhouse gas emissions are still well above EU average and more efforts are needed to achieve carbon neutrality, while the distance to the best performing countries in the digital transition has increased, as measured in the European Commission’s assessment of Austria’s 2020 National Energy and Climate Plan (NECP) and the 2020 Digital Economy and Society Index (DESI). Austria will need to increase its ambition to reduce its greenhouse gas emissions and achieve carbon neutrality as well as to join the group of leading countries in the digital transition. This section describes where Austria stands in achieving targets related to the green and digital transitions. 2.3.1 Green dimension

The recovery and resilience plan should contribute to the green transition and at least 37% of the financial allocation needs to contribute to climate objectives. The measures in the plan are expected to contribute to achieving the EU’s 2050 climate neutrality objective, and the 2030 energy and climate targets, taking into account Member States’ national energy and climate plans. They should also contribute to meeting environmental targets for waste, water, pollution control, sustainable mobility, biodiversity protection and restoration, marine and water resources, and support the transition to sustainable food systems as well as to a circular economy as appropriate, while ensuring that nobody is left behind. Greenhouse gas emissions Austria’s greenhouse gas emissions are still above EU and national targets. Total greenhouse gas (GHG) emissions are above 1990 levels, while they have fallen by a quarter in the rest of the EU over the same period. Per capita GHG emissions also remain above the 2019 EU average. In recent years, emission reductions in industry have been offset by increases in final energy consumption in buildings and transport. Prior to the COVID -19 pandemic, Austria risked missing its 2020 mandatory emissions reduction target and was also not on track to reach the 2030 target. Austria’s NECP identifies major challenges in reaching the 2030 target for GHG emissions not covered by the EU Emission Trading System (ETS). Austria’s transformation to a climate neutral economy will require sizeable private and public investment over a sustained period. Without further measures, Austria’s ambitious goal to become climate-neutral by 2040 is unlikely to be achieved. Reaching EU and national climate targets will require broadening and improving the pricing of GHG emissions to accelerate the green transition. Diesel and petrol tax levels in Austria (including VAT) are among the lowest in the EU. Climate mitigation would benefit from a faster phase out of subsidies and incentives that are counterproductive to energy and climate targets. Broadening and improving the carbon pricing in polluting sectors not covered by the EU ETS will be key for emission reductions. The transition to climate neutrality is a challenge in particular for regions in which carbon-intensive industries play a key role for employment. Reducing emissions related to transport is key for Austria’s shift towards climate neutrality, and for meeting air quality standards. The share of transport-related emissions (mostly road, excluding aviation) rose steadily since 1990, increasing their share in Austria’s total GHG emissions from 18% to 30% (in 2019), with air quality standards remaining a concern. According to Austria’s NECP, the transport sector has the greatest potential for GHG emission reduction (7.2 million t CO2eq by 2030 compared to 2016). Austria is shifting transalpine transport to rail, but similar efforts are needed for other modes of transport. In particular, climate mitigation would benefit from additional investment in low and zero-emission vehicles and sustainable urban mobility. The building sector is an important emitter in Austria, which maintains an important potential for emissions reduction. Austria has a quantitative target for further emission reductions also in the building sector (3 Mt CO2eq between 2016 and 2030). The more efficient use of building materials in construction and renovation (circular economy) would contribute to a further reduction in GHG emissions and benefit environmental targets. Renewable energy Austria is on track to meet its EU renewable energy target, but significant investment is required to reach Austria’s objective of 100% renewable electricity consumption by 2030. To decarbonise its electricity system, Austria needs to install additional renewable energy generation of 27 terawatt hours annually. To this end, the draft Renewables Expansion Law pursues the revision of the national support system for renewable energies. Achieving this goal will also require a substantial increase of renewable energy in the heating and cooling and transport sectors. It is therefore important to finalise and implement the renewable heating strategy, as well as to promote e-mobility and the use of renewable and low carbon fuels. Energy and resource efficiency Austria is not on track to meet its energy efficiency target, but further efforts are planned. As reflected in the final NECP, for energy efficiency, the Austrian contribution is translated into a range of 28.7-30.8 million tons of oil equivalent (Mtoe) for primary energy consumption and 24.0-25.6 Mtoe for final energy consumption. These targets are low in ambition. The NECP recognises the ‘energy efficiency first’ principle and provides elements on energy efficiency of buildings. Austria’s 2020 Long-term renovation strategy sets a clear list of milestones until 2050, expressed in GHG emission and estimates that the measures are adequate to achieve the envisaged 80% decarbonisation of the buildings stock. The strategy emphasises the phasing out of coal and oil for heating purposes and addresses building renovation with a comprehensive mix of regulatory requirements, fiscal and economic incentives, and information measures. Energy system infrastructure The energy system infrastructure needs to be adapted to the needs of the green transition. The planned increase in the share of renewable energy sources will require a higher degree of resilience and flexibility for the national energy system. Significant investment in storage infrastructure, transmission and distribution networks is needed to support the transformation of the energy system. Greening the tax system Austria has considerable scope for comprehensive tax reforms to foster fairness, inclusive growth, and environmental sustainability. Increasing the level and efficiency of Austria’s energy taxes also by introducing a price for CO2 is key to reducing emissions. As announced in the government programme, Austria is planning to green its tax system. While several measures of the first part of an eco-social reform have been adopted, including (i) an extension of the commuters’ tax allowance for the use of public transport and bicycles, (ii) the exemption of renewable electricity produced by railway companies from network charges, (iii) the harmonisation of the air ticket charge, and (iv) a reform of the motor vehicle registration tax with a stronger link to CO2 emissions, additional measures such as those to counteract ‘Tanktourismus’, to green the existing truck toll and to abolish company car privileges are still missing. Green budgeting Making use of green budgeting can contribute to delivering on national and international commitments for climate change and environmental protection. Evaluating the environmental impact of budgetary and fiscal policies and assessing their coherence with strategic objectives can help make governments more accountable and therefore improve compliance with central environmental and climate goals. So far, Austria makes no use of green budgeting practices. Circular economy Efficient use of resources, including natural capital, and developing eco-innovation is key to boosting competitiveness and building open strategic autonomy, while minimising the environmental impact. Through further regulatory measures and financial incentives, Austria could promote sustainable product design, resource efficient production processes, digital solutions, industrial symbiosis, remanufacturing in key value chains, and alternatives to unsustainable extraction of raw materials, and new circular business models. There is also scope to shift reusable and recyclable waste away from incineration, including through economic instruments, to ensure that post-2020 recycling targets, in particular on plastics, are met. Investments in eco-innovation would trigger productivity growth while reducing Austria’s ecological footprint. Further investments are needed to maintain Austria’s leading position in environmental technology. Biodiversity protection and restoration Protecting and restoring biodiversity and healthy ecosystems is key to boosting resilience and will help meet climate targets. In terms of biodiversity and ecosystem health, Austria presents a mixed picture. It is rich in biodiversity, as reflected in the above-average size of the Natura 2000 network. With around a quarter of its utilised agricultural area devoted to organic farming, which contributes to sustainable food framework and provision of eco-system services, Austria is among EU frontrunners. At the same time, many protected habitats and species remain in an unfavourable conservation status, with further recent declines being reported . Intensive land-take and expanding urban sprawl remain a source for concern. In July 2020, Austria submitted its prioritised action framework (PAF) listing priority conservation and restoration measures for rivers, forests and peat bog habitats to reverse this decline and to ensure a full implementation of the EU nature rules. Fully implementing these measures would not only significantly improve biodiversity, but also contribute to climate mitigation and adaptation.

Average temperature in Austria rose by around 2°C since the beginning of industrialisation, increasing the need for adaptation to climate change. Accounting for 58% of natural carbon storage in Austria, forests can play a key role in climate mitigation and adaptation. However, climate-change-induced extreme weather events and pest infection, which particularly affect monoculture ecosystems, threaten their resilience. The table below gives an overview of Austria’s objectives, targets and contributions under Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action. Table 2.3.1: Overview of Austria’s objectives, targets and contributions under Regulation (EU) 2018/1999 National targets and contributions Latest available data 2020 2030 Assessment of 2030 ambition level Binding target for greenhouse gas emissions compared to 2005 under the Effort Sharing Regulation (%) 11.0% 16.0% 36.0% As in ESR National target/contribution for renewable energy: Share of energy from renewable sources in gross final consumption of energy (%) 33. 6% 34.0% 46.0%-50.0% Adequate (46% is the result of RES formula) National contribution for energy efficiency Primary energy consumption (Mtoe) 32.2% 31.5% 30.8% low Final energy consumption (Mtoe) 28.3% 25.1% 25.6% low Level of electricity interconnectivity (%) 15.3% 10.0% 15.0% N.A. Source: Assessment of the final national energy and climate plan of Austria, SWD (2020) 919 final. 2.3.2 Digital dimension The recovery and resilience plan should contribute to the digital transition and at least 20% of the financial allocation needs to contribute to digital objectives. The measures in the plan should, inter alia, contribute to the digital transformation of the economic and social sector (including public administration, accessible public services, and the justice and health systems). The objective of the measures in the plan should be to improve not only the competitiveness, but also the resilience, agility and security of companies and public actors, all while ensuring inclusiveness. Austria ranks 13th among EU Member States in the DESI 2020 . While Austria remains slightly above the EU average, the gap with the best performing countries has increased. The 2020 ‘Digital Action Plan Austria’ formulates a strategic framework for digitalisation, emphasising Austria’s long-term target to become a ‘Digital Responsible Society’. Higher levels of digital skills and digital learning help supporting the recovery. Thirty-four percent of the Austrian population between 16 and 74 years do not have basic digital skills . There is a need to improve at least basic digital skills of the population through equal access to education and upskilling and reskilling measures. Digitalisation of school education is a major priority, requiring significant investments in connectivity, digital devices, digital learning content and digital skills training for teachers. In 2020, the proportion of ICT specialists in the workforce accounted for 4.5%, slightly higher than the EU average of 4.3%. However, Austrian businesses still lack staff with the right digital skills. Therefore, Austria has a need to incentivise and invest in the up- and reskilling of its labour force, increase the number of digital experts in all disciplines and focus on increasing the workforce potential through inclusion to catch up with the best-performing countries. The weak uptake of digital technologies and business models among smaller companies represents a bottleneck for productivity growth. Austria performs below the EU average as regards the integration of digital technologies by businesses. Austrian companies still do not take full advantage of the use of digital technologies such as cloud services or big data, despite a recent substantial increase in the percentage of companies using social media and selling online. Lack of skilled staff is a bottleneck for further growth. It is also important to raise awareness among SMEs of the relevance of digitalisation of their business processes and products to reap the full range of benefits from adopting digital technologies. Austria’s performance in connectivity is currently below EU average, particularly for fixed very high-capacity networks. Although the country has a high level of mobile coverage, it scores below the EU average for fixed very high-speed broadband coverage and take-up. Austria has become a pioneer in the roll-out of 5G, and consumers already have access to commercial 5G offers. The coverage with fixed very high-capacity networks, however, is low with 39% of the households covered in 2020. This is below the EU average of 59%. Investment to increase Gigabit-capable connections needs to rise substantially to bridge the gap between Austria and the rest of the EU. The acceleration of the roll-out of rural broadband would enable further progress in digitalisation. Additional efforts and initiatives are required to bring Gigabit-capable connections to underserved rural areas, as current measures will not be sufficient to achieve the EU-wide 2025 Gigabit targets. Digital public services are the DESI dimension for which Austria performs best. Austria has taken many targeted measures in digital public services to deal with the COVID-19 crisis. Austria has traditionally been a front-runner in federal e-government services and scores above the EU-average in providing digital public services to its population. Digitalisation is the main objective of the ‘Digital Austria’ initiative to consolidate Austria’s role as a leading digital nation to guarantee and expand prosperity, equal job opportunities, as well as the quality of life in the long term. Continued efforts by the Austrian public sector to meet the legal requirements of the Web Accessibility Directive will ensure their efficient and effective delivery. Overall, the Austrian public sector is digitally advanced compared to its EU peers, and an additional focus on open data and e-government users will help Austria join the most advanced countries in the DESI ranking for digital public services. Digital-related investment in R&D is an important driver for the digital and green transformation. The recently published federal strategy for research, technology and innovation 2030 puts emphasis on the need to strengthen R&D of (key) technologies in digitalisation, in particular on contributing to the development of new digital products and services and on supporting the digital transformation of the economy, such as Artificial Intelligence, High Performance Computing, cybersecurity and blockchain. To boost the Industry 4.0 transition, Austria requires R&D efforts in several areas such as virtualisation, sensor systems, software engineering, cyber-physical systems. Microelectronics is a key enabling technology for the digital transformation of all economic and societal sectors, as well as for the achievement of the European Green Deal objectives. The supply of clean and renewable energy, of smart and sustainable mobility, resource-efficient buildings and environment-friendly agriculture depend on power electronics, integrated sensors and energy-efficient processors. Hence, Austria needs to further strengthen its research and innovation ecosystem in semiconductor technologies for digitalisation, including components and systems for power management, smart sensing, and data processing. Digitalisation is a key enabler for the green transition in Austria. A good example would be the deployment of a smart bi-directional electric vehicle charging infrastructure based on open European standards, to simultaneously advance in renewables and avoid fragmented proprietary solutions between regions or EU countries. Digitalisation of transport is another promising area for Austria to tap its strengths in key digital enablers (microelectronics, AI, 5G connectivity) for the green transformation of mobility systems. Innovation procurement is key for the digital-green economic recovery, as it determines the pace of public sector modernisation, reinforces industrial competitiveness and increases private sector investments in strategic technologies. Graph 2.3.2. Digital Economy and Society Index (DESI) composite index summary Note: EU aggregate corresponds to EU28, based on 2020 DESI report





Box 2.3.2: Progress towards the Sustainable Development Goals (SDGs) The objectives of the Sustainable Development Goals are integrated in the European Semester since the 2020 cycle. This provides a strong commitment towards sustainability in coordination of economic and employment policies in the EU. In that respect, this box outlines Austria’s performance with respect to SDGs with particular relevance for the four dimensions underpinning the 2021 Annual Sustainable Growth Strategy and of relevance to the recovery and resilience plans (green transition, fairness, digital transition and productivity, and macroeconomic stability), indicating possible areas where investments and reforms in line with the objectives of the Facility could further accelerate the progress on the SDGs. Figure 2.3.2: SDGs and key dimensions of the recovery and resilience plan Green transition While Austria performs well on several SDG indictors related to the green transition, it still needs to catch up on others. Austria is working towards its climate targets and reducing greenhouse gas emissions in some sectors, but there are still some challenges ahead. Between 2014 and 2019, final energy consumption per capita slightly increased from 3.1 to 3.2 tonnes of oil equivalent, which is about 50% higher the EU-27 average of 2.2t. Likewise, per capita emissions in Austria remain above the EU-27 average. Domestic Transport-related greenhouse gas emissions rose by 9.3% from 2010 to 2019 and industrial processes by 5.2%, while there were reductions in other sectors, such as in waste management (-37.4), energy supply (-27,4) and other energy use (e.g. buildings, -21.1%). Although accounting for only 3.4% of all emissions, it is noteworthy that international aviation increased by 36% over the same period. Reductions in GHG emissions linked to transport and buildings are key to Austria achieving its 2030 climate targets. On SDG 12 (responsible production and consumption), the environmental goods and services sector saw strong, above-EU average growth; however, also the generation of waste per capita increased slightly between 2014 and 2018. Austria is a frontrunner in the EU with its proportion of land used for organic farming. Compared with other EU countries, the proportion of organically farmed land in Austria (25.3%) is several times higher than the EU-28 average of 8.5%. Fairness Austria generally ranks high on indicators assessing the fairness of society and economy. Austria is successfully tackling poverty: the rate of people at risk of poverty and social exclusion fell from 19.2% in 2014 to 16.9% in 2019. This is significantly lower than the EU average. Austria reduced its avoidable mortality by 7% between 2012 and 2017. On ‘quality in education’, Austria has increased participation in early childhood education and care (for 3- to 5-year-olds), has steadily increased the tertiary education rate and lies well above the EU average in lifelong learning and the employability index. However, there is room for improvement in ensuring equal opportunities in education. Education outcomes of young from disadvantaged of migrant background remain distinctively lower and they drop out of school more often. The Austrian gender pay gap has narrowed in recent years, but women still perform significantly more unpaid work than men (SGD 5). Drops in income have had a greater effect on lower incomes than on higher ones. However, the income gap has recently narrowed again. Digital transition and productivity Austria performs well on ‘Decent work and economic growth’ (SDG 8) and ‘Industry, innovation, and infrastructure’ (SDG 9). With 3.19% of GDP allocated to R&D in 2019, Austria has one of the highest R&D spending in the EU, even if this is below the national target of 3.76%. The share of employees in high-tech and medium-high-tech industry rose from 2010 to 2018 from 5.3% to 5.8%. By stepping up policy efforts, Austria could make further progress on the SDGs related to the digital transition and productivity. Macroeconomic stability In addition to the overall good performance on SDG 8, Austria achieves high scores on indicators measuring ‘Peace, justice, and strong instructions’ (SDG 16), showing a stable and secure environment for pursuing economic activities. 3. Objectives, structure and governance of the plan 3.1 Overall strategy of the plan The Austrian recovery and resilience plan is expected to address the twin transition and has a clear focus on inclusive growth. The Austrian plan helps address economic, social and ecological weaknesses and challenges, with a clear emphasis on climate protection and digitalisation. Austria invests in boosting the economy, supporting sustainability, improving the outcomes of education and its business environment. The additional funds and new reforms will complement the already implemented economic recovery programmes and national economic stimulus packages. The Austrian recovery and resilience plan includes both new investments and prolongation of existing programmes with additional funding. The Austrian recovery and resilience plan is organised around four components: 1 Sustainable recovery, 2 Digital recovery, 3 Knowledge-based recovery, and 4 Just recovery. Each of these components contains four subcomponents, for a total of sixteen subcomponents. The plan comprises 27 reform and 32 investment measures. The first component, Sustainable recovery, comprises measures to support Austria’s green transition. The component addresses structural issues related to sustainability and enables investments to facilitate reducing GHG emissions in line with the European and Austria’s specific climate targets. Additionally, investments in the green transition contribute positively to the economic recovery by increasing economic growth and employment. ·Subcomponent 1.A Renovation wave contains a reform measure ‘Renewable Heat Act’, and two investments, ‘Promoting the exchange of oil and gas heating systems’ with a focus on reducing the use of fossil resources for heating purposes and ‘Combating energy poverty’ seeking to minimise the social cost of green policies. They all promote the transition to more sustainable heating, while supporting low-income households in this transition in order to strengthen social cohesion. ·Subcomponent 1.B Eco-friendly mobility contains two reforms, the ‘Mobility Masterplan’ and the ‘1, 2, 3 Ticket’ with the objective to harmonise the tariff system of public transport in Austria and make it more affordable. The subcomponent also includes three investments: ‘Promoting zero-emission buses, infrastructure’, ‘Promotion of zero-emission vehicles and infrastructure’, and ‘Construction of new railway lines and electrification of regional railways’. ·Subcomponent 1.C Biodiversity and circular economy contains a reform ‘Legal framework to increase collection rates for plastic beverage packaging and the supply of reusable containers in the food retail sector’ and four investments in biodiversity and the circular economy: ‘Biodiversity Fund’, ‘Investments in empty take-back systems and measures to increase re-usage rates for beverage containers’, ‘Installation and retrofitting of sorting facilities’, and ‘Support for the repair of electrical and electronic equipment’. ·Subcomponent 1.D Transformation towards climate neutrality consists of a reform ‘Renewables Expansion Law’ and an investment measure ‘Transforming industry into climate neutrality’. The second component, Digital recovery, addresses challenges related to connectivity, with a view to strengthening competitiveness as well as social cohesion. The component seeks to speed up the deployment of broadband, addresses the needs for further digitalisation of the public administration, incentivises digital and green investments in the private sector, and addresses challenges in access to digital equipment in the education system. The component takes into account that the need to address these challenges has accelerated during the COVID-19 crisis. ·Subcomponent 2.A Broadband expansion contains a reform measure, ‘Creation of the Internet Infrastructure Austria 2030 Platform (PIA 2030)’, and an investment, ‘Gigabit enabled access networks and symmetric Gigabit connectivity in areas with particular socio-economic priorities’. ·Subcomponent 2.B Digitalisation of education consists of the reform measure ‘Fair and equal access to basic digital skills for all lower secondary students’ and the investment ‘Provision of digital terminal equipment for students’. ·Subcomponent 2.C Digitalisation of the public administration contains a reform, ‘Provision of digital terminal equipment for students’, and an investment measure, ‘Digitalisation Fund Public Administration’. ·Subcomponent 2.D Digitalisation and ecological transformation of businesses consists of three investment measures: ‘Digitalisation of SMEs’, ‘Digital investments in enterprises’ and ‘Green investments in enterprises’. The third component, Knowledge-based recovery, consists of several reform and investment measures related to research, innovation, technology, retraining and upskilling, as well as education. All those measures aim to prepare the economy and the people in the labour market and in the education system for the challenges of the future. ·Subcomponent 3.A Research contains a reform measure, the ‘Research, Technology and Innovation Strategy 2030’, and three investment measures for the sustainable development of universities in the context of digitalisation: ‘Quantum Austria — Promotion of Quantum Sciences’, the ‘Austrian Institute of Precision Medicine’ and (digital) ‘Research Infrastructures’. ·Subcomponent 3.B Re-skilling and up-skilling consists of the reform measure ‘education bonus’ aiming at incentivising training for unemployed and the investment measure ‘Funding for reskilling and upskilling.’ ·Subcomponent 3.C Education contains a reform measure ‘Improving access to education’ and two investments: ‘Remedial education package’ and ‘Development of elementary education’.

·Subcomponent 3.D Strategic innovation contains two planned Important Projects of Common European Interest (IPCEI), one on ‘Microelectronics and connectivity’ and another one on ‘Hydrogen’. The fourth component, Just recovery, addresses the intertwined challenges related to social cohesion and the ageing of society, supports arts and culture and improves Austria’s governance and administrative procedures. The reforms and investments in this component focus on challenges related to the health and long-term care sector, as well as on municipalities. In addition, the cultural sector, particularly hard hit by the COVID-19 crisis, is supported by targeted reforms and investments. The component also contains a number of additional reform measures, which support and reinforce the overall objectives of the Austrian recovery and resilience plan. ·Subcomponent 4.A Health contains the reform measure ‘Making primary care more attractive’. The investments in this subcomponent are related to the ‘Support for primary health care centre projects’, ‘Development of the electronic mother-child passport platform including the interfaces to the early aid networks’, the ‘National roll-out of “early aid” for socially disadvantaged pregnant women, their young children and families’. ·Subcomponent 4.B Resilient municipalities contains two reform measures: a new ‘Soil Strategy’ and a ‘Reform to further develop care provision’. It includes investments on ‘Climate-fit town centres’ and ‘Investment for the implementation of community nursing’. ·Subcomponent 4.C Arts and culture contains two reform elements: ‘Development of a building culture programme’ and ‘Development of a national strategy for digitalisation of cultural heritage’. Additionally, it includes three investments: ‘Rehabilitation of the Vienna Volkskundemuseum and the Prater Ateliers’, ‘Digitalisation wave for cultural heritage’ and ‘Investment fund for climate-friendly cultural enterprises’. ·Subcomponent 4.D Resilience through reforms contains several additional reform measures. They range from the development of governance in climate action to addressing the problem of a lack of multi-level governance, the implementation of CO2 pricing in the context of the eco-social tax reform, the establishment of a new legal form (‘Austrian Limited’) to support growth-oriented start-ups and the facilitation of administrative procedures. The reforms will help create an appropriate framework for Austria’s recovery. Table 3.1a: Overview of the plan: components and associated cost Component Costs (EUR million) 1 Sustainable recovery 1.A Renovation wave 209 1.B Eco-friendly mobility 849 1.C Biodiversity and circular economy 350 1.D Transformation to climate neutrality 100 2 Digital recovery 2.A Broadband expansion 891 2.B Digitalisation of education 172 2.C Digitalisation of the public administration 160 2.D Digitalisation and ecological transformation of businesses 605 3 Knowledge-based recovery 3.A Research 212 3.B Re-skilling and up-skilling 277 3.C Education 129 3.D Strategic innovation 250 4 Just recovery 4.A Health 125 4.B Resilient municipalities 104 4.C Arts and culture 67 4.D Resilience through reforms 0 The milestones and targets are concentrated at the beginning, in the middle and at the end of the lifetime of the facility. Overall, the distribution of milestones and targets reflects the lifecycle of the investments and reforms and allows to verify that the objectives of the components are achieved. The highest number of milestones and targets are at the end of 2021/beginning of 2022, at the end of 2023 and in the second quarter of 2026. While the milestones for the reforms are concentrated in the first half of the duration of the Facility, as they have also the function for setting framework conditions, the implementation of the investments continues until the end of the duration of the Facility. Table 3.1b: Distribution of milestones and targets per year in the recovery and resilience plan of Austria 3.2 Implementation aspects of the plan The Austrian recovery and resilience plan makes explicit reference to the consistency with other programmes. The Austrian plan entails reform and investment measures that are proportionate to the allocation of non-repayable financial support to Austria. The plan highlights that the reform and investment measures are complementary to the further reforms and investments of the national reform programme. The relevant reform and investment measures are aligned with the National Energy and Climate Plan (NECP) and contribute to its implementation. In addition, the plan is coordinated with the negotiations of the partnership agreements and operational programmes under the Union funds for the funding period 2021-2027, to ensure complementarity and synergies. The Austrian recovery and resilience plan seem furthermore consistent with the objectives of the Youth Guarantee and the draft territorial Just Transition plans. Sectorial support to policy reforms could be provided by the Horizon Policy Support Facility that may complement the Technical Support Instrument. The concrete points of reference are included in the description of the subcomponents. Austria’s plan explicitly states that the selected reform and investment measures are consistent with the challenges and priorities identified in the most recent euro area recommendations . The Ministry of Finance is responsible for the coordination of the implementation of the plan. The relevant line Ministries are responsible for the implementation of the reforms and investments falling into their areas of expertise and for compliance with the requirements of the RRF. The implementing bodies (responsible line Ministries) have drawn up individual control plans. The implementing bodies report to the Ministry of Finance the achievement of milestones and targets and flag if any delays in the achievement are expected. The Ministry of Finance reports on a semi-annual basis the achievements on milestones and targets to the Commission, in April, along with the submission of the National Reform Programme and in October, along with the submission of the Draft Budgetary Plan. The Ministry of Finance also signs the management declaration accompanying any payment request under the RRF. The Austrian recovery and resilience plan contains a dedicated chapter on gender equality and equal opportunities for all. This chapter acknowledges that crises, such as the COVID-19 pandemic, reinforce challenges related to gender equality and equal opportunities for all and provides a short overview of how the different reform and investment measures of the plan also address challenges related to gender equality and equal opportunities. The first component, Sustainable recovery, includes measures to address energy poverty and to enable people with lower household income to participate in the green transition. In addition, the expansion of affordable public transport is beneficial to households with lower income and to women, who tend to use public transport to a larger extent than men. For the second component, Digital recovery, the expansion of broadband access aims at improving the territorial and social cohesion, while also increasing the overall competitiveness and improving the work-life balance by facilitating telework. The distribution of digital devices to all pupils in the lower secondary education helps improve equal opportunities in education. For the third component, Knowledge-based recovery, the included up- and reskilling measures focus on women and people from disadvantaged groups. The ‘Remedial education package’ supports disadvantaged pupils in catching up on the course content that they may not have been able to cover fully during the prolonged periods of distance learning. The increased support in elementary education should also be particularly beneficial for children from disadvantaged socio-economic backgrounds. The investment and reforms relating to research, technology and innovation focus on increasing the share of women working in these areas. The fourth component, Just recovery, includes a broad range of measures, which are particularly beneficial for women. Reforms and investments relating to health and long-term care seek to strengthen the social cohesion and contribute to improving the situation of women on the labour market. Pension splitting and measures to increase the effective retirement age should contribute to increasing the pensions of women, notably at the lower end, and therefore help reduce the gender pension gap. The Austrian recovery and resilience plan reports on a comprehensive consultation process that took place ahead of the design of the plan. The consultation process included the Länder, cities, municipalities, social partners, NGOs, youth organisations and other relevant representatives of civil society. These were invited to submit their project proposals in advance. Overall, the Austrian government received project proposals amounting to EUR 56 billion and some of these proposals have been taken up in the plan. Some measures proposed by the Länder and municipalities have been included in the plan, notably investment support measures and measures in education, both contributing to social and territorial cohesion. The plan states that the measures related to the labour market incorporate inputs and suggestions from the social partners. The dedicated subchapter 4.6 ‘Consultations carried out’ (Erfolgte Konsultation) suggests that a large part of the measures included in the plan is supported by one or more of the relevant actors included in the consultation process. The plan lists two planned IPCEIs, one in the area of microelectronic and connectivity and one on hydrogen, as relevant multi-country projects and contains a brief description of the required coordination steps across participating Member States. Through the project on microelectronics and connectivity, areas such as low power electronics, sensors and process technologies will be strengthened. The project on building a European hydrogen ecosystem will support hydrogen production, storage and applications in particular in energy-intensive industrial and mobility sectors that are difficult to decarbonise and aims to contribute to EU’s climate objectives. The plan contains a communication strategy to emphasise the contribution of the European Union to the green and digital transformation of the Austrian society and economy. The communication strategy will highlight the contribution towards increasing the innovation potential and the education and qualification levels of all citizens, notably the younger generations. It will seek to raise the awareness of the population relating to the plan and the included measures including the financing by the European Union that should be made evident at all relevant levels. Furthermore, the communication related to the recovery and resilience plan should involve the parliament and relevant stakeholders to ensure ownership. The target groups of the communication strategy are the general public, potential beneficiaries, implementing bodies, media, as well as social partners and the parliament. The communication strategy is structured around a central website and supported by dedicated communication channels for the specific target groups. Press releases, press conferences and dedicated press meetings in close cooperation with the representation of the European Union in Austria will form the base of the communication strategy. To reach out to the general public, Austria will use existing communication projects of the European Union, as well as the dialogues in Austria through the Conference on the Future of Europe. The flagship initiatives will be promoted by dedicated communication activities. At project level, the existing standards on publicity and communication related to EU funding will be applied. The achievement of the objectives related to communication are going to be measured in number of accesses to the website and through the reception of the plan in the media.

A security self-assessment for investments in connectivity and digital capacities has not been provided as it has not been considered appropriate by Austria, in accordance with Article 18(4) point (g) of Regulation (EU) 2021/241. The relevant connectivity measures do not entail active components and the rollout of broadband does not include 5G deployment. In addition, according to information provided by Austria, the digitalisation of the public administration will be carried out in full respect of the relevant EU directive and national rules and regulations. As such, the envisaged IT consolidation in the federal government intends to use the latest security technologies to increase the level of security. State aid and competition rules fully apply to the measures funded by the Recovery and Resilience Facility. Union funds channelled through the authorities of Member States, like the RRF funds, become State resources and can constitute State aid if all the other criteria of Article 107(1) TFEU are met. When this is the case and State aid is present, the relevant measures must be notified and approved by the Commission before Member States can grant the aid, unless those measures are covered by an existing aid scheme or comply with the applicable conditions of a block exemption regulation, in particular the General Block Exemption Regulation (GBER) declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 TFEU . When State aid is present and it requires notification, it is the duty of the Member State to notify State aid measures to the Commission before granting them, in compliance with Article 108(3) TFEU. In this respect, the State aid analysis carried out by Austria in the recovery and resilience plan cannot be deemed a State aid notification. In so far as Austria considers that a specific measure contained in the recovery and resilience plan entails de minimis aid or aid exempted from the notification requirement, it is the responsibility of Austria to ensure full compliance with the applicable rules. In addition to complying with EU’s State aid rules, measures taken under this framework should be compatible with the EU’s international obligations, in particular under World Trade Organization rules. 4. Summary of the assessment of the plan 4.1 Comprehensive and adequately balanced response to the economic and social situation The recovery and resilience plan provides for a comprehensive set of measures that effectively addresses all six pillars referred to in Article 3 of the RRF Regulation, taking into account the country-specific challenges. The reforms and investments will contribute to a sustainable recovery and tackle the adverse effects and consequences of the COVID-19 crisis in Austria. While the reforms will strengthen the economic and institutional resilience, the investments are focused on forward-looking areas and will, in particular, advance the green and digital transition of both the public and private sphere. Austria submitted its National Reform Programme on 30 April 2021. The information provided in the National Reform Programme is being considered and jointly assessed in this Staff Working Document together with the recovery and resilience plan. The measures covering the green and digital dimension account for the biggest financial allocation and go beyond the minimum targets of 37% and 20%. In particular, climate-relevant measures amount to 58.7% and digital measures to 52.8% of the total financial allocation under the RRF to Austria’s plan. As such, the Austrian plan is concentrated on the first two pillars. The following table illustrates the coverage of all six pillars. Table 4.1: Coverage of the six pillars of the Facility by the Austrian recovery and resilience plan components Green transition Digital transition Smart, sustainable and inclusive growth Social and territorial cohesion Health, and economic, social institutional resilience Policies for the next generation Component 1 Sustainable recovery 1.A Renovation wave ● ● 1.B Eco-friendly mobility ● ● 1.C Biodiversity and circular economy ● ● 1.D Transformation towards climate neutrality ● ● Component 2 Digital recovery 2.A Broadband expansion ● 2.B Digitalisation of schools ● ● 2.C Digitalisation of the public administration ● 2.D Digital and ecological transformation of enterprises ● ● ● Component 3 Knowledge-based recovery 3.A Research ● ● 3.B Re-skilling and up-skilling ● ● ● ● 3.C Education ● ● 3.D Strategic innovation ● ● ● Component 4 Just recovery 4.A Health care ● ● ● ● 4.B Resilient municipalities ● ● ● 4.C Art and culture ● ● ● ● 4.D Resilience through reforms ● ● ● ● ● ● Green transition Austria’s recovery and resilience plan puts the main focus on measures supporting the green transition. Whilst component 1 amounting to EUR 1.5 billion is entirely dedicated to sustainability, the three remaining components of the plan also contain climate-relevant measures. Overall, the recovery and resilience plan comprises measures accounting for EUR 2 031 200 000 contributing to the green transition, representing 58.7% of Austria’s total financial allocation under the RRF. Under the first component, the recovery and resilience plan allocates EUR 209 million to thermal renovation and energy efficiency of residential buildings, addressing also energy poverty. The buildings sector (residential and commercial buildings) generated GHG emissions equivalent to 8.3 million tons of CO2 (around 10% of the total emissions) in 2017. Even though GHG emissions from buildings have decreased over the past decades, there is still great savings potential in this sector. Reducing transport-related emissions is key for Austria’s shift to carbon neutrality and for meeting air quality standards. Between 1990 and 2017, greenhouse gas (GHG) emissions from transport increased by almost 80%. Investment enhancing eco-friendly mobility, including railway infrastructure, zero-emission vehicles and charging stations, represents the second-largest subcomponent of the recovery and resilience plan (EUR 849 million). The recovery and resilience plan proposes significant investment in the protection of biodiversity and transition to a circular economy (EUR 350 million), aiming to improve, preserve and restore biodiversity, prevent waste and promote repair and recycling. These investments will help address the low plastic packaging recycling rate. They will also help protect Austria’s richness in biodiversity and natural carbon sinks, contributing to the objectives of the EU’s 2030 Biodiversity Strategy. The recovery and resilience plan includes investments in decarbonisation of industry (EUR 100 million) and enhanced the support to a planned Important Project of Common European interest (IPCEI) on renewable hydrogen (EUR 125 million) under component 3. Austria has a strong industrial base, hence industry (including installations covered by the EU emissions trading system – ETS) is the largest emitting sector in Austria. These investments will accelerate emissions abatement and the uptake of advanced eco-innovation and circularity in energy-intensive sectors, while also developing the potential of hydrogen for industrial and e-mobility transformation. The energy efficiency and climate adaptation measures under component 1 are further complemented by support for green investment by enterprises (EUR 504 million), including energy saving renovations and e-mobility, proposed under component 2. Component 4 also promotes the use of renewable energy, resource efficiency and climate adaptation by supporting enterprises in the cultural sector (EUR 15 million), which was hard-hit by the COVID19-crisis. Similarly, it will also strengthen the resilience of municipalities through green renovations and energy efficiency of public buildings and climate adaptation measures in town centres (EUR 50 million). All investment measures contribute effectively and in a balanced manner to Austria’s green transition, whereas the structural reforms proposed in Austria’s recovery and resilience plan will amplify their lasting impact. For instance, the investments in thermal renovations and energy transition will be reinforced by a modernisation of national support schemes for renewable energy and a new regulatory framework for renewable heating. Investment in clean mobility will be underpinned by a Mobility Masterplan 2030 and a reform incentivising the modal shift towards public transport. Investment in more effective recycling will be accompanied by an amendment of the waste management law. Protection of biodiversity will benefit from a new soil protection strategy tackling intensive land-use. Finally, all green measures are envisaged to be directly or indirectly fostered by a new climate governance framework and the planned eco-social tax reform that will be designed to reduce annual CO2 emissions by at least 2.6 million tons by 2030. Digital transformation The recovery and resilience plan contributes to Austria’s digital transformation. A substantial amount of investments contributes to digital objectives – EUR 1.8 billion or 52.8% of Austria’s total financial allocation under the RRF. The largest share of investments towards digital transformation (for an amount of EUR 1.3 billion) are found in component 2 Digital recovery, although important digital-related measures are also contained in component 3 Knowledge-based recovery and component 4 Just recovery. The investments are strengthened by reforms to ensure a long-lasting impact. The envisaged reforms and investments promote digital transformation in a variety of areas, including connectivity, public administration and public services, private sector, education, research and innovation, health and culture. The recovery and resilience will plan help enhance connectivity as the linchpin infrastructure for digital transformation. While Austria performs well in the roll-out of 5G networks, it scores below the EU average for fixed very high-speed broadband coverage and take-up. The investment in the deployment of Gigabit-capable broadband network, which accounts for the largest share of the digital-related expenditure under the recovery and resilience plan (EUR 891 million), is expected to help address this challenge. The investment is underpinned by a reform to facilitate broadband deployment, in particular by ensuring coordination between all stakeholders and reducing red tape. This reform and investment, in addition to providing the infrastructure for the digital transformation, contribute to ensuring equal opportunities between urban and rural areas. These initiatives are in line with the key action ‘Accelerating investments in Europe’s Gigabit connectivity’ under the Commission Communication on Shaping Europe’s Digital Future.

The recovery and resilience plan promotes digital transformation both in the public and private sectors. The envisaged measures for the digitalisation of the public administration are aimed at increasing the efficiency and effectiveness of the federal administration and result in new digital services for citizens and businesses. The financing of the projects will be complemented by a reform to implement the once-only principle when dealing with the public authorities, which is expected to reduce the administrative burden on citizens and businesses. Specific investments are also envisaged to facilitate digitalisation of companies. In particular, the recovery and resilience plan contains targeted investments to help SMEs adopt digital technologies, which has proven to be a bottleneck for productivity growth. Also, the recovery and resilience plan includes an investment premium of 14% for all companies investing in certain digital technologies, notably advanced ones, which will increase companies’ competitiveness and resilience. The recovery and resilience plan also focuses on the development of human capital as a key enabler for the digital economy. The plan includes a reform and investment to provide access to digital education and to digital equipment for students and to support the digitalisation of teaching practices of lower secondary schools. The measures will contribute to addressing the challenges Austria faces with the development of digital skills, digital inclusion, and ensuring access to quality education and equal opportunities. Moreover, for the adult population, the recovery and resilience plan contains measures to facilitate reskilling and upskilling, which include a strong focus on developing basic IT skills and IT skills in specific occupational fields. A number of measures under component 3 are aimed at promoting digital-related research and development (R&D). In particular, the planned IPCEI on microelectronics and connectivity aims at supporting the development of future innovative network and microelectronics technologies based on smaller structures and the combination of functionalities and materials, contributing to Europe’s open strategic autonomy in the global supply chains for microelectronics. In addition, a number of measures are targeted at further developing quantum research, life sciences and digital infrastructures, which is expected to boost the competitiveness, foster research and innovation, and support Europe in ensuring technology sovereignty. The recovery and resilience plan will also contribute to the digitalisation of health services and culture in Austria. The development of the electronic mother-child passport will improve health opportunities for pregnant and breastfeeding women and their children and will promote accessibility of health services. Moreover, the plan supports the digitalisation of cultural heritage, making it available to a wider public, including for educational purposes. Overall, the scope of Austria’s recovery and resilience plan encompasses a significant number of digital-related measures targeted at various areas, with the digital contribution of the planned investments exceeding the minimum threshold set by the Regulation. Smart, sustainable and inclusive growth The plan extensively covers the third pillar on smart, sustainable and inclusive growth. All components contain elements aiming to strengthen the competitiveness and productivity of Austria’s economy. Component 1 will promote sustainable growth, in particular. The measures in this component aim to support the shift towards sustainable mobility and will increase the number of zero-emission vehicles in Austria. Moreover, they will support the transition from a linear to a circular economy and aim to transform the industry towards climate neutrality. These measures will have a long-lasting impact, ensuring the competitiveness of the economy and creating jobs. Component 2 includes a set of measures targeted at SMEs. They will enhance the digitalisation of SMEs and will promote investments on greening of businesses. This will prepare the ground for structural changes towards a sustainable economy and strengthen future-oriented areas. Component 3 covers measures to strengthen research and innovation. This will enhance the growth potential and entrepreneurship. At the same time, the investments will promote cross-border cooperation in important strategic areas and bring added value on the European level, in line with the Commission’s New Industrial Strategy. Component 4 helps address the needs of businesses in the area of art and culture. The measures in this component aim to strengthen the resilience of the cultural sector by supporting innovation and transformation towards sustainability. In particular, they aim to promote environmental and digital investments in future-oriented areas, such as circular economy. The Austrian plan covers a coherent set of reforms and investments to promote smart, sustainable and inclusive growth. While focusing on strategically important areas, such as research and innovation, the measures will ensure that also SMEs and the cultural sector will not be left behind. Social and territorial cohesion The Austrian recovery and resilience plan covers sufficiently the fourth pillar, as it has both a strong social dimension and a focus on Austria’s regions. Social cohesion is expected to be tackled by education measures targeting either disadvantaged groups or catching up generally with educational deficits caused by the COVID-19 crisis. As female labour market potential remains underutilised, the envisaged quantitative and qualitative improvement of early childhood education and care facilities addressed within the recovery and resilience plan could help increase full-time employment of women with caring responsibilities. The roll-out of ‘early aid’ will further support disadvantaged women, children and families. Territorial cohesion will likely be fostered by measures linked to renovation of buildings, broadband and sustainable mobility. More and better primary health care centres will also be of benefit for the remote regions, as access to quality health care will be improved all over the country. The envisaged reforms (pension splitting, early starter bonus and the eco-social tax reform) also go in the right direction. As women still tend to take care of raising children more than men, they are likely to have interrupted careers followed by lower pensions. The pension splitting will therefore contribute to narrowing the pension gap between men and women by sharing acquired pension rights for times of childcare responsibilities. The introduction of the early starter bonus (instead of the Hacklerregelung – early pension for specific professions, mainly occupied by men) will also contribute to reducing the gender pension gap. Health and economic, social and institutional resilience The Austrian recovery and resilience plan covers sufficiently the fifth pillar related to resilience. The crisis from the COVID-19 pandemic put at the forefront the link between health systems and the economy. Strengthening Austria’s health system and increasing the focus on primary health care (subcomponent 4.A) is expected to make a strong contribution to economic growth and related job creation. A stronger and more resilient health system will equally be better placed to absorb surges in healthcare demand. In addition, the general improvement of the population’s health will translate into a more productive labour force, reduced losses due to absenteeism and reduced constraints to socio-economic activities. Social and institutional resilience will be improved by the envisaged pension reforms, which will contribute, at least to a certain extent, to dampening the increase of expenditures within the pension system and will further contribute to narrowing the gender pension gap. Overall, both pension reforms (4.D.2 and 4.D.3) will make the system somewhat more sustainable in the medium run. Policies for the next generation, children and the youth The sixth pillar is duly addressed in the Austrian plan, covering three components with a balanced mix of reforms and investments. The envisaged investments will allocate resources to the education system and will be flanked by reforms to improve access to education. A number of measures under component 3 aim to increase the capacities for elementary education and to bring some progress in reducing inequalities in educational attainment, which is heavily influenced by socio-economic or migrant background. Bridging the learning gaps, which have increased during the COVID-19 crisis due to distance learning, will be key to ensure that no one is left behind. This is reflected in the measures Austria has put forward to support pupils with additional hours, to complete their degrees and final examinations. In addition, pupils will receive IT equipment in order to ensure that a lack of financial means will not lead to disadvantages in digital competences. During the COVID-19 pandemic, the importance of digitally well-equipped schools and pupils became apparent and underlined the need for IT infrastructure. The measures under component 2 will ensure the access to basic digital education at lower secondary level and aim to create a level playing field for pupils. Training the next generation towards future-oriented sectors will be promoted by measures under component 3. The upskilling and reskilling measures in this component aim to strengthen the competences of the unemployed and low-skilled, with a particular focus on digital skills. This will enhance opportunities for disadvantaged groups and improve their overall job prospects. By seeking to increase the labour market outcomes for the low-skilled, the plan effectively addresses the European Pillar of Social Rights.

The plan will also contribute to the well-being of pregnant women with measures under component 4. The introduction of the electronic mother-child passport will promote screening programmes and will provide for an effective electronic platform to improve early detection of risk factors and diseases during pregnancy. In addition, a comprehensive package on early aid will support disadvantaged pregnant women. These measures will also improve the prospects of children. Overall, the plan covers all six pillars, prioritising the green and digital dimensions. The strong focus on the green pillar is driven by the aim to reach climate neutrality by 2040, without falling behind on competitiveness or economic growth. The measures falling under this pillar will support the green transition of the Austrian economy and will have a long-lasting impact, aiming to significantly reduce CO2 emissions. The focus on the digital pillar recognises the importance of digital competences and digitalisation across all areas of the economy. The measures will provide for the digital transformation of the public administration and ensure the competitiveness of businesses by making them fit for the digital age and enhancing cross-border cooperation in strategically important areas. Considering Austria’s economic and social situation, focusing on the first two pillars shows the forward-looking approach of the plan and represents a tailor-made response to country-specific challenges. It is also in line with the priorities of the Facility. The plan covers the third pillar to a great extent and the measures will promote smart, sustainable and inclusive growth and strengthen Austria’s competitiveness and productivity. As regards the fourth pillar, the measures will enhance the social and territorial cohesion as the plan entails a strong social dimension and focusses on Austria’s regions, while aspects linked to rural areas are to some extent direc