Recommendation for a COUNCIL RECOMMENDATION on Austria’s 2012 national reform programme and delivering a Council opinion on Austria’s stability programme for 2011-2016
Date: 2012-05-30
Institutions: European Commission
Subjects: Austria, administrative reform, banking system, budget deficit, budgetary equilibrium, dropout, free competition, retirement conditions, tax reform

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
COM(2012) 306 final 

Recommendation for a 

COUNCIL RECOMMENDATION 

on Austria’s 2012 national reform programme  

and delivering a Council opinion on Austria’s stability programme for 2011-2016 

{SWD(2012) 306 final} 

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Recommendation for a 

COUNCIL RECOMMENDATION 

on Austria’s 2012 national reform programme  

and delivering a Council opinion on Austria’s stability programme for 2011-2016 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 

Having regard to the recommendation of the European Commission2, 

Having regard to the resolutions of the European Parliament,3 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

After consulting the Economic and Financial Committee, 

Whereas: 

(1) 

(2) 

On  26  March  2010,  the  European  Council  agreed  to  the  European  Commission’s 
proposal  to  launch  a  new  strategy  for  jobs  and  growth,  Europe  2020,  based  on 
enhanced coordination of economic policies, which will focus on the key areas where 
action 
to  boost  Europe’s  potential  for  sustainable  growth  and 
competitiveness. 

is  needed 

On 13 July 2010, the Council adopted a recommendation on the broad guidelines for 
the economic policies of the Member States and the Union (2010 to 2014) and, on 21 
October  2010,  adopted  a  decision  on  guidelines  for  the  employment  policies  of  the 
Member States4, which together form the ‘integrated guidelines’. Member States were 
invited  to  take  the  integrated  guidelines  into  account  in  their  national  economic  and 
employment policies. 

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4 

OJ L 209, 02.08.1997, p. 1 
COM(2012)306 final 
P7_TA(2012)0048 and P7_TA(2012)0047 
Council Decision 2012/238/EU of 26 April 2012 

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(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

On 12 July 2011, the Council adopted a recommendation on Austria’s national reform 
programme  for  2011  and  delivered  its  opinion  on  Austria’s  updated  stability 
programme for 2011-2014. 

On 23 November 2011, the Commission adopted the second Annual Growth Survey, 
marking  the  start  of  the  second  European  Semester  of  ex-ante  and  integrated  policy 
coordination,  which  is  anchored  in  the  Europe  2020  strategy.  On  14  February  2012, 
the  Commission,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  adopted  the  Alert 
Mechanism Report5, in which it did not identify Austria as one of the Member States 
for which an in-depth review would be carried out. 

On 2 March 2012, the European Council endorsed the priorities for ensuring financial 
stability,  fiscal  consolidation  and  action  to  foster  growth.  It  underscored  the  need  to 
pursue  differentiated,  growth-friendly  fiscal  consolidation,  to  restore  normal  lending 
conditions  to  the  economy,  to  promote  growth  and  competitiveness,  to  tackle 
unemployment  and  the  social  consequences  of  the  crisis,  and  to  modernise  public 
administration. 

On 2 March 2012, the European Council also invited the Member States participating 
in the Euro Plus Pact to present their commitments in time for their inclusion in their 
stability or convergence programmes and their national reform programmes. 

On 24 April 2012, Austria submitted its 2012 stability programme covering the period 
2011-2016  and,  on  25  April  2012,  its  2012  national  reform  programme.  In  order  to 
take  account  of  their  interlinkages,  the  two  programmes  have  been  assessed  at  the 
same time. 

Based  on  the  assessment  of  the  2012  stability  programme  pursuant  to  Council 
Regulation  (EC)  No  1466/97,  the  Council  is  of  the  opinion  that  the  macroeconomic 
scenario underpinning the budgetary projections in the programme is cautious for the 
years 2012 and 2013. For 2014-2016 the scenario becomes more optimistic, projecting 
average  GDP  growth  of  2.1%,  consistently  above  the  current  estimates  of  potential 
growth.  The  objective  of  the  budgetary  strategy  outlined  in  the  programme  is  to 
correct the excessive deficit by 2013 and reach the medium-term budgetary objective 
(MTO) by 2016. The programme has changed the MTO from the target of a balanced 
budget  over  the  business  cycle  to  a  structural  deficit  of  0.45%  of  GDP,  adequately 
reflecting the requirements of the Stability and Growth Pact. The foreseen correction 
of the excessive deficit is in line with the deadline set by the Council recommendation 
issued in the context of the Excessive Deficit Procedure in December 2009. However, 
based on the (recalculated) structural budget balance,6 the average annual fiscal effort 
planned  at  0.5%  of  GDP  for  the  period  2011-2013  is  lower  than  the  0.75%  of  GDP 
recommended by the Council. The envisaged structural progress towards the MTO is 
sufficient  in  2015,  but  lower  than  0.5%  of GDP  per  year  benchmark  of  the  Stability 
and Growth Pact in 2014 and 2016. However, in 2014-2015 the projected growth rate 
of  government  expenditure,  taking  into  account  discretionary  revenue  measures, 
respects  the  expenditure  benchmark  of  the  Stability  and  Growth  Pact.  Nevertheless, 

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COM(2012) 68 final 
Cyclically  adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
services  on  the  basis  of  the  information  provided  in  the  programme,  using  the  commonly  agreed 
methodology. 

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there  are  risks  accompanying  the  fiscal  targets  both  on  the  revenue  and  on  the 
expenditure  side.  For  example,  the  budgetary  effect  of  some  measures  is  difficult  to 
quantify because of dependence on individual uptake. Since the legislation has not yet 
been  decided  the  details  of  the  financial  transaction  tax  are  not  yet  known.  The 
envisaged expenditure cuts at the sub-national level are not defined. The programme 
foresees that the debt-to-GDP ratio, which amounted to 72.2% at the end of 2011, is 
going to peak at 75.3% in 2013 before gradually falling to 70.6% in 2016. In terms of 
the  debt  reduction  benchmark  of  the  Stability  and  Growth  Pact,  Austria  will  be  in  a 
transition  period  in  the  years  2014-2016  and  the  plans  presented  in  the  programme 
would  ensure  sufficient  progress  towards  compliance  with  the  debt  reduction 
benchmark.  However,  there  are  risks  attached  to  this  projection  because  of  the 
growing  debt  of  state-owned  companies  classified  outside  the  general  government 
sector and potential further burden due to the banking sector government support. 

(9)  With  the  adoption  of  the  latest  fiscal  consolidation  package,  Austria  is  set  on  a  path 
leading to more sustainable public finances. However, the measures contained in the 
package do not encompass significant streamlining in the fiscal relations between the 
federal,  regional  and  local  governments,  widely  acknowledged  as  a  major  source  of 
potential  savings.  An  agreement  in  principle  was  reached  between  the  federal  and 
regional  governments  on  the  centralisation  of  health  care  financing,  but  details  still 
need to be negotiated.  

(10) 

In  order  to  raise  the  effective  retirement  age,  Austria  has  enacted  reforms  mainly 
aimed  at  restricting  access  to  the  invalidity  pension  scheme.  Bringing  forward  the 
harmonisation  of  the  statutory  retirement  age  between  men  and  women,  currently 
foreseen for 2024-2033, has not been addressed. Employability of older workers and 
active  aging  cultures  within  companies  need  to  be  further  enhanced.  The  proposed 
measures  might  not  be  far-reaching  enough  to  substantially  raise  the  effective 
retirement age.  

(11)  The performance of the Austrian labour market has been very good, as witnessed by 
the  lowest  unemployment  rate  in  the  EU  in  2010  and  2011.  However,  the  country's 
labour  force  potential  is  projected  to  shrink  from  2020  onwards.  Therefore,  Austria 
will have to strive to fully tap the potential of working age population by addressing 
the problems of the low employment rate of older workers and the widespread use of 
early  retirement  and  invalidity  pension  schemes,  the  high  tax  and  social  security 
burden on labour income, and the relatively high concentration of women in low-wage 
and  part-time  employment.  Furthermore,  the  potential  of  people  with  a  migration 
background  is  not  fully  used  due  to  low  education  achievements  or  difficulties  with 
the  recognition  of  skills  acquired  abroad.  Education  outcomes  as  reflected  in  PISA 
results  are  below  EU  average  and  the  influence  of  socio-economic  background  on 
education achievements is particularly high. Steadily growing number of students, due 
to high incoming mobility (‘mass university’) and high drop-out rates (around 40 %), 
remain the main challenges together with a considerable gap in funding.  

(12)  Austria  enjoys  a  favourable  position  in  terms  of  competitiveness  and  productivity. 
Nevertheless, it faces relative structural weaknesses in several areas, which may harm 
its  long-term  growth  potential.  Competition  in  the  services  sector  has  not  been 
particularly supportive of domestic demand. The issues of high network access prices 
and the distortive behaviour of incumbent firms (hampering market entry, competition 
and  innovation)  have  not  been  addressed.  Unjustified  restrictions  in  the  liberal 

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professions  persist:  the  number  of  regulated  professions  notified  by  Austria  to  the 
Commission  is  far  above  the  EU  average.  There  is  a  need  to  assess  the  justification 
and  proportionality  of  regulation  in  these  professions.  There  has  been  no  tangible 
progress on Austria’s commitment to strengthen the federal competition authority. The 
Services Directive has finally been implemented through the adoption of a ‘horizontal’ 
law  and  through  changes  in  legislation  at  province  level,  as  recommended  by  the 
Council in 2011. 

(13)  The Austrian financial sector faces particular challenges related to the high exposure 
of Austrian banks to the countries of Central, Eastern and South Eastern Europe, as in 
several  of  these  economies  asset  quality  deterioration  may  still  be  ongoing.  Policy 
decisions with cross-border impact need to be preceded by information exchange and 
coordination  with  host  country  supervisors.  Authorities  also  need  to  continue  to 
closely monitor and restructure the banks which benefited from public sector support, 
especially the credit institutions which were nationalised. 

(14)  Austria  has  made  a  number  of  commitments  under  the  Euro  Plus  Pact.  These 
commitments, and the implementation of the commitments presented in 2011, relate to 
fostering  employment,  improving  competitiveness,  and  enhancing  sustainability  of 
public  finances.  The  Commission  has  assessed  the  implementation  of  the  Euro  Plus 
Pact commitments. The results of this assessment have been taken into account in the 
recommendations. 

(15) 

In  the  context  of  the  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Austria’s  economic  policy.  It  has  assessed  the  stability 
programme  and  national  reform  programme.  It  has  taken  into  account  not  only  their 
relevance  for  sustainable  fiscal  and  socio-economic  policy  in  Austria  but  also  their 
compliance  with  EU  rules  and  guidance,  given  the  need  to  reinforce  the  overall 
economic governance of the European Union by providing EU-level input into future 
national decisions. Its recommendations under the European Semester are reflected in 
recommendations (1) to (7) below. 

(16) 

In  the  light  of  this  assessment,  the  Council  has  examined  Austria’s  stability 
programme, and its opinion7 is reflected in particular in recommendation (1) below, 

HEREBY RECOMMENDS that Austria should take action within the period 2012-2013 to: 

1. 

2. 

7 

Implement the 2012 budget as envisaged and reinforce and rigorously implement the 
budgetary  strategy  for  the  year  2013  and  beyond;  sufficiently  specify  measures  (in 
particular  at  the  sub-national  level),  to  ensure  a  timely  correction  of  the  excessive 
deficit  and  the  achievement  of  the  average  annual  structural  adjustment  effort 
specified in the Council Recommendations under the Excessive Deficit Procedure . 
Thereafter,  ensure  an  adequate  structural  adjustment  effort  to  make  sufficient 
progress  towards  the  medium-term  budgetary  objective  (MTO),  including  meeting 
the expenditure benchmark. 

Take  further  steps  to  strengthen  the  national  budgetary  framework  by  aligning 
responsibilities  across  the  federal,  regional  and  local  levels  of  government,  in 

Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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3. 

4. 

5. 

6. 

7. 

particular  by  implementing  concrete  reforms  aimed  at  improving  the  organisation, 
financing and efficiency of healthcare and education. 

Bring  forward  the  harmonisation  of  the  statutory  retirement  age  between  men  and 
women;  enhance  older  workers'  employability  and  monitor  closely 
the 
implementation of the recent reforms restricting access to early exit channels in order 
to  ensure  that  the  statutory  and  effective  retirement  age  is  rising  in  line  with  life 
expectancy.  

Take steps to reduce the effective tax and social security burden on labour especially 
for low income earners with a view to increasing employment rates for older persons 
and women given  the need to counteract the impact of demographic change on the 
working  population.  Shift  the  tax  burden  in  a  budgetary  neutral  way,  towards  real 
estate taxes, and environmental taxes. Reduce the high gender pay gap and enhance 
full-time  employment  opportunities  for  women,  notably  through  the  provision  of 
additional care services for dependants.  

Take further measures to improve educational outcomes, especially of disadvantaged 
young people. Take measures to reduce drop-outs from higher education. 

Take further steps to foster competition, in the services sectors, by removing barriers 
to market entry in the communications, transport and energy retail markets. Remove 
unjustified restrictions on access to the liberal professions. Enhance the powers of the 
competition  authorities  and  speed  up  the  implementation  of  the  competition  law 
reform.  

Step  up  the  restructuring  of  banks  which  benefited  from  public  support,  while 
avoiding deleveraging. Further improve the cooperation and coordination of national 
policy decisions with financial sector supervisors in other countries.  

Done at Brussels, 

For the Council 
The President 

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