Recommendation for a COUNCIL RECOMMENDATION on Austria’s 2013 national reform programme and delivering a Council opinion on Austria’s stability programme for 2012-2017
Date: 2013-05-29
Institutions: European Commission
Subjects: Austria, banking system, budget deficit, budgetary equilibrium, competition law, educational reform, female work, health costs, migrant worker, retirement conditions, stability programme

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
COM(2013) 370 final 

Recommendation for a 

COUNCIL RECOMMENDATION 

on Austria’s 2013 national reform programme  

and delivering a Council opinion on Austria’s stability programme for 2012-2017 

{SWD(2013) 370 final} 

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Recommendation for a 

COUNCIL RECOMMENDATION 

on Austria’s 2013 national reform programme  

and delivering a Council opinion on Austria’s stability programme for 2012-2017 

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 Parliament3, 

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) 

(3) 

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

On 13 July 2010, on the basis of the Commission's proposals, 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. 

On 29 June 2012, the Heads of State or Government decided on a Compact for Growth 
and  Jobs,  providing  a  coherent  framework  for  action  at  national,  EU  and  euro  area 
levels using all possible levers, instruments and policies. They decided on action to be 
taken  at  the  level  of  the  Member  States,  in  particular  expressing  full  commitment  to 
achieving the objectives of the Europe 2020 Strategy and to implementing the country-
specific recommendations. 

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OJ L 209, 2.8.1997, p. 1. 
COM(2013)370 final. 
P7_TA(2013)0052 and P7_TA(2013)0053. 
Council Decision 2013/208/EU of 22 April 2013. 

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(4) 

(5) 

(6) 

(7) 

(8) 

On 6 July 2012, the Council adopted a recommendation on Austria’s national reform 
programme  for  2012  and  delivered  its  opinion  on  Austria’s  updated  stability 
programme for 2011-2016. 
On  28  November  2012,  the  Commission  adopted  the  Annual  Growth  Survey5, 
marking  the  start  of  the  2013  European  Semester  of  economic  policy  coordination. 
Also  on  28  November  2012,  the  Commission,  on  the  basis  of  Regulation  (EU)  No 
1176/2011, adopted the Alert Mechanism Report6, in which it did not identify Austria 
as one of the Member States for which an in-depth review would be carried out. 

On  14  March  2013,  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 16 April 2013, Austria submitted its 2013 stability programme covering the period 
2012-2017 and its 2013 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  2013  stability  programme  pursuant  to  Council 
Regulation  (EC)  No  1466/97,  the  Council  is  of  the  opinion  that  Austria  undertook 
considerable  consolidation  efforts  to  bring  the  budget  on  a  path  to  correct  the 
excessive  deficit.  With  regard  to  the  2013  programme,  the  macroeconomic  scenario 
underpinning  the  budgetary  projections  is  optimistic.  The  main  objective  of  the 
budgetary  strategy  outlined  in  the  programme  is  to  gradually  reduce  the  general 
government deficit to reach a balanced budget in nominal terms by 2016 and to meet 
the  medium-term  objective  (MTO)  by  2015.  The  programme  confirms  the  previous 
MTO  of  a  structural  deficit  of  0.45%  of  GDP.  The  MTO  is  in  line  with  the 
requirements of the Stability and Growth Pact. Based on current projections, Austria is 
on  track  to  correct  its  excessive  deficit  by  2013  given  that  the  general  government 
deficit is at 2.5% of GDP in 2012 and is expected to further decrease to 2.2% of GDP 
in  2013  and  to  1.8%  of  GDP  in  2014  respectively  according  to  the  Commission 
forecast.  However,  there  are  possible  additional  costs  relating  to  the  unwinding  of  a 
large  bank  which  could  have  a  significant  deficit-increasing  impact.  After  a  strong 
improvement  exceeding  the  adjustment  path  required  in  the  EDP  in  2012,  the 
structural balance deficit is projected to increase in 2013 up to 1.8%. A slight increase 
of  the  structural  deficit  in  2013  is  confirmed  also  by  the  Commission  forecast. 
According to the information of the programme from 2014 onwards, the recalculated 
structural balance foresees a structural adjustment exceeding 0.5% in 2014 and 2015 
enabling Austria to reach the MTO two years in advance in comparison to the scenario 
presented  in  the  programme,  i.e.  in  2015  instead  of  2017.  As  for  the  expenditure 
benchmark according to the information provided in the programme the growth rate of 
government expenditure, net of  discretionary measures, over years 2014 and 2016 is 
expected to contribute to an annual structural adjustment towards the MTO by 0.5% of 
GDP. However, the projected significant decline in the expenditure/GDP ratio in the 
programme scenario is very ambitious since expenditure is estimated to attain in terms 
of GDP one of the lowest level in more than fifteen years. Austria can be expected to 

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COM(2012) 750 final. 
COM(2012) 751 final. 

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be in transition period from 2014 to 2016 regarding compliance with the debt criterion 
and plans would ensure sufficient progress towards compliance. 

The  strengthening  of  the  budgetary  framework  has  left  the  fiscal  relations  between 
layers  of  government  largely  unchanged  and  overlapping  responsibilities  and 
inconsistencies between funding and spending responsibilities remain a challenge. The 
complex  mechanism  of  continuous  agreements  between  the  national  government, 
social insurance providers and the sub-federal level, constitute an implementation risk 
to measures aimed at containing health expenditure. In education, the negotiations on a 
6-point  proposal  including  the  abolition  of  school  authorities  at  district  level  are  a 
welcome  step  towards  streamlining  of  responsibilities  between  different  layers  of 
government, but further simplification would be needed to reduce fragmentation more 
substantially. 

(9) 

The Austrian labour force potential is projected to shrink from 2020 and the economy 
is becoming more skills-intensive. There is scope to optimise the use of its working-
age population, in particular women, migrants and older workers. 

(10)  Older workers have an employment rate below the EU average (43.1% v. 48.8%) and 
almost 30% of people spend between 1.5 and three years in unemployment or on sick 
leave  just  before  retiring.  The  still  relatively  widespread  use  of  early  retirement  and 
invalidity  pension  schemes  as  well  as  a  relatively  low  statutory  retirement  age  for 
women  (60),  which  is  going  to  increase  only  very  gradually  in  the  future,  has  a 
negative impact on the labour supply of older workers. 

(11)  Although the female employment rate in Austria is relatively high (70.3 % compared 
to 62.4 % at EU level in 2012), there is still scope for increasing it by reducing gender 
segmentation  in  the  labour  market.  The  share  of  women  in  part-time  employment  is 
among the highest in the EU and availability of childcare and long-term care services 
is  limited.  Female  employment  rates  measured  in  full-time  equivalents  (55.6 %  in 
2012) suggest that Austria has particular difficulties in fully tapping the potential of its 
female  labour  force.  Moreover,  women  are  found  almost  twice  as  often  in  marginal 
employment  and  are  highly  concentrated  in  low-wage  employment.  This  pattern 
results in a gender pay gap of 24 %, which is the third highest in the EU. A reduction 
of the tax burden for low income earners could provide higher incentives to increase 
labour  market  participation.  The  structure  of  the  Austrian  tax  system  provides  the 
space to shift taxation towards other sources which are less detrimental to growth. In 
fact, property tax revenues in Austria account for 0.5% of GDP and are significantly 
below the EU average of 2.1% of GDP. In particular, revenues from recurrent taxes on 
immovable property which are considered to be the least detrimental to growth are the 
third lowest in the EU, representing 0.2% of GDP in 2011 (EU average: 1.3%).  

(12)  With 19 % of the working age population in 2011 being foreign born, Austria has one 
of  the  largest  shares  of  working-age  immigrants  in  the  OECD.  Migrants  often  face 
difficulties  on  the  labour  market  and  have  significantly  higher  unemployment  rates 
(9.7 %  vs  3.6 %)  and  lower  employment  rates  (non-EU  27  nationals:  62.8 %  vs 
Austrians:  76.4 %)  Additionally,  people  with  a  migrant  background  are  three  times 
more  often  employed  and  paid  below  their  actual  qualification  levels  than  Austrians 
(2008: 27.5 % vs 9.7 %). Also their education out  comes are lower and their poverty 
risk is twice as high (26.6% v. 12.6%). 

(13)  Medium and long-term pension and health care expenditure projections pose a risk to 
the sustainability of public finances. Long-term care expenditure projections also point 
to a sustainability risk, although to a lesser extent. The recent reforms to the pension 

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system are likely to reduce the sustainability risks to some degree, if accompanied by 
improvements in labour market conditions that allow older workers to stay longer in 
employment. However, an accelerated harmonisation of retirement ages between men 
and women as well as a link of the statutory retirement age to gains in life expectancy 
is still missing. The issue of the fiscal sustainability of the health care and long-term 
care system has to be addressed, also in view of the increasing need and demand for 
long-term  care  provision.  The  recent  policy  measures  taken  in  the  health  sectors  are 
likely  to  go  in  the  right  direction,  although  careful  assessment  of  their  effectiveness 
has  to  be  carried  out  in  the  coming  years.  There  is  scope  to  enhance  prevention, 
rehabilitation and independent living to contain future costs of long-term care.  

(14)  According  to  comparative  international  studies  and  tests,  education  outcomes  in 
Austria  are  below  average  for  10-  to  15-year-olds  despite  the  fact  that  Austria’s 
spending  on  education  is,  at  6.01 %  of  GDP,  well  above  the  EU  average  of  5.41 %. 
More than 25 % of young people aged 15 have poor reading skills and outcomes are 
only slightly better in mathematics. Achievement  gaps between  young people  with a 
migration  background  and  their  native  peers  are  among  the  highest  in  the  EU.  In 
higher  education  increasing  student  numbers  are  putting  pressure  on  financial  and 
organisational systems but the share of students completing their studies successfully 
is  low.  The  division  of  responsibilities  in  the  management  and  funding  of  the 
education system is also fragmented. 

(15)  Austria  is  one  of  the  Member  States  that  would  see  most  benefit  (in  GDP)  from 
reduced barriers to cross-border service provision. However, there are still significant 
barriers  to  entry  and  effective  competition  in  the  services  sector.  These  barriers  are 
especially  pronounced  in  the  liberal  professions  and  railway  transport.  Professional 
services play an important role in the business service markets, accounting for 10 % of 
GDP and 11 % of total employment. Restrictions on gaining access to and practising 
professions  in  the  services  sector,  e.g.  as  regards  legal  form  and  shareholding 
requirements,  persist.  There  is  a  strong  case  for  assessing  how  justified  these 
restrictions are and if the same public interest objectives cannot be reached with lighter 
regulatory  regimes.  While  a  recent  change  in  competition  law  will  strengthen  the 
powers  of  the  Austrian  competition  authority,  its  financial  and  human  resources  are 
still below the levels observed in economies of a similar or even smaller size. 

(16)  Austria  has  made  progress  in  the  cross-border  home-host  financial  supervisory 
cooperation.  Moreover,  further  headway  has  been  made  with  the  restructuring  of 
nationalised or partly nationalised banks which have benefitted from restructuring aid. 
However, due to risks associated with a further deterioration in asset quality of these 
banks,  there  are  still  remaining  pockets  of  vulnerability  which  need  to  be  closely 
monitored.  

(17) 

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. 

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(18) 

(19) 

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, 

In  the  context  of  the  European  Semester  the  Commission  has  also  carried  out  an 
analysis of the economic policy of the euro area as a whole. On this basis the Council 
has issued specific recommendations addressed to the Member States whose currency 
is  the  euro.  Austria  also  should  ensure  the  full  and  timely  implementation  of  these 
recommendations. 

HEREBY RECOMMENDS that Austria should take action within the period 2013-2014 to: 

1. 

2. 

3. 

4. 

5. 

6. 

Implement the budget for the year 2013 as envisaged so as to correct the excessive 
deficit in a sustainable manner and achieve the structural adjustment effort specified 
in  the  Council  recommendations  under  the  Excessive  Deficit  Procedure.  After 
correction  of  the  excessive  deficit,  pursue  the  structural  adjustment  effort  at  an 
appropriate  pace  so  as  to  reach  the  MTO  by  2015.  Streamline  fiscal  relations 
between layers of government, for example simplifying the organisational setting and 
aligning spending and funding responsibilities. 

Bring  forward  the  harmonisation  of  pensionable  age  for  men  and  women,  link  the 
statutory  retirement  age  to  life  expectancy,  implement  and  monitor  the  recent 
reforms  restricting  access 
improve  older  workers’ 
to  early  retirement  and 
employability in order to raise the effective retirement age and the employment rate 
of older workers. 

Take new measures to increase the labour market participation of women, namely by 
further improving child care and long-term care services and address the high gender 
pay and pension gaps. Fully use the labour market potential of people with a migrant 
background by improving the recognition of their qualifications and their education 
outcomes.  Reduce  the  effective  tax  and  social  security  burden  on  labour  for  low-
income earners in a budget-neutral way by relying more on other sources of taxation 
less detrimental to growth, such as recurrent property taxes.  

Effectively implement the recent reforms of the health care system to make sure that 
the  expected  cost  efficiency  gains  materialise.  Develop  a  financially  sustainable 
model  for  the  provision  of  long-term  care  and  put  a  stronger  focus  on  prevention, 
rehabilitation and independent living. 

Improve  educational  outcomes,  in  particular  of  disadvantaged  young  people, 
including by enhancing early childhood education and reducing the negative effects 
of early tracking. Further improve strategic planning in higher education and enhance 
measures to reduce drop-outs. 

Further strengthen the powers and resources of the federal competition authority and 
monitor  the  implementation  of  the  competition  law  reform.  Remove  excessive 
barriers  for  service  providers.  This  includes  reviewing  whether  existing  restrictions 
on  entry  and  conduct  in  regulated  professions  are  justified  by  general  interest  and 
fostering competition notably in the railway sector.  

7 

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

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7. 

With  a  view  to  maintaining  financial  stability  continue  to  closely  oversee  the 
nationalised and partly nationalised banks and speed up their restructuring.  

Done at Brussels,  

For the Council 
The President 

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