COMMISSION STAFF WORKING DOCUMENT Country Report Austria 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2019-02-27
Institutions: European Commission, Secretariat-General
Subjects: Austria, economic situation, education, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 27.2.2019  SWD(2019) 1019 final  COMMISSION STAFF WORKING DOCUMENT Country Report Austria 2019     Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2019) 150 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

3.  Reform priorities 

3.1.  Public finances and taxation 

3.2.  Financial sector 

3.3.  Labour market, education and social policies 

3.4.   Competitiveness reforms and investment 

Annex A: Overview Table 

Annex B: Commission Debt Sustainability Analysis and fiscal risks 

Annex C: Standard Tables 

3 

7 

12 

15 

15 

25 

29 

38 

48 

52 

53 

Annex D: Investment Guidance on Cohesion Policy Funding 2021-2027 for AUSTRIA 

59 

References 

LIST OF TABLES 

Table 1.1: 

Key economic and financial indicators — Austria 

Table 2.1: 

Summary table on 2018 CSR assessment 

Table 3.1.1:  New features introduced by the 2017 IFR Act 

Table C.1: 

Financial market indicators 

Table C.2: 

Headline Social Scoreboard indicators 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

Table C.6: 

Green growth 

LIST OF GRAPHS 

Graph 1.1:  GDP growth and contributions 

Graph 1.2: 

Headline and core inflation 

Graph 1.3: 

Regional disparities 

1 

63 

11 

13 

17 

53 

54 

55 

56 

57 

58 

7 

7 

8 

 
 
 
 
Graph 1.4: 

Benchmark for nominal compensation growth,      Austria 

Graph 1.5: 

Activity, employment and unemployment rates (quarterly) 

Graph 1.6: 

Labour productivity 

Graph 1.7: 

Key public finance developments 

Graph 2.1:  Overall multiannual implementation of 2011-2018 CSRs to date 

Graph 3.1.1: 

Intergovernmental transfers as a percentage of total revenue by level of government 

(2016) 

Graph 3.1.2:  Austria's fiscal framework 

Graph 3.1.3:  Comparison of selected tax revenues, 2017 

Graph 3.1.4:  Drivers of change in public pension expenditure 

Graph 1: 

The distributional and equity effects of the Family Bonus plus and the child 

supplement 

Graph 2: 

Labour supply (left) and growth effects (right) 

Graph 3.1.5:  Pension expenditure - long-term projections 

Graph 3.2.1:  Credit growth y-o-y  % change 

Graph 3.2.2:  Price developments and valuation gaps 

Graph 3.2.3:  Distribution of venture funds raised (%) 

Graph 3.3.1:  Beveridge curve Austria 

Graph 3.3.2:  Gender pay gap and components 

Graph 1: 

Distributional and equity effects of increased female full-time employment 

Graph 3.3.3:  Percentage of the population at risk of poverty or social exclusion by NUTS 2 region 

(Bundesland) 2016 

Graph 3.3.4: 

Tertiary attainment by NUTS 2 region in per cent 

Graph 3.4.1: 

TFP developments in selected countries 

Graph 3.4.2:  Employment in fast-growing enterprises in innovative sectors (% of total employment) 

Graph 3.4.3:  Share of ICT sector in GDP 

LIST OF BOXES 

Box 2.1: EU funds and programmes contributed to addressing structural challenges and to fostering 

growth and competitiveness in Austria 

Box 3.1.1: Effects of the new Family Bonus plus 

Box 3.3.1: Monitoring performance in the light of the European Pillar of Social Rights 

Box 3.3.2: From part-time to full-time: the budgetary and distributional potential of increasing female 

work intensity 

Box 3.4.1: Investment challenges and reforms in Austria 

8 

9 

9 

10 

12 

15 

16 

17 

18 

19 

20 

21 

25 

27 

28 

29 

31 

33 

35 

37 

38 

40 

41 

14 
19 
30 

33 
47 

2 

 
 
 
 
 
EXECUTIVE SUMMARY 

Addressing  its  remaining  structural  reforms 
and  investing  more  to  increase  productivity 
would  support  Austria’s  long-term  growth. (1) 
Economic growth is projected to slow down but it 
is  still  expected  to  remain  robust.  Austria's  fiscal 
framework  provides  little  incentives  for  efficient 
public  spending,  especially  at  the  subnational 
level.  The  projections  for  pension,  health,  and 
long-term  care  expenditures  point  to  a  challenge 
for  fiscal  sustainability  in  the  long-term.  Austria 
appears to have considerable scope for shifting the 
tax burden away from labour to more growth- and 
inclusiveness-friendly  sources  of  revenue.  Certain 
groups are not participating to their full potential in 
the  labour  market.  Pupils’  basic  skills  continue  to 
depend  strongly  on  their  socio-economic  and 
improve 
migrant  background.  Key 
productivity  and  generate  sustainable  long-term 
growth  are 
translate  research  and 
development  investment  into  innovation,  support 
innovative  businesses  and  to  tackle  restrictive 
regulation. 

to  better 

levers 

to 

to 

by 

robust 

supported 

The  Austrian  economy  has  been  growing 
private 
strongly, 
consumption and investment. GDP is expected to 
have  grown  by  2.7 %  in  2018.  Domestic  demand 
remained  the  main  driver  of  growth,  thanks  to 
increasing 
rising  private  consumption  due 
employment  and  wages,  but  also  solid  investment 
growth  in  the  business  sector  and  a  rebound  in 
construction  investment.  Export  growth  remained 
supported  overall  growth.  The 
strong  and 
unemployment  rate  is  expected  to  have  fallen 
further  from  5.5 %  in  2017  to  4.8 %  in  2018. 
Headline  and  core  inflation  remained  around  2 % 
and  thus  above  the  euro  area  average.  For  2019 
to  grow  more 
is  forecast 
and  2020  GDP 
moderately at 1.6 % in both years.  

Public finances have improved. Having declined 
to  0.8 %  of  GDP  in  2017  on  the  back  of  the 
the  government  headline 
economic  upswing, 

(1)  This  report  assesses  Austria’s  economy  in  light  of  the 
European Commission’s Annual Growth Survey published 
on 21 November 2018. In the survey, the Commission calls 
on  EU  Member  States  to  implement  reforms  to  make  the 
European  economy  more  productive, 
resilient  and 
inclusive.  In  so  doing,  Member  States  should  focus  their 
efforts  on  the  three  elements  of  the  virtuous  triangle  of 
economic  policy  —  delivering  high-quality  investment, 
efforts  on  productivity  growth, 
focusing 
reforms 
inclusiveness  and 
institutional  quality  and  ensuring 
macroeconomic stability and sound public finance. 

3 

deficit is expected to decrease further, turning into 
a  surplus  of  0.1 %  of  GDP  in  2020  under  the 
assumption  of  unchanged  policies.  This  is  mainly 
the result of higher than expected tax revenues and 
higher  employment.  Public  debt  is  expected  to 
continue  its  downward  path,  decreasing  from 
78.3 % of GDP in 2017 to 67.8 % of GDP in 2020. 

is 

and 

skills 

important 

enterprises. 

Focussing investment  (both public  and private) 
innovation,  digitalisation,  sustainability, 
on 
childcare 
for 
productivity  and  growth  in  Austria.  Austria’s 
investment  rate  is  above  the  EU  average,  but  is 
expected to moderate. High investment in research 
and  development  is  not  fully  translating  into 
innovation  outcomes  and  digital  technologies  are 
still not widely used, particularly among small and 
medium-sized 
energy 
efficiency  and  the  share  of  renewables  would 
strengthen  Austria’s  sustainable  growth  potential. 
Investment  in  skills  but  also  affordable  full-time 
childcare  services  and  all-day  schools  would  help 
to  improve  labour  market  outcomes,  in  particular 
for  disadvantaged  groups  and  women.  Annex  D 
the 
identifies  key  priorities  for  support  by 
European  Regional  Development  Fund  and  the 
European  Social  Fund  Plus  over  2021-2027, 
building  on  the  analysis  of  investment  needs  and 
challenges outlined in this report. 

Increasing 

Austria  has  made 
addressing 
the 
recommendations  

some  progress (2) 
2018 

in 
country-specific 

There  has  been  some  progress  in  the  following 
areas: 

  While public health expenditure is in line with 
the legislated ceilings, as a share of GDP, it is 
still increasing. 

  Several measures have been taken to reduce the 
labour tax  wedge  for families and low  income 
earners.  Labour  market  outcomes  for  women 
improved,  mainly  due  to  improved  childcare 
provision.  However,  their  share  of  part-time 
employment  remains  high  in  comparison  and 

(2)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  in  each  respective  subpart  of  a  country 
specific recommendation is presented in the overview table 
in the Annex. 

 
 
                                                           
                                                           
 
Executive summary 

provision  of  childcare  differs  substantially 
between the regions (Länder).  

decrease  energy  consumption  and  reduce  poverty 
and social exclusion. 

  Austria  has 

slightly  prolonged 

its  key 
programme  for  business  digitalisation,  has 
established  a  new  digital  agency  and  launched 
a call for digital innovation hubs. 

There  has  been  limited  progress  in  the  following 
areas: 

  Action has been taken to increase the effective 
retirement  age,  but  nothing  has  been  done  to 
increase  the  statutory  retirement  age.  The 
sustainability  of  the  pension  system  remains  a 
challenge.  

  While  measures 

the 

the 

supporting 

de-
institutionalisation  of  long-term  care  are  being 
implemented, 
the 
for 
increases 
‘Pflegeregress’ 
additional  public  spending  with  negative 
effects  for  the  long-term  sustainability  of  the 
system.  

abolishment 

of 
need 

the 

  Austria  has  implemented  several  initiatives  to 
improve  its  fiscal  framework  but  its  rules 
remain complex and subnational tax autonomy 
has not yet been sufficiently increased.  

  While  recent  measures  to  strengthen  early 
childhood education and care could have long-
term  positive  effects  on  educational  outcomes, 
the  direction  of  reform  measures  in  general 
education  undermine  previous  reform  efforts 
and  are  not  in  line  with  EU  and  OECD  best 
practices.  

  Austria  advances  with  its  burden  reduction 
efforts  but  has  not  addressed  restrictions 
identified  by 
for  key 
professions  nor  performed  a  wider  review  of 
service sector regulation.  

the  Commission 

Regarding progress in reaching the national targets 
under  the  Europe  2020  strategy,  Austria  has 
already  reached  its  targets  on  tertiary  education 
attainment  and  limiting  early  school  leaving.  It  is 
on 
the 
renewable energy targets. However, more effort is 
needed 
the  ambitious  research  and 
development target, cut greenhouse gas emissions, 

the  employment  and 

to  reach 

to  meet 

track 

4 

of 

  Austria  performs  relatively  well  on  the 
indicators 
the  Social  Scoreboard 
supporting  the  European  Pillar  of  Social 
Rights.  It  has  robust  policies  to  help  people 
enter the labour market and ensure fair working 
conditions.  Policies  to  reduce  poverty  and 
social  exclusion  risks  are  generally  effective. 
However,  there  have  recently  been  concerns 
about  the  proper  involvement  of  the  social 
partners  in  policy  reforms.  Insufficient  full-
time  childcare  contributes  to  the  high  share  of 
part-time  employment  of  women,  which 
hampers  the  full  use  of  female  labour  market 
potential. 

Key structural issues analysed in this report, which 
point 
for  Austria’s 
economy, are the following 

to  particular  challenges 

  Austria’s  fiscal  framework  provides  few 
incentives  for  efficient  public  spending, 
especially at the  subnational level. The 2017 
Fiscal  Relations  Act 
Intergovernmental 
introduced  various  measures  designed 
to 
reduce  the  overall  complexity  of  the  system, 
their 
which  are  generally  advanced 
implementation. However the Act falls short of 
increasing  subnational  tax  autonomy  and  a 
more  transparent  allocation  of  competences 
across  levels  of  government,  reforms  that 
remain  high  on  the  political  agenda.  The 
Kompetenzbereinigungspaket  is  a  first  step 
towards  a  re-allocation  of  competences,  but 
affects only a limited number of policy areas. 

in 

reforms 

comprehensive 

  Recent  reform  measures  aim  to  reduce 
Austria’s  high  tax  burden  on  labour,  and 
more 
are 
announced.  The  Austrian  government  has 
expressed its commitment to reduce the tax-to-
GDP ratio from currently 42.4 % to 40 % in the 
coming  years.  Recent  reform  measures  reduce 
social security contributions for employers and 
low-income earners and provide a tax relief for 
working  parents.  A  comprehensive  reform  of 
personal 
is 
announced  for  2020.  However,  there  are  no 
plans for a change in the tax mix towards more 
growth-friendly sources of revenue.  

corporate 

income 

and 

tax 

 
 
  The  projections  for  pension,  health,  and 
long-term  care  expenditures  point  to  a 
challenge for fiscal sustainability in the long-
term. Although the projected increase in public 
pension  expenditure  seems  moderate,  Austria 
starts  from  one  of  the  highest  pension-to-GDP 
ratios in the  EU. Maintaining the  current level 
of  benefits  for  pensioners  would  require 
tapping additional sources of financing, raising 
the question of inter-generational fairness. The 
main  driver  of  public  health  spending  -  an 
over-sized  hospital  sector  -  is  the  result  of  a 
organisational 
fragmented 
structure.  Efficiency  gains  are  expected  from 
merging  social  insurance  agencies,  but  the 
reform 
imply  upfront  costs. 
Considering that public spending for long-term 
care  is  projected  to  double  by  2070,  the 
removal  of  the  requirement  to  use  personal 
assets  to  cover  long-term  inpatient  care  will 
further increase expenditures.  

financial 

likely 

and 

to 

is 

  Financial  sector  resilience  has 

from 

further 
strengthened and the risks to public finances 
the  asset  management 
stemming 
companies  for  impaired  assets  have  been 
contained.  Banking  sector  capitalisation  has 
remained  flat  in  the  first  half  of  2018,  while 
profitability in the domestic market has perked 
up,  driven  also  by  the  acceleration  in  lending 
activity.  Foreign-currency  loans  granted  by 
banks  on 
local  market  have  further 
declined,  but  still  warrant  close  monitoring. 
The  winding-down  of  the  asset  management 
companies  set  up  during  the  financial  crisis  to 
manage  impaired  assets  has  advanced  better 
than expected, and risks to public  finances are 
limited.  

the 

  House  prices  and 
but 

impact 

rents  have 
the 

risen 
considerably, 
on 
consumption  and  financial  market  risks  is 
contained. Housing prices and rents have been 
increasing  steadily  since  2005,  mostly  driven 
by developments in Vienna. This can be linked 
to excess housing demand. Despite increases in 
mortgage  lending,  financial  market  risks  are 
contained  for  now.  The  impact  on  private 
consumption  seems  also  relatively  limited. 
Rising  rents  were  partly  due  to  an  increased 
share of privately financed housing completion. 
Despite  rising  construction  and  land  prices, 

Executive summary 

squeezing 
the  availability  of  affordable 
housing,  housing  assistance  expenditure  per 
capita decreased in  most regions, especially in 
Vienna. 

  The  Austrian  labour  market  continues  to 
improve,  but  challenges  for  specific  groups 
remain.  Employment  and  activity  rates  have 
continually risen since the start of the recovery. 
At  the  same  time,  there  are  signs  of  labour 
shortages in certain sectors and regions. With a 
high  proportion  of  women  in  part-time  work 
and a high gender pay gap, female participation 
in the labour market is below potential. This is 
partly due to insufficient and uneven provision 
of childcare for children under three. Although 
rate  of  older  workers 
the  employment 
increased,  it  remains  below  the  EU  average. 
Further  challenges  include  integrating  people 
with a migrant background (including refugees) 
into the labour market and high unemployment 
rates among low-skilled. 

  Overall,  social  transfers  are  effective  in 
reducing  income  inequality  and  protecting 
people  from  poverty  and  social  exclusion, 
but  vulnerable  groups  remain.  The  risk  of 
poverty and social exclusion remains stable and 
below  the  EU  average.  Although  pensions  are 
generally  adequate,  the  risk  of  poverty  and 
social  exclusion  for  women  over  65  is  higher 
than for  men,  mainly due to the gender gap in 
pensions.  Income  inequality  is  relatively  low, 
though  wealth  remains  highly  concentrated. 
The  tax-benefit  system  continues  to  perform 
well in reducing relatively high market income 
disparities  and  protecting  people  from  social 
exclusion.  

  Despite  education  reforms,  basic  skills 
among  disadvantaged  students  have  not 
improved.  Recent  education  reforms  partly  
reverse  previous  reform  efforts  and  are  not  in 
line  with  EU  and  OECD  best  practices,  for 
example  as  regards  expansion  of  all  day 
schooling,  which  has  slowed  down.  Pupils’ 
basic skills still depend strongly on their socio-
economic  or  migrant  background.  Austria’s 
tertiary  education  attainment  rate  has  already 
reached  the  national  and  the  Europe  2020 
target.  

5 

 
 
hampers 

productivity 

  Restrictive  regulation  in  Austria’s  services 
and 
markets 
discourages 
investment. 
innovation  and 
Austria has high access barriers and restrictive 
rules  on  practising  key  trades  and  professions. 
Regulatory  barriers,  notably  as  regards  the 
daily  operation  of  shops,  contribute  to  the 
relatively weak development of Austria’s retail 
sector.  Regulatory  restrictions  are 
limiting 
investment,  job  creation  and  innovation  in  the 
services  sector  itself.  They  also  affect  other 
parts  of  the  economy  for  which  competitive 
and innovative services are a crucial input.  

science-business 

  Stagnating  productivity  requires  boosting 
innovation results and supporting innovative 
businesses.  Austria  is  investing  heavily  in 
research  and 
innovation  but  has  not  yet 
managed  to  overcome  the  stagnation  in  total 
factor  productivity.  Efforts  are  still  needed  to 
support 
strengthen 
knowledge-intensive  sectors,  promote  eco-
innovation  and 
‘smart 
link  up 
specialisation  strategies’.  Structural  challenges 
remain  for  starting  and  scaling-up  innovative 
businesses  in  Austria.  Apart  from  regulatory 
barriers, the lack of later-stage funding options 
play a role, as well as skills shortages in some 
professions.  

regional 

links, 

sector 

Austria’s 

technology 

information 

  Austria  faces  challenges  in  the  take-up  of 
digital  technologies  and  business  models  by 
smaller  firms,  as  well  as  in  broadband 
and 
coverage. 
communication 
is 
comparatively  small.  Micro-,  small-  and 
medium-sized  firms  are  lagging  behind  in 
technologies.  High-speed 
taking-up 
connectivity in rural areas is lacking, increasing 
the  divide  in  digitalisation  and  innovation 
capacities  between  regions.  Austria’s  national 
digitalisation strategy still lacks monitoring and 
systematic performance review tools. There are 
also shortcomings in digital skills. 

new 

Executive summary 

6 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth 

has 

picked 

consumption 

Austria’s  economy  is  growing  robustly  and 
up 
private 
considerably.  After  increasing  by  2.6 %  in  2017, 
real  GDP  is  expected  to  have  expanded  at  a 
slightly higher pace in 2018 (2.7 %). It is forecast 
to  slow  thereafter  (see  Graph  1.1).  Domestic 
demand  remained  the  main  driver  of  growth, 
thanks to rising private consumption. This reflects 
favourable 
labour  market  developments  and 
increasing  wages,  as  well  as  solid  investment 
growth  in  the  business  and  construction  sector. 
Despite  less  dynamic  growth  in  international 
markets,  export  growth  remained  strong  in  2018. 
Domestic demand is expected to remain firm in the 
coming years but to slow in line with an expected 
economic  slowdown.  This  will  be  mainly  driven 
by  decreasing  external  demand,  in  line  with  the 
expected  economic  slowdown  in  Austria’s  main 
trading partners. 

Graph 1.1:  GDP growth and contributions 

(1) Winter forecast for real GDP growth 
Source: European Commission 

Investment 

the 

economic 

slowdown. 

Investment  is  contributing  strongly  to  GDP 
growth,  but  is  expected  to  slow  down  in  line 
with 
In  2017, 
investment  grew  by  3.9 %.  Capacity  expansion 
needs in response to strong economic growth also 
led to solid increases in acquisitions of machinery 
and equipment, which grew by 4.6 %. In addition, 
the 
after  several  years  of  subdued  growth, 

construction sector rebounded in 2017, growing by 
3.5 %, mostly driven by the increase in residential 
housing.  In  2018,  total  investment  is  expected  to 
have grown at a slightly slower pace. This reflects 
the  overall  moderation  in  economic  growth  in  the 
the  year,  driven  mainly  by 
second  half  of 
decreasing 
(European 
Commission, 2018a). Long-term economic growth 
will depend on ensuring that sufficient investment 
will  be  directed  towards  productivity-enhancing 
factors,  including  digitalisation,  skills,  research 
and innovation (see Section 3.4). 

external 

demand 

Inflation 

Graph 1.2:  Headline and core inflation 

Source: European Commission (WF 2019 for HICP, AF 2018 for 
core inflation) 

Austria’s  inflation  rate  is  expected  to  stay 
around 2 % in the coming years, remaining also 
above  the  euro  area  level.  The  strengthening  of 
the  economy  is  mirrored  by  robust  headline  and 
core  inflation,  which  stood  at  2.1 %  and  1.9 %  in 
2018,  respectively.  The  thriving  tourism  sector  is 
contributing to rising services prices, especially in 
hotels  and  restaurants,  but  increasing  rents  also 
contributed  to  the  overall  price  increase.  Rising 
wages and strong domestic demand are expected to 
boost  domestic  price  pressure,  mainly  in  the 
service  and  industrial  goods  sector.  With  2.0 %, 
Austria’s  headline  inflation  is  expected  to  remain 
above the euro area average of 1.4 % for 2019 and 
1.5 % for 2020 (see Graph 1.2). 

7 

-5-4-3-2-101234505060708091011121314151617181920%, ppsPrivate consumptionPublic consumptionInvestmentInventoriesNet exportsReal GDP (% change)Forecast100105110115120125130135140145150909510010511011512012513013514005060708091011121314151617181920Index, 2005=100Index, 2005=100HICP inflation, AustriaHICP inflation, euro areaCore inflation, Austria (rhs)Core inflation, euro area (rhs)Forecast 
 
 
 
 
 
1. Economic situation and outlook 

Regional disparities 

Graph 1.3: 

Regional disparities 

GDP per head in PPS (2016); change in GDP per head (2011-
2016); Investment as % of GDP (average 2010-2015); 
population growth (2010-2016); Productivity as GVA per 
person employed (2016). 
Source: Eurostat 

and 

growth 

labour  market 
Economic 
developments  differ  between  the  West  of 
Austria  as  compared  to  the  East  and  South, 
with  Vienna  taking  a  special  position.  The 
Western Bundesländer show high current GDP per 
capita  values  and  high  GDP  growth  over  the  last 
years (e.g Tirol had a GDP per capita in percentage 
of the EU average of 129 % in 2010 and 138 % in 
2016). They also have lower unemployment rates, 
and,  in  Tirol  and  Vorarlberg,  higher  population 
growth. GDP per capita in Vienna decreased from 
164% of the EU average in 2010 to 153% in 2016, 
which  is  probably  related  to  a  strong  increase  of 
the  population.  The  capital  also  has  the  highest 
unemployment  rate  (10.1 %  of  people  aged  20  to 
64 years in 2017, compared to 2.9 % in Salzburg). 
Disparities  of 
less 
pronounced across the Bundesländer than for GDP 
per capita (see Graph 1.3). Disparities with regard 
to the investment rate are even more limited, with 
values to the EU average. 

labour  productivity  are 

Labour market 

The  Austrian 
labour  market  continues  to 
improve. Employment is forecast to have grown at 
1.5 % in 2018, driven mainly by services, industry 
and  public  sector.  This  pushed  the  unemployment 
rate down to a level of 4.9 % in the third quarter of 

8 

its 

reaching 

structural 

2018, 
In  an 
environment  of  increasing  demand  for  labour  and 
falling  unemployment,  there  are  signs  of  labour 
shortages. 

level. 

Graph 1.4: 

Benchmark for nominal compensation growth,      
Austria 

Source: European Commission 

Wage  growth 
is  edging  up  reflecting  the 
performance  of  the  labour  market.  Nominal 
compensation per employee is expected to increase 
by  2.5 %  in  2018  and  continue  doing  so  in  2019, 
after  a  temporary  slowdown  in  2017.  This  wage 
growth  is  however  slower  than  what  could  be 
expected  based  on  the  historical  relationship  with 
inflation,  productivity  and  unemployment,  but 
higher  than  the  rate  which  would  be  consistent 
with  a  stable  evolution  of  cost  competitiveness. 
(see  Graph  1.4)  At  the  same  time,  it  implies  a 
slight  appreciation  of  the  real  effective  exchange 
rate (an indicator of external cost competitiveness). 
(3)  As  inflation  slightly  eased,  real  wage  growth 
improved, from 0.2 % in 2017 to 0.8 % in 2018. 

Despite  increased  labour  market  participation 
labour 
by  older  workers  and  women, 
underutilisation 
challenge. 
remains 
Employment  and  activity 
rates  have  been 
continually  rising  since  the  start  of  the  recovery 

a 

(3)  This  is  a  benchmark  for  wage  growth  consistent  with 
internal and external labour market conditions. Calculation: 
the  wage  growth  predicted  on  the  basis  of  changes  in 
labour  productivity,  prices,  the  unemployment  rate,  and 
wage  growth  consistent  with  constant  unit  labour  cost 
based  on  the  real  effective  exchange  rate  (European 
Commission, 2018b). 

20406080100120140160180GDP per headGDP per headchangeInvestmentratePopulation growthProductivityIndex, EU 28=100EU28Non-capital regions-2-10123456789900010203040506070809101112131415161718%Prediction based on inflation, productivity andunemploymentActual nominal compensation growthNominal compensation growth consistent with constantUCL-based REER 
 
 
                                                           
1. Economic situation and outlook 

low  house  ownership  rates  at  the  bottom  of  the 
wealth 
(European  Commission, 
2018c).  

distribution 

Productivity 

Graph 1.6: 

Labour productivity 

reaching  76.2 %  and  80 %  respectively  in  the 
second  quarter  of  2018  (see  Graph  1.5).  This  is 
mainly  driven  by  increased  participation  of  older 
workers  and  women,  but  at  the  same  time  hours 
worked  per  worker  have  declined.  With  an 
employment  rate  for  women  of  71.4 %  in  2017, 
Austria  has 
second  highest  part-time 
employment  rate  in  the  EU,  at  47.9 %  after  the 
Netherlands.  This  is  accompanied  by  a  very  wide 
gender pay gap. The employment rate for non-EU 
nationals slightly increased in 2017 to 60.9 %, but 
it  is  still  significantly  below  the  employment  rate 
of Austrian nationals (16.9 pps lower).  

the 

Graph 1.5:  Activity, employment and unemployment 

rates (quarterly) 

(1) Unemployment rate (% of labour force), total, ages 15-
74, seasonally adjusted 
(2) Activity and employment rates (% of population), total, 
ages 20-64, seasonally adjusted 
Source: Eurostat 

Social developments 

income 

inequality 

is  relatively 

While 
low, 
wealth remains highly concentrated. In 2017, the 
richest  20 %  of  households  had  a  disposable 
income  4.3  times  that  of  the  poorest  20 %.  While 
this  ratio  has  slightly  increased  with  respect  to 
2016, it is still well below the EU-wide average of 
5.1.  The  tax-benefit  system  continues  to  perform 
well  in  reducing  relatively  high  market  income 
disparities  and  protecting  people  from  social 
exclusion. The risk of poverty and social exclusion 
remains stable and below the EU average and pre-
crisis 
household 
disposable income,  Austria ranks high in terms of 
inequality based on net wealth, mainly the result of 

levels.  However, 

unlike 

Source: Eurostat and European Commission 

Labour  productivity 
in  Austria  has  been 
recently  growing  at  a  slower  pace,  as  total 
factor  productivity  increases  only  slightly.  Real 
labour  productivity  per  person  employed  dropped 
heavily  during  the  crisis  and  only  started  to 
increase  again  in  2015.  The  overall  amount  of 
hours  worked per capita has  decreased in the past 
decade,  due  to  an  increased  share  of  part-time 
work.  Therefore,  labour  productivity  per  hour 
worked  is  the  preferred  indicator  when  assessing 
labour  productivity  developments 
in  Austria. 
Nevertheless,  since  the  crisis,  labour  productivity 
has  been  growing  at  a  slower  pace.  Total  factor 
productivity is still struggling to achieve pre-crisis 
levels  and  remains  below  the  euro  area  level. 
While  it  has  been  increasing  again  weakly  since 
2015,  this  might  primarily  be  driven  by  cyclical 
components (see Section 3.4.). While nominal unit 
labour costs stagnated in 2017, increasing only by 
0.6 % compared to 2016, they are expected to have 
increased again in 2018, in line with developments 
in  labour  productivity  growth  and  inflation  (see 
Graph 1.6). 

9 

01234567455055606570758085% of labour force% of populationUnemployment rate 15-74 (rhs)Activity rate 20-64Employment rate 20-649095100105110115120125130135000102030405060708091011121314151617Index, 2000=100Nominal unit labour costsTotal factor productivity - ATTotal factor productivity - EAReal labour productivity per personReal labour productivity per hour worked 
 
 
1. Economic situation and outlook 

2010 to 2017, on the back of rising nominal GDP. 
Nevertheless,  private  sector  credit  flow  increased 
again in 2017, reaching 4.3 % of GDP (well below 
the  macroeconomic  scoreboard  threshold).  After 
several  years  of  continued  deleveraging,  credit 
flows  for  non-financial  corporations  accelerated 
somewhat in the past three years. However, this is 
in line with economic growth, as the indebtedness 
of  non-financial  corporations  continues  to  fall, 
reaching  72.1 %  of  GDP  in  2017.  Meanwhile, 
household  debt  decreased  to  50.4 %  in  2017  (see 
Section 3.2) (European Commission, 2018c). 

Public finances and fiscal sustainability 

Graph 1.7: 

Key public finance developments 

External position 

The current account surplus remained stable at 
a moderate level in 2017, with a slightly positive 
net  international  investment  position.  In  2017, 
the current account surplus stood at 2.0 % of GDP, 
a slight decline compared to 2016. For many years 
Austria  has  had  a  positive  trade  balance,  aided 
particularly  by  its  tourism  industry.  Business 
services  for  companies  are  also  contributing 
increasingly  to  service  exports.  In  2017,  exports 
grew by 4.7 % compared to 2016. Export growth is 
expected  to  remain  roughly  stable  in  2018  and 
decrease  thereafter. The 5-year percentage change 
of Austria’s export market share, turned positive in 
2017  (+2.3 %),  due  to  a  base  effect (4)  as  well  as 
world  trade  developments,  and  is  expected  to 
remain positive in 2018. Austria’s net international 
investment  position    has  been  positive  since  2013 
and is expected to further improve in 2018. 

Housing 

and 

have 

rents 

prices 

House 
grown 
considerably in the past decade, but the impact 
on  private  consumption  and  financial  market 
risks  seem  to  be  contained.  Housing  prices  and 
rents have been increasing steadily since 2005. The 
increases  seem 
to  be  mostly  driven  by  the 
developments  in  Vienna.  Despite  increases  in 
mortgage  credit  growth,  financial  market  risks 
seem to be contained for now. Also the impact on 
private consumption is relatively limited, which is 
due  to  a  low  homeownership  rate  coupled  with  a 
large share of social housing (see Section 3.2). The 
increase  in  house  prices  can  be  linked  to  excess 
demand,  which  peaked  in  2016.  Since  then,  signs 
of a relaxation are apparent as house price growth 
has slowed and housing supply is increasing, while 
demand  is  set  to  decline.  The  increasing  share  of 
privately 
together  with 
decreasing  public  financing  in  this  sector,  might 
have contributed to rising rents (see Section 3.4).  

financed 

housing 

Private sector debt 

In 2017, private sector debt continued to decline 
to  122.5 %  of  GDP.  The  share  of  private  sector 
debt as percentage of GDP declined steadily from 

(4)  The MIP scoreboard indicator is the percentage change of 
export market shares (goods and services) over five years. 
Base  effect:  that  one  of  the  very  good  or  bad  performing 
years is no longer included in the observed period.  

Source: European Commission 

is  due 

finances  have 

Public 
improved.  Having 
improved to 0.8% of GDP in 2017 on the back of 
the  economic  upswing,  the  government  headline 
deficit  is  expected  to  further  narrow  in  2018  and 
2019, turning to a surplus of 0.1 % of GDP in 2020 
under  the  assumption  of  unchanged  policies.  The 
to  higher-than-expected 
improvement 
revenues  from  personal  and  corporate  income 
taxes,  due  in  turn  to  better  employment  and 
demand  conditions.  The  structural  balance  is 
projected  to  improve  accordingly,  reaching  -0.2% 
of GDP in 2020, above the medium-term objective 
of  -0.5  %  of  GDP.  Public  debt  is  expected  to 
decrease from 78.3% of GDP in 2017 to 67.8% of 
GDP  in  2020.  This  debt  reduction  reflects  the 
favourable  development  of  the  primary  balance, 
debt-decreasing  stock-flow  adjustments,  and  a 
reverse  snowball  effect  since  nominal  GDP  is 

10 

-6-4-2024681040424446485052541011121314151617181920%of (pot.) GDP, yoy% change % of GDPExpenditureRevenueDeficit (rhs)Structural balance (rhs)Revenue (rhs)Expenditure (rhs)forecast 
                                                           
 
1. Economic situation and outlook 

growing 
faster 
government debt. 

than 

interest  payments  on 

care and pensions (see Section 3.1). 

Despite  positive  budgetary  developments, 
Austria remains at medium fiscal sustainability 
risk in the long term. Long-term risks are rooted 
in the projected increase for long-term care, health 

Table 1.1: 

Key economic and financial indicators — Austria 

(1)  Net international investment position,  excluding direct investment and portfolio equity shares 
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation 
Source: Eurostat and ECB as of 31-1-2019, where available; European Commission for forecast figures (Winter forecast 2019 for 
real GDP and HICP, Autumn forecast 2018 otherwise) 

11 

2004-072008-122013-1520162017201820192020Real GDP (y-o-y)3.00.60.62.02.62.71.61.6Potential growth (y-o-y)2.11.01.11.41.82.02.02.1Private consumption (y-o-y)1.90.90.21.41.4...Public consumption (y-o-y)2.11.20.81.81.5...Gross fixed capital formation (y-o-y)1.7-0.21.14.33.9...Exports of goods and services (y-o-y)7.61.22.42.74.7...Imports of goods and services (y-o-y) 6.21.32.43.45.1...Contribution to GDP growth:Domestic demand (y-o-y)1.90.70.52.12.0...Inventories (y-o-y)0.4-0.10.00.00.5...Net exports (y-o-y)0.90.00.0-0.2-0.1...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.30.00.30.50.80.90.70.7Capital accumulation (y-o-y)0.70.50.50.50.60.60.60.6Total factor productivity (y-o-y)1.20.50.30.30.40.50.60.7Output gap0.3-0.4-1.1-0.70.10.80.80.5Unemployment rate5.34.75.66.05.54.84.64.4GDP deflator (y-o-y)2.11.72.01.41.31.61.91.8Harmonised index of consumer prices (HICP, y-o-y)2.02.31.51.02.22.12.02.0Nominal compensation per employee (y-o-y)2.52.22.02.41.52.52.62.4Labour productivity (real, person employed, y-o-y)1.7-0.40.00.70.8...Unit labour costs (ULC, whole economy, y-o-y)0.92.52.01.60.61.61.71.4Real unit labour costs (y-o-y)-1.20.80.00.2-0.60.0-0.2-0.5Real effective exchange rate (ULC, y-o-y)0.1-0.11.00.90.20.8-0.8-0.7Real effective exchange rate (HICP, y-o-y)-0.3-0.70.51.71.02.2-0.7-0.2Savings rate of households (net saving as percentage of net disposable income)11.210.07.17.86.8...Private credit flow, consolidated (% of GDP)5.92.21.33.44.3...Private sector debt, consolidated (% of GDP)123.1129.7125.4124.1122.5...of which household debt, consolidated (% of GDP)50.953.151.051.450.4...of which non-financial corporate debt, consolidated (% of GDP)72.276.674.372.872.1...Gross non-performing debt (% of total debt instruments and total loans and advances) (2).3.45.34.23.0...Corporations, net lending (+) or net borrowing (-) (% of GDP)0.01.91.51.41.00.50.40.5Corporations, gross operating surplus (% of GDP)26.925.324.024.224.624.724.925.2Households, net lending (+) or net borrowing (-) (% of GDP)5.24.02.22.61.81.61.61.7Deflated house price index (y-o-y)0.72.92.67.03.5...Residential investment (% of GDP)4.44.34.34.34.4...Current account balance (% of GDP), balance of payments2.92.62.02.52.02.02.22.4Trade balance (% of GDP), balance of payments3.83.23.23.63.0...Terms of trade of goods and services (y-o-y)-0.7-0.70.70.6-0.9-0.7-0.1-0.1Capital account balance (% of GDP)-0.1-0.1-0.3-0.1-0.1...Net international investment position (% of GDP)-12.8-5.12.33.73.7...NIIP excluding non-defaultable instruments (% of GDP) (1)-9.8-11.3-11.4-9.6-4.1...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)175.9193.7175.0158.8148.0...Export performance vs. advanced countries (% change over 5 years)14.7-2.8-10.3-6.7-2.3...Export market share, goods and services (y-o-y)..-0.23.8-0.9...Net FDI flows (% of GDP)1.42.81.10.50.0...General government balance (% of GDP)-2.8-3.2-1.9-1.6-0.8-0.30.00.1Structural budget balance (% of GDP)..-0.8-1.1-0.8-0.8-0.4-0.2General government gross debt (% of GDP)66.579.183.483.078.374.571.067.8Tax-to-GDP ratio (%) (3)42.242.243.642.642.442.442.141.9Tax rate for a single person earning the average wage (%)33.233.334.731.9....Tax rate for a single person earning 50% of the average wage (%)21.321.523.120.9....forecast 
 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

of 

all 

51  % 

Since  the  start  of  the  European  Semester  in 
2011, 
country-specific 
recommendations  addressed  to  Austria  have 
recorded  at  least  ‘some  progress'(5)  (see  Graph 
2.1).  Substantial  progress  has  been  achieved  in 
consolidating  public  finances  and  stabilising  the 
financial  sector,  while  full  implementation  has 
been achieved in transposing the Service Directive.  

Graph 2.1:  Overall multiannual implementation of 2011-

2018 CSRs to date 

* The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact 
** 2011-2012 annual assessment: Different CSR assessment 
categories 
*** The multiannual CSR assessment looks at the 
implementation until 2019 Country Report since the CSRs 
were first adopted. 
Source: European Commission 

among 

different 
the 

layers 
number 

the 
reducing 

Austria  has  implemented  several  initiatives  to 
improve  the  fiscal  framework  but  subnational 
tax  autonomy  has  not  yet  been  sufficiently 
increased. The Intergovernmental Fiscal Relations 
Act  2017  contributed  to  simplifying  financial 
of 
relations 
government, 
of 
intergovernmental 
and  marginally 
transfers 
increasing  the  amount  of  revenues  that  federal 
taxes. 
states  can 
Nevertheless, the fiscal framework remains overly 
complex,  and  the  misalignment  between  spending 
powers  and  revenue-raising  responsibilities  is  still 
substantial.  The  agreement  between  the  different 
layers  of  government  underlying  the  Act  contains 
ambitious 
to  be 
initiatives 
implemented.  Recent 
for  a  more 
transparent allocation of competences across levels 

that  still  need 
initiatives 

through  autonomous 

raise 

of government are a step in the right direction but 
concern  only  a  limited  number  of  policy  areas  so 
far. 

Several  implemented  measures  have  helped  
reduce the labour tax wedge. The tax burden was 
reduced  for  low-income  earners,  families  with 
working  parents  and  employers.  However,  the 
overall  tax  structure  remains  unchanged,  there  is 
still  scope  for  shifting  the  tax  burden  to  more 
growth-friendly  sources  of  revenue.  Also,  the  tax 
bracket creep still needs to be addressed.  

effective 

age,  but 

Since  2014,  action  has  been  taken  to  increase 
the 
the 
retirement 
sustainability  of  the  pension  system  remains  a 
challenge.  Since  access  to  early  retirement  and 
invalidity  pensions  was  restricted,  the  effective 
retirement  age  has 
the 
statutory retirement age has not changed and fiscal 
sustainability remains a challenge. 

increased.  However, 

Austria  has  made  positive  steps 
towards 
increasing  efficiency  in  the  healthcare  sector 
but  underlying  challenges  remain.  While  public 
health  expenditure  is  in  line  with  the  legislated 
ceilings,  public  expenditure  as  a  share  of  GDP  is 
still increasing. The 2017 Intergovernmental Fiscal 
Relations  Act  set  tighter  ceilings  up  to  2021, 
discouraged 
inpatient  care,  and  strengthened 
outpatient  multidisciplinary  primary  care  with  the 
aim  of  shifting  services  away  from  the  costly 
hospital  sector.  The  announced  reform  of  social 
insurance organisation may increase efficiency but 
is  likely  to  cause  upfront  costs.  The  general 
overlap  of  competencies  in  the  healthcare  sector 
remains to be addressed.  

the 

low 

Austria  has  partially  improved  labour  market 
outcomes  for  women.  While  female  employment 
has increased since 2011, most of the increase has 
been  in  part-time  employment.  While  Austria  is 
addressing 
take-up  of  childcare  for 
children  below  3  years  by  implementing  the 
Agreement  of  the  Government  with  the  provinces 
(in  accordance 
the  Federal 
Constitution  Act),  which  led  to  an  expansion  of 
childcare  and  full-day  schools,  the  Barcelona 
target of 33 % coverage is not reached yet. Uneven 
coverage between the Länder remains.  

to  Art  15a  of 

(5)  For  the  assessment  of  other  past  reforms  see  in  particular 

Section 3. 

12 

No Progress9%Limited Progress40%Some Progress37%Substantial Progress9%Full Implementation5% 
 
 
                                                           
2. Progress with country-specific recommendations 

Table 2.1: 

Summary table on 2018 CSR assessment 

(1) This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact. 
Source: European Commission 

Austria  has  taken  some  steps  to  improve  basic 
skills  for  disadvantaged  young  people  and 
people with  migrant  backgrounds. While recent 
measures  to  strengthen  early  childhood  education 
and  care  could  have  long-term  positive  effects  on 
educational  outcomes,  the  direction  of  reform 
measures  in  general  education  are  less  promising. 
They partly reverse previous reform efforts and are 
not in line with EU and OECD best practices. The 
expansion of all day schools has slowed down. 

to 

efforts 

Austria  has  made 
stimulate 
investment  and  productivity  through  burden 
reduction and support for company growth, but 
service  sector  regulation  remains  high.  Austria 
has  reduced  regulatory  compliance  costs  through 
administrative burden reduction and e-government 
solutions. It has also implemented a revision of its 
regulation  on  trades  (Gewerbeordnung)  and  has 
opened  its  stock  market  for  listings  of  small  and 
medium-sized  companies,  though  venture  capital 
remains an issue. Austria has not yet addressed the 
restrictions  identified  by  the  Commission  for  key 

professions  nor  performed  a  wider  review  of 
service sector regulation. 

the 

Overall,  Austria  has  made  some (6)  progress  in 
country-specific 
2018 
addressing 
recommendations  (CSRs).  Limited  progress  was 
made on CSR1 addressing the sustainability of the 
pension, health and long-term care system together 
with  the  alignment  of  financing  and  spending 
responsibilities.  Overall,  some  progress  was  made 
on  CSR2.  Some  progress  was  made  in  improving 
labour market outcomes for women, while limited 
progress  was  made  in  improving  the  educational 
achievements  of  disadvantaged  young  people. 
Some  progress  was  made  in  stimulating  business 
digitalisation,  while  limited  progress  was  made  in 
supporting 
reducing 
and 
regulatory barriers in the service sector. 

company  growth 

(6)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
CSR is presented in the Overview Table in the Annex. This 
overall  assessment  does  not  include  an  assessment  of 
compliance with the Stability and Growth Pact. 

13 

Austria Overall assessment of progress with 2018 CSRs:  Some progress* CSR 1:  Ensure the sustainability of the health and long-term care and the pension systems, including by increasing the statutory retirement age and by restricting early retirement. Make public services more efficient, including through aligning financing and spending responsibilities. Limited progress  Some progress in ensuring sustainability of health  Limited progess in ensuring sustainability of long-term care  Limited progress in ensuring sustainability of the pension system   Limited progress in making public services more efficient CSR 2:  Reduce the tax wedge, especially for low-income earners, by shifting the tax burden to sources of revenue less detrimental to growth. Improve labour market outcomes of women. Improve basic skills for disadvantaged young people and people with a migrant background. Support productivity growth by stimulating digitalisation of businesses and company growth and by reducing regulatory barriers in the service sector. Some progress  Some progress in reducing the tax wedge, especially for low-income earners.  Some progress in improving labour market outcomes of women  Limited progress in improving basic skills   Some progress in supporting productivity growth by stimulating digitalisation of businesses  Limited progress  in stimulating company growth and by reducing regulatory barriers   
                                                           
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: EU funds and programmes contributed to addressing structural challenges and to 
fostering growth and competitiveness in Austria 

EU solidarity continues to support structural change in Austria. The financial allocation from European 
Structural  and  Investment  Funds  (ESI  Funds)  aimed  to  support  Austria  in  facing  development  challenges, 
amounts to EUR 4.9 billion in the current Multiannual Financial Framework, equivalent to around 0.2 % of 
the GDP annually or around 6.6 % of all public investment per year on average. As of the end of 2018, some 
EUR  2.8  billion  (around  57 %  of  the  total)  was  already  allocated  to  specific  projects,  excluding  the 
programmes  for  European  Territorial  Cooperation.  In  addition  to  the  ESI  funds,  the  Connecting  Europe 
Facility had allocated EUR 854 million to projects on strategic transport networks benefiting Austria in 2014-
17. Furthermore,  numerous  Austrian  research  institutions,  innovative  firms  and  individual  researchers  have 
benefited from other EU funding instruments, notably Horizon 2020 which has provided EUR 989 million to 
improve innovation and research in Austria.  

EU funding  has helped to  address  policy challenges identified  in the 2018 CSRs.  The European Social 
Fund (ESF) contributed to improving skills and employment outcomes for disadvantaged groups, supporting 
by  the  end  of  2017  over  77,900  participants,  including  more  than  56,700  from  migrant  and  minority 
backgrounds.  Overall  more  than  9,600  people  have  gained  a  qualification.  EU  Funds  supported  closer 
collaboration between business and research institutions, and R&D investments in the private sector. The ESI 
Fund  support  which  will  be  granted  to  the  enterprises  selected  for  support  by  the  end of  2017,  will  trigger 
EUR 621  million  of  private  investment,  and  will  result  in  an  employment  increase  of  1,211  full  time 
equivalents. Horizon 2020 supported 1,687 research projects covering a broad thematic spectrum. 

In addition, the Commission can provide tailor-made technical support upon a Member State's request 
via  the  Structural  Reform  Support  Programme  to  help  Member  States  implement  growth-sustaining 
reforms to address challenges identified in the European Semester process or other national reforms. 
Austria,  for  example,  is  receiving  support  to  improve  the  functioning  of  the  Federal  Austrian  Competition 
Authority in the field of competition law and data analytics; and to develop and enhance the tax compliance 
by  applying  EU  best  practices  in  the  field  of  predictive  analytics.  The  Commission  is  also  assisting  the 
authorities in their efforts to implement comprehensive policies to enhance the integration of young refugees 
and  migrants.  In  addition,  work  has  started  to  support  a  successful  setting-up  of  multidisciplinary  primary 
care units to secure long-term sustainability of Austria's social security system. 

EU  funding  contributes  to  the  mobilisation  of  private  investment  through  financial  instruments.  In 
addition  to  a  risk  capital  fund  co-financed  with  ESIF,  the  European  Fund  for  Strategic  Investments  (EFSI) 
provides total financing of EUR 1.3 billion in Austria and is supporting EUR 4.4 billion in private and public 
investments. Austria ranks 23rd as to the overall volume of approved operations as a share of GDP. Under the 
Infrastructure  and  Innovation  window,  15  projects(1)  were  approved  and  financed  by  the  EIB  with  EFSI 
backing,  for  approximately  EUR  1.2  billion  in  total  financing  set  to  trigger  EUR  3.7  billion  in  total 
investment.  Under  the  small  and  medium-sized  enterprises  component,  the  5  approved  agreements  with 
intermediary banks financed by the EIF with EFSI backing amount to EUR 164 million, expected to trigger 
approximately  EUR  651  million  in  investments  with  some  1,152  small  and  medium-sized  enterprises  and 
mid-cap companies expected to benefit from improved access to finance. An example of EFSI-backed project 
in Austria is "Bauer", a small and medium-sized enterprise which manufactures irrigation systems for large 
agricultural  land.  The  company  secured  an  Investment  Plan-backed  loan  from  UniCredit  Bank  Austria  to 
renovate its production sites to make them more energy-efficient.  

More information: https://cohesiondata.ec.europa.eu/countries/AT 

(1) 

Among which 3 are multi-country projects. 

14 

 
 
 
 
 
 
 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

Fiscal framework 

fiscal 

favours 

federalism 

Austria's 
the 
perception  of  soft  budget  constraints  at  the 
subnational  level,  providing  few  incentives  for 
efficient  public  spending.  The  Intergovernmental 
Fiscal  Relations    Act  is  at  the  core  of  Austria's 
fiscal  framework. (7)  It  regulates  the  allocation  of 
revenues from taxes and levies across the different 
levels  of  government  to  finance  tasks  assigned  to 
them  by  the  federal  constitution.  The  subnational 
level has important expenditure-incurring tasks: in 
2016,  about  16.5 %  and  15.1 %  of  total  public 
expenditure  was  spent  at  Länder  and  local  level 
with  health  care  and  social  protection  being  the 
biggest  items.  Only  a  very  minor  share  of  that 
expenditure 
is  financed  via  own  sources  of 
revenue, leading to a significant mismatch between 
expenditure 
power 
revenue 
responsibilities, compared to other federal systems 
e.g., Belgium and Germany (Graph 3.1.1). 

raising 

and 

Instead  of  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. As a result, 
the  link  between  tax  burden  and  expenditure  is 
largely  blurred,  making  it  difficult  for  citizens  to 
hold  their  subnational  government  accountable. 
Moreover,  potential  efficiency  gains  through  tax 
competition  are  precluded  from  the  beginning. 
Besides  the  lack  of  fiscal  transparency,  political 
bargaining  in  the  run-up  to  the  Intergovernmental 
Fiscal  Relations  Acts  has  further  efficiency-
reducing effects. (Matzinger, 2015a, b). While the 
Intergovernmental  Fiscal  Relations  is  enacted  by 
the  Federal  Parliament  with  simple  majority,  it  is 
actually  based  on  a  unanimously  negotiated  pact 

(7)  While 

in 

the 

Charter 

Constitutional 

(Bundes-
Verfassungsgesetz)  assigns 
legislative  and  executive 
competences  to  the  federal,  state  and  local  level,  basic 
fiscal  principles  are  defined 
the  1948  Fiscal 
Constitutional  Law  (Finanzverfassungsgesetz),  which  in 
turn  provides  for  the  Intergovernmental  Fiscal  Relations 
Act 
the 
intergovernmental  fiscal  relations.  The  IFRA  is  usually 
adopted for a period of four to six  years. The  latest  IFRA 
was  adopted  in  2017  for  the  period  2017-2021.  The 
overview: 
Ministry 
https://english.bmf.gv.at/budget-economic-policy/Fiscal-
Federalism.html.  

(Finanzausgleichsgesetz) 

provides 

regulate 

Finance 

an 

of 

to 

all 

As 

representatives  of 

involving 
levels  of 
subnational 
a 
government. 
representatives  can  use  their  political  leverage  to 
negotiate  higher  financing  in  advance,  leaving 
them  with  broadly  softened  budget  constraints 
(Matzinger, 2015a, b). 

result, 

Graph 3.1.1:  Intergovernmental transfers as a percentage 

of total revenue by level of government (2016) 

Source: OECD  

of 

the 

fiscal  equity,  Austria's 

To  ensure 
fiscal 
framework  involves  significant  re-distribution 
across 
levels  of  government.  Graph  3.1.2 
illustrates the complexity of the  current system of 
fiscal relations. (8) In 2018, some 83 % of total tax 
revenue  was  shared  across  different  levels  of 
government  (vertical  equalisation)  and  across 
(horizontal 
same 
entities 
equalisation). (9)  At  each  distributional  level,  a 
variety of allocation  formulas is applied, the  most 
important  being  fixed  percentages  of  historical 
revenue  shares  and  weighted  population  shares. 
Prior  to  the  vertical  allocation,  deductions  are 
made  to  finance  health,  long-term  care,  and  the 
family  equalisation  fund.  In  addition,  part  of  the 
local share is re-allocated to the Länder, to support 
economically  lagging  municipalities.  The  system 

level 

(8)  In  what  follows  refers  to  the  main  financial  flows  and 
patterns  only.  Data  are  compiled  by  the  Ministry  of 
Finance.  For  more  detailed  analyses  see  Mitterer,  Biwald 
and  Haindl  (2017),  Chamber  of  Labour  of  Lower  Austria 
(2016), and Ministry of Finance (2018).  

(9)  According  to  estimations  for  2018  provided  by  the 

Ministry of Finance. 

15 

0102030405060708090FederalStateLocal%ATBEDE 
 
                                                           
 
 
                                                           
3.1. Public finances and taxation 

Graph 3.1.2:  Austria's fiscal framework 

(1) Shared taxes comprise value-added tax, personal and corporate income tax, among others. 
(2) Transfers include earmarked grants (hospitals) and transfers, cost bearing (teachers). 
Source:  Illustration based on Bröthaler, Bauer, Schönbäck (2006a, b) and Bröthaler et al. (2012). Data refer to 2018 and are 
compiled by the Ministry of Finance. 

of  transfers  comprises  unconditional  block  grants, 
special need transfers and earmarked grants as well 
as  cost  compensation  mainly  from  the  federal  to 
the subnational  level but also between the  Länder 
and  municipalities.  Taken 
fiscal 
equalisation favours the Länder level. The initially 
allocated  amount  of  EUR   12.3  bn  grows  to 
EUR   23.2  bn  thanks  to  transfers  from  both  the 
federal and the local level.  

together, 

The  2017  Intergovernmental  Fiscal  Relations 
Act has introduced many changes but cannot be 
considered  a  major  step  towards  increased  tax 
autonomy or a more transparent distribution of 
the  main 
competences.  Table  3.1.1  outlines 
elements 
2017 
introduced 
Intergovernmental  Fiscal  Relations  Act  and  the 
current  state  of  play  in  their  implementation. 
Interestingly,  the  Länder  have  not  yet  used  their 
new 
to  raise  additional  revenues  by 
increasing  the  rates  for  the  housing  subsidy 
contribution.  

leeway 

the 

by 

Comprehensive constitutional reform is high on 
the  political  agenda,  but  vested 
interests 
hamper  its  political  feasibility.  In  December 
2018,  a  constitutional  law  was  passed  for  a  more 
transparent  distribution  of  competences  across 
levels 
government 
(Kompetenzbereinigungspaket).In essence, the law 
re-allocates  shared  policy  areas  to  either  the 
federal  or  the  Länder  level  exclusively.  However, 
only  a  few  policy  areas  are  affected  (e.g., 
maternity, child, and youth care is assigned to the 
Länder; demographic policy to the federal level).  

of 

Taxation 

Austria appears to have considerable scope for 
shifting  the  tax  burden  away  from  labour  to 
revenue  sources  that  favour  more  growth  and 
inclusiveness. Standing at 55.3 % in 2017, Austria 
ranks  third  in  the  share  of  labour  taxes  over  total 
tax  revenue  among  EU  Member  States  (EU 
average:  49.7 %).  In  2017,  the  tax  wedge  for  a 

16 

 
 
3.1. Public finances and taxation 

Table 3.1.1:  New features introduced by the 2017 IFR Act 

(1)The status of implementation is based on information provided by the Austrian Federal Ministry of Finance. 
Source: Illustration based on Mitterer, Biwald, and Haindl (2017) 

contributions 

single  earner  with  the  average  wage  (a  rough 
indicator  of  work  attractiveness)  was  at  47.4 %, 
and  among  the  highest  in  the  EU. (10)  Also,  low-
wage  and  secondary  earners,  who  are  considered 
particularly  responsive  to  changes  in  after-tax 
wages,  face  comparatively  high  tax  burdens. (11) 
The largest component of  the labour tax  wedge  is 
social 
(European  Commission, 
2018c).  At  the  same  time,  more  growth-friendly 
sources  of  revenue  appear  underutilised  from  a 
cross-country perspective (Graph 3.1.3). Corporate 
income  and  capital  taxes  but  also  environmental 
and  wealth-related  taxes  only  generate  minor 
shares of total tax revenue and fall well below the 
respective EU averages.  Especially given Austria's 
striking wealth inequality, the absence of taxes on 
inheritance  and  gifts  or  net  wealth,  and  the  low 
recurrent property tax, provide scope for tax shifts 
to  relieve  the  burden  on  labour. (12)  Simulations 
put the potential revenue from a general tax on net 
wealth  at  between  EUR   2.7  and  6.3  billion, 
depending  how  the  tax  schedule  is  designed  and 
how  much  tax  avoidance  is  assumed  (Ferschli  et 
al., 2017). Also, taxing pollution and resource use 
could  facilitate  a  shift  in  consumers'  choices 
towards  products  and  resources  that  are  socially 
and  environmentally  beneficial.  Moreover,  the 

(10)  The tax wedge on labour is defined as the sum of personal 
income  taxes  and  employee  and  employer  social  security 
contributions net of family allowances divided by the total 
labour  cost  (gross  wages  plus  employer's  SSC).  It  is 
calculated  for  specific  types  of  tax  payers  in  terms  of 
household  composition  and  income  level  expressed  as  a 
percentage  of  average  wages.  Data  are  taken  from  the 
OECD Taxing Wages Database. 

(11)  While  the  female  participation  rate  is  relatively  high  and 
the  inactivity  trap  indicator  is  below  EU-average,  the 
disincentives to increase hours of work are relatively high.  
(12)  See  European  Commission  (2018c)  for  a  microsimulation 
study on the budgetary, distributional and growth effects of 
a shift from labour to recurrent property taxes in Austria.  

tax 

treatment  of  diesel 

preferential 
is 
questionable as its emissions are higher than those 
of petrol and cause excessive pollution in seven air 
quality zones. 

fuel 

Graph 3.1.3:  Comparison of selected tax revenues, 2017 

Source: European Commission  

Austria’s projected pension expenditure poses a 
medium  risk  to  fiscal  sustainability  in  the  long 
term.  In  2016,  Austria's  public  spending  on 
pensions  stood  at  13.8 % of  GDP  and  is  expected 
to increase by 0.5 pps by 2070. While this increase 
seems  moderate,  Austria  starts  from  one  of  the 
highest  pension-to-GDP  ratios  in  the  EU.  In 
particular  between  2016  and  2040,  pension 
expenditure  is  projected  to  increase  by  1.1  pps  of 
GDP,  when  the  post-war  baby-boomer  generation 
will have retired. 

17 

010203040506070% of total taxesMin to max EU28Average EU 28ATSelected subcomponentsMain taxcategoriesAreaMeasureState of playTask-oriented financing Allocation of shared taxes to municipalities in the fields of elementary and compulsory education according to fulfilled quality.Postponed to the next IFR ActTax autonomySet up of working groups "tax autonomy" and "property tax" to strenghen subnational sources own revenue.Work in progressHousing subsidy contribution becomes exclusive levy of the Länder, who can freely set rates. ImplementedSpending reviewsSpending reviews in the fields of school health and water supply aim at evaluating the efficiency of public spending.Reports expected for early 2019BenchmarkingComparative assessment of efficiency across level of government in the field of security administration. Work in progressFiscal sustainabilityIntergovernmental agreement on restrictive expenditure paths for health and long-term care.Expenditure limits projected to be respectedLump-sum transfer of EUR 300 million to Länder and municipalities. ImplementedLump-sum transfer of EUR 125 million to Länder and municipalities for increased expenditures due to migration.ImplementedPrimary fiscal equalisationStreamlining of ex-ante deductions, simplified allocation rules for local tax shares, decreased use of fixed allocation formula based on historical revenuesImplementedSecondary fiscal equalistionFiscal equalisation between municipalities becomes competence of Länder.ImplementedBroadening of scope of transfers from Länder to municipalities to include intercommunal cooperation, etc..ImplementedConstitutional reformIntergovernmental agreement on a state reform for a more transparent attribution of legislative and executive competences across levels of government by 2018.Constitutional law is expected to enter into force in 2020. 
                                                           
  
 
 
 
 
3.1. Public finances and taxation 

Graph 3.1.4:  Drivers of change in public pension 

expenditure 

Source: European Commission 

Demographic  change  is  the  main  driver  of 
pension  expenditure,  leading  to  a  continuous 
narrowing  of  the  contribution  base  relative  to 
the number of beneficiaries. Graph 3.1.4 presents 
the  breakdown  of  the  pension-to-GDP  ratio  into 
four  underlying  components 
(Ageing  Report 
2018). The dependency ratio (i.e., the ratio of old-
age  people  to  working-age  people)  is  what  drives 
expenditure upward due to the retiring of the baby-
boomer generation and the more structural feature 
of  increasing  life  expectancy.  If  this  were  not 
counteracted  by 
three  components, 
the  other 
pension  expenditure  would  increase  by  10.1 pps 
(compared  to  6.5  pps  for  the  EU-28)  until  2070. 
However,  the  effective  exit  age  from  the  labour 
market  is  projected  to  increase  and  this  helps 
mitigate  the  expenditure  increase  as  captured  by 
the  coverage  ratio  (i.e.,  the  ratio  of  pensioners  to 
elderly  people).  Besides  past  reforms  to  restrict 
early  retirement,  it  is  mainly  the  change  in  the 
statutory  retirement  age  for  women,  which  has 

caused  the  coverage  ratio  to  fall.  The  average 
pension benefit (i.e. the ratio of average pension to 
average  wage)  is  projected  to  decline  due  to  a 
decrease  in  the  replacement  rate,  itself  in  turn 
mainly  driven  by  increasing  female  part-time 
employment.  A  slight  dampening  effect  is  also 
exerted  by  the  labour  market  as  the  projected 
increase in the employment rate supports economic 
growth and broadens the contribution base. 

Sensitivity  analyses  for  net  migration  show  a 
significant 
impact  on  projected  pension 
expenditure. (13)  Based  on  the  assumption  that 
migrants tend to join the labour force (14), pension 
expenditure  would  increase  by  around  a  extra  1.1 
pp,  assuming  net  migration  at  33 %  lower  than 
expected under the baseline. The opposite scenario 
of  net  migration  being  33 %  higher  than  in  the 
baseline  would  result  in  a  decrease  in  pension 
expenditure  by  1.3  pps  of  GDP  for  Austria, 
compared  to  the  baseline  scenario  (see  Graph 
3.1.5).  Introducing  an  automatic  link  between  the 
statutory  retirement  age  and  changes  in  life 
expectancy  would  have  a  substantial  downward 
impact on pension expenditure. Such a link would 
reduce public pension spending by 2.4 pps of GDP 
by 2070 compared to the baseline. 

to  quantify 

(13)  Sensitivity  scenarios  in  are  included  in  the  2018  Ageing 
Report 
the  responsiveness  of  pension 
expenditure to changes in the key underlying assumptions. 
This  is  necessary  as  the  pension  projection  exercise  is 
carried out on the basis of commonly-agreed demographic 
and  macroeconomic  assumptions,  as  well  as  a  no-policy 
change  scenario.  As  the  assumptions  used  for  these  types 
of  long-run  projection  are  surrounded  by  considerable 
uncertainty,  the  sensitivity  tests  allow  us  to  quantify  the 
responsiveness  of  pension  expenditure  to  changes  in  key 
underlying assumptions (European Comission, 2018c). 
(14)  This assumption depends significantly on whether migrants 
are  successfully  integrated  into  the  labour  market.  See 
Section 3.3 for more detailed analyses of integration policy 
and related labour market outcomes.  

18 

-4-3-2-101234pps of GDPDependency ratioBenefit ratioCoverage ratioLabour market ratioResidualPension in % of GDP 
 
 
                                                           
 
3.1. Public finances and taxation 

Box 3.1.1: Effects of the new Family Bonus plus 

In recognition of the high tax-to-GDP-ratio, the new Family Bonus plus constitutes the first important 
reform  measure  of  the  current  government  with  the  expressed  aim  to  reduce  the  tax  burden  of 
working parents. As of January 2019, it foresees a non-refundable tax credit of up to EUR 1,500 per child 
and year.(1) As the tax credit reduces the income tax liability at most to zero, parents who pay little or no 
income tax may not benefit from the full amount. As this may especially concern single earner families and 
working lone parents, a child supplement (Kindermehrbetrag) of EUR 250 per child and year is granted in 
those  cases  in  the  form  of  a  negative  tax.(²) In  return  for  the  new  measures,  the  child  allowance  and  the 
deductibility  of  child  care  costs  are  abolished. The  overall  budgetary  effect  of  the  reform  is  estimated  at 
EUR 1.5 billion.(³) In what follows analyses the distributional, equity and labour market effects of the two 
tax  relief  measures.  Simulations  of  the  effects  of  the  reform  have  been  conducted  by  the  European 
Commission  Joint  Research  Centre,  based  on  the  EUROMOD  model  using  2016  EU-SILC  data.  Growth 
effects are assessed with QUEST.(4)  

Graph 1:  The distributional and equity effects of the Family Bonus plus and the child supplement 

(1) Poverty line is EUR 14,887.66 (60% of median equivalised annual disposable income). 
Source: European Commission based on the EUROMOD model.  

Overall, the reform leads to an increase in equivalised disposable income all deciles but the strength of 
the  effect  hinges  on  the  distribution  of  children  and  the  eligibility  of  their  parents  across  deciles.  A 
substantial part of households in the lower deciles is not eligible for the bonus or the supplement because 
those households do not pay income tax or because they are no single earner or single parent households. 
The  more  pronounced  income  increase  in  the  second  and  third  decile  is  driven  by  the  household 
composition: there are many households with more than one child of which the majority is also eligible for 
either the family bonus or the child supplement. 

The family bonus has significant effects on income inequality and the at-risk-of-poverty rate. Overall, 
the reform reduces the Gini coefficient of equivalised disposable income from 0.251 to 0.248 but this effect 
stems  almost  solely  from  the  family  bonus.  The  at-risk-of-poverty  rate  decreases  significantly  from  13.1 
percent  to  12.5  percent.  However,  when  looking  at  individual  household  types,  the  risk  of  being  poor  is 
reduced significantly only for families with two adults and children. While the reduction of the poverty rate 
among single parent households is almost entirely due to the child supplement, the effect is statistically not 
significant.  

19 

010,00020,00030,00040,00050,00060,00012345678910AllMean eq. disp. incomeDecileBaselineReform+0.5%+2.0%+2.4%+2.3%+2.0%+1.5%+0.9%+0.5%+1.2%+0.3%+1.1%02468101214161812312312312312312312312312312312345678910%% eligible% not eligibleDecileChild 
 
 
 
 
 
 
3.1. Public finances and taxation 

Graph 2:  Labour supply (left) and growth effects (right) 

(1) Average values are calculated for all households subject to behavioural changes. Short part time and long part 
time denote participation in market jobs within weekly hour intervals of [1-15] and [16-32]. Full time and over time 
denote labour market participation with weekly hour intervals of [33-42] and [43-60], respectively.    
Source: European Commission based on the EUROMOD model (left) and QUEST model simulation (right) 

The  reform  has  positive  effects  on  male  and  female  labour  supply  in  terms  of  both  the  number  of 
hours  worked  as  well  as  labour  market  participation.  Full-time  equivalent  labour  market  participation 
increases by 0.53 percent for women and by 0.33 percent of men. The effect is visible on both the extensive 
and the intensive margin. The participation rate increases by 0.13 percent for  women and 0.15 percent by 
men. In terms of labour intensity, the introduction of the tax credit provides strong incentives to switch from 
part-time to full or over time, with the effect being particularly pronounced for women.  

Over  the  medium  term,  the  tax  relief  provided  by  the  family  bonus  and  the  child  supplement  is 
expected to increase employment, consumption and investment. By reducing the average and marginal 
tax  rates  faced  by  employees,  the  reform  stimulates  labour  supply  on  both  the  intensive  as  well  as  the 
extensive  margin,  leading  to  a  new  equilibrium  with  higher  employment  and  lower  real  gross  wages.  Net 
wages increase because the relief provided by the tax credit over-compensates the decrease in gross wages. 
The  employment  effect  is  larger  for  low-skilled  and  medium-skilled  workers,  mainly  because  their  labour 
supply elasticity is higher than that of high-skilled  workers. Due to the increase in net  wages, households 
will also increase consumption and from the second year on, there will be a positive effect on investment. 
The overall effect of the reform on GDP is positive. Real GDP is estimated to be 0.15 percent higher after 5 
years.  

(1) 
The non-refundable tax credit amounts to EUR 1,500 (EUR 500) for each child below (above) the age of 18 
who  are  eligible  for  the  family  allowance  (Familienbeihilfe).  For  each  child,  the  bonus  may  be  halved  between  the 
spouses or claimed by one spouse only. 
(²) 
For children that live outside Austria but in the European Union or Switzerland, the family bonus and the child 
supplement will be indexed to the living costs of the respective country (see Section 3.3 on the indexation of cash social 
benefits).    
(³) 
The estimated savings from the abolishment of the child allowance and the deductibility of child care costs are 
EUR 240 million and EUR 110 million, respectively. The Ministry of Finance expects a net budgetary effect of the reform 
of  EUR  1.2  billion.  The  different  estimates  are  mainly  due  to  different  assumptions  regarding  the  take-up  rate  of  the 
family bonus. In line with Fink and Rocha-Akis (2018) and the Budgetary Office (2018), the present study assumes a full 
take-up  of  the  bonus.  A  slight  over-estimation  of  the  budgetary  cost  may  also  be  due  to the  fact that the  indexation  of 
taxes and social benefits to living costs abroad is not simulatable due to data limitations.   
(4) 
See Barrios et al. (2017) on the dynamic scoring of tax reforms linking EUROMOD and QUEST. 

See Ratto et al (2009) for an introduction to QUEST and Varga and in 't Veld (2014) for a recent application. 

20 

-0.2-0.100.10.20.3012345% changeyearsGDPEmploymentReal gross wagesConsumptionInvestment-5-4-3-2-1012% changeMalesFemalesFull-time equivalentLabour Market participationShort part-timeLong part-timeFull-timeOver time 
 
 
3.1. Public finances and taxation 

Graph 3.1.5:  Pension expenditure - long-term projections 

pension reforms to be separated from social policy. 
Risks related to pension adequacy for low-income 
earners  are  often  related  to  health  problems, 
disability  or  interrupted  careers,  which  should  be 
addressed  by  targeted  policies  to  prevent  old-age 
poverty.  

Health care 

fiscal  sustainability.  While 

Public  spending  on  healthcare  in  Austria  is 
comparable  to  the  EU  average,  but  ageing-
related  cost  pressures  threaten  the  country’s 
total 
long-term 
health-care expenditure (including long-term care) 
was above the EU average in 2015 (11.1 % versus 
10.2 %  of  GDP),  public  health  expenditure  in  the 
same  year stood at the EU average (8% of GDP). 
With  72.4 %  in  2015,  the  public  share  of  total 
expenditure  on  health  was  lower  than  the  EU 
average of 78 % – but when measured in per capita 
terms, Austria is well above the EU average, both 
in terms of total (EUR 4 031 versus an EU average 
of  EUR   3 305)  and,  to  a  lesser  extent,  of  public 
spending  (EUR   2 965  versus  an  EU  average  of 
spending 
EUR   2 609).  Public  health-care 
(excluding  long-term  care)  in  Austria  is  projected 
to increase above the EU average of 0.9 by 1.3 pps 
until 2070 (2018 Ageing Report baseline scenario), 
mainly  due  to  projected  demographic  changes, 
paired  with  a  moderately  positive  assumption  on 
health  developments.  Taking  into  account  the 
impact  of  non-demographic  factors  on  future 
risk 
spending  growth 
scenario), 
expenditure 
health 
public 
(excluding long-term care) is  expected to increase 
by  2.1 pps  of  GDP  by  2070,  substantially  above 
the  EU  average  of  1.6  pps.  Current  public  health 
expenditure  without  long-term care is in line  with 
the  legislated  ceilings  but  public  expenditure  as  a 
share of actual GDP is still on an upward trend.  

(2018  Ageing  Report 
care 

Source: European Commission 

high 

comparatively 

Pensions 
in  Austria  are  considered  rather 
adequate  compared  to  the  EU  average,  but 
income inequality in working life is reproduced 
in  retirement.  Pension  adequacy  depends  on 
income maintenance, pension duration and poverty 
protection.  Overall,  the  2018  Pension  Adequacy 
Report  shows  that  the  Austrian  pension  system 
produces 
aggregate 
replacement  ratios  and  median  relative  income 
ratios  for  people  aged  65+.  By  international 
standards,  the  Austrian  system  shows  rather  long 
pension  payment 
retirement  duration. 
However, while the poverty risk for elderly men is 
significantly  lower  than  the  EU-27  average  (EU-
27: 12.3 %, Austria: 9.1 % in 2017), this is not the 
case  for  elderly  women  (EU-27:  16.6 %,  Austria: 
15.8 % in 2017). The main driver of this outcome 
is a substantial gender gap in pension income (EU-
27:  37.2 %,  Austria:  40.6 %  in  2016),  largely  the 
result  of  gender-specific 
inequalities 
generated during working life (see Section 3.3).  

income 

and 

A  public  debate  on  pension  reform  needs  to 
address  changing  labour  market  conditions. 
The  ability  of  pension  systems  to  cover  people 
with  different  types  of  occupations  and  economic 
activities  will  have  a  significant  bearing  on  the 
future  adequacy  of  old-age  incomes.  Extending 
pension coverage to people in non-standard or self-
employment  and  adapting  accrual  conditions  to 
diverse work patterns is necessary, if people are to 
build  up  adequate  pension  rights 
in  future 
(European  Commission  2018e).  This  would  allow 

the  Austrian 
The  coverage  provided  by 
healthcare  system  is  high.  The  share  of  the 
population  facing  unmet  needs  for  a  medical 
examination or treatment due to financial reasons, 
waiting  time  or  long  travel  distances  is  (together 
with  the  Netherlands),  the  lowest  in  the  EU  and 
varies very little across gender, age group, activity 
status  and  income  quintiles.  However,  although 
’physician  density’ (15)  is  high  compared  to  other 

(15)  Number of physicians per 1,000 inhabitants. 

21 

-1-0.500.511.522.52016202020302040205020602070pps of GDPAgeing Report baseline scenario33% lower migration33% higher migration 
 
                                                           
3.1. Public finances and taxation 

the 

reform, 

following 

healthcare 
legal  and 
organisational  framework  set  out  in  the  Primary 
Health  Care  Act  and  the  Austrian  Structural  Plan 
for Healthcare 2017. While the implementation of 
multidisciplinary  primary  healthcare  units 
is 
ongoing,  the 
the  reform  is  opposed  by  the 
Chamber of Doctors. The reform received support 
by  the  European  Commission  and  a  cooperation 
with  the  European  Investment  Bank  was  initiated 
to  secure  additional  investment  necessary  for 
implementation.  

The  on-going  modernisation  of  the  Austrian 
health  sector  will  reduce  health  system  costs. 
Austria  continues  to  roll  out  its  Electronic  Health 
Record  system in  all Länder by the end of 2019. 
The  forecast  cost  savings  amount  to  EUR 129 
million in the  first  year, although  operating costs 
are  expected  to  be  EUR 18  million  a  year.  In 
parallel,  work  is  ongoing  to  increase  the  usability 
and  accessibility  of  Electronic  Health  Record 
documents,  and  adapt  its  infrastructure  for  use  in 
future  services  e.g.  related  to  primary  care  and 
extension of e-card services. 

Austria's health sector makes insufficient use of 
EU-wide  tendering,  procurement  aggregation 
and non-price award criteria. Hospitals and care 
centres  in  Austria  face  demographic  change, 
increasingly  complex  products  and  higher  market 
concentration  for  some  inputs.  The  high  share  of 
single bids in Austria illustrates problems linked to 
its small market size. For example, in 2017, 50 % 
of medical imaging equipment tenders and 60 % of 
medicinal  products  received  only  one  bid.  Public 
procurement practices designed to overcome small 
market size are particularly relevant in this respect. 
For  example,  EU-wide  tendering  remains  under-
utilised, with only 0.23 % of GDP, compared to an 
EU  average  of  0.62 %.  The  2018  public 
procurement 
fine  of 
EUR 50 000  for  unjustified  awards  without  a 
public  tender  are  expected  to  lead  to  more  EU-
wide  tendering.  Tender  aggregation  is  used  at 
regional  level,  while  cross-regional  and  cross-
border  joint  procurement  projects  are  increasing 
but  still  more  limited.  A  further  move  away  from 
price as the sole award criterion could raise quality 
and  promote  innovation,  notably  where  it  is  still 
used  widely,  such  as  in  tendering  for  medical 
devices (50 % in Austria in 2017). 

reform  and 

the  new 

EU health systems, there are growing disparities in 
their geographical distribution.  

to 

insurance  agencies 

The  announced  reform  of  social  insurance 
organisation  may  increase  efficiency,  but  is 
likely  to  cause  upfront  costs.  The  level  of 
spending  on  administration  is  at  the  EU  average, 
but to achieve  greater efficiency and cost savings, 
the  government  has  adopted  the  ‘Social  Security 
organisation  Act’,  which  plans  to  reduce  the  21 
current  social 
just  5. 
According  to  the  government’s  budget  impact 
assessment, the reform is expected to carry a large 
saving potential of about EUR 1 billion and is one 
of  the  potential  options  to  increase  efficiency 
(London School of Economics, 2017). However, in 
its assessment of the draft law, the Austrian Court 
of Accounts concluded that the budget impact was 
still unclear, as savings may only materialise in the 
medium-to-long-term.  Other 
reform  options 
indicated  by  the  study  conducted  by  the  London 
School  of  Economics  –  such  as  an  improved  risk 
adjustment  mechanism  across  existing  funds  – 
could  have  mimicked  the  results  of  a  merger  at 
lower  costs.  The  reform  also  falls  short  of 
delivering  the  full  potential  improvement,  as  it 
keeps some categories in separate insurance funds, 
thereby 
risk 
adjustment.  

leaving 

some 

room 

still 

for 

The  Austrian  health  system  is  still  subject  to 
inefficient  use  of  resources  in  secondary  care. 
Empirical  data  suggest  overutilisation  of  hospital 
care in Austria. The number of available acute care 
beds  (566  per  100 000  inhabitants  in  2015), 
although  somewhat  lower  than  a  decade  before 
(643 per 100 000 in 2005) is over 40 % higher than 
the  average  number in the EU (402). At the  same 
time,  the  number  of  inpatient  discharges  per  100 
inhabitants  (26)  is  one  of  the  highest  in  the  EU, 
more than 60 % higher than the EU average of 16 
and the inpatient average length of stay of 8.5 days 
is above the EU average for 2015 (7.6). Similarly, 
the  share  of  day-cases  out  of  total  discharges  was 
lower than the EU average (21.3 % versus 32.3 %). 
Sectoral  fragmentation,  which  also  contributes  to 
the  bias  towards  hospital  care,  is  a  long-standing 
weakness of the Austrian healthcare system.  

The  Primary  Healthcare  reform  can  help  shift 
the  weight  from  hospital  care.  With  the  aim  of 
rationalising  the  excessive  reliance  on  in-patient 
care,  Austria  is  currently  pursuing  a  primary 

22 

 
3.1. Public finances and taxation 

in 

long-term 

the  same  year  (1.6 %). 
the  EU  average 
to  demographic  changes  and 
However,  due 
increasing 
care 
expectancy, 
life 
spending  as  a  percentage  of  GDP  is  projected  to 
increase  steadily.  In  the  2018  Ageing  Report 
reference scenario, public long-term expenditure is 
mainly  driven  by  the  combination  of  changes  in 
the population structure and a moderately positive 
evolution  of  health  (non-disability)  status.  The 
joint impact of those factors is a projected increase 
in  spending  of  about  1.9  pps  of  GDP  by  2070 
(from  1.9 %  to  3.8 %),  an  increase  of  100 %, 
which  is  well  above  the  average  EU  increase  of 
73 %.  The  2018  Ageing  Report  risk  scenario 
captures  the  impact  of  additional  cost  drivers  to 
demography  and  health  status  i.e.,  the  possible 
effect  of  a  cost  and  coverage  convergence,  and 
projects an increase in spending of 3.4 pps of GDP 
by 2070, an increase of almost 180 % and slightly 
higher than the EU average of 170 %.  

Recent  policy  measures 
exert  additional 
pressure  on  the  public  budget.  Reforms  enacted 
in  recent  years  did  not  make  any  substantial 
changes to how the system is organised. Assigning 
competences for cash social benefits to the federal 
level  may  increase  efficiency  and  transparency, 
and  the  institution  of  the  Long-term  Care  Fund 
(extended  to  2021)  targets  short/medium-term 
viability  of  the  system.  Despite  the  need  to  adopt 
measures to improve the fiscal sustainability of the 
system,  in  2017  the  Austrian  Parliament  passed  a 
constitutional provision prohibiting the recourse to 
assets  belonging  to  people  in  inpatient  long-term 
care  (or  those  of  their  relatives,  heirs  or  gift-
recipients),  to  cover  the  cost  of  their  long-term 
care  (so-called  Pflegeregress).   (19)  To  cover  the 
losses  of  revenue  due  to  this  measure,  it  was 
initially  legislated  that  the  federal  government 
would transfer a total of EUR 100 million per year 
to  the  Länder,  but  this  allocation  has  already 
increased  to  EUR 340  million,  and  is  likely  to 

(19)  In  Austria,  up  to  now  it  has  in  theory  been  the  person  in 
need  of  long-term  care  who  was  responsible  for  financing 
their stay in a residential or nursing home. Personal income 
used  for  this  purpose  typically  consisted  of  a  retirement 
pension  plus  ‘long-term  care  cash  benefit’  (Pflegegeld). 
Patients  also  had  to  use  their  personal  assets  (such  as 
savings or property) to finance such care before their social 
assistance (Sozialhilfe) would step in to bear any cost they 
could  not  cover.  This  use  of  assets  to  finance  long-term 
care was then subject to specific regulations in  the Länder, 
which are responsible for both long-term care services and 
social assistance. 

Long-term care 

care 

long-term 

concerning 

system  of 

Austria’s 
is 
characterised  by  a  relatively  high  share  of 
informal  care,  and  home  care  has  recently 
declined.  (16)  The  Austrian  system  of  long-term 
care  has  a  twofold  design,  consisting  of  cash 
benefits  and  publicly  organised  long-term  care 
services  in-kind.  Non  means-tested  cash  benefits 
vary  in  size,  according  to  different  levels  of 
individual  care  requirements.  In-kind  elements 
include  institutional  inpatient  (stationary),  semi-
inpatient  (day-care)  and  mobile/outpatient  (i.e.  at-
home)  care  services,  which  are  under 
the 
the  Länder.  No  detailed 
responsibility  of 
quantification 
the 
available 
is 
distribution  of  institutional  versus  home-based 
care,  nor  for  the  share  of  informal  provision,  but 
available  figures  indicate  that  the  prevalence  of 
home-based care has declined since 2013 and there 
has  been  simultaneous  growth  in  inpatient  and 
outpatient  (mobile)  services,  as  well  as  24-hour 
care at home. Furthermore the availability of long-
term care services differs between the Länder, and 
the Austrian long-term care system is characterised 
by a rather large informal care sector. Measures to 
support  family  carers  would  need  to  focus  on  the 
compatibility  of  caring  responsibilities  and  work. 
(17)  As  far  as  expenditure  is  concerned,  based  on 
available  figures,  the  focus  on  in-kind  services 
seems  slightly  above  the  EU  average.  As  these 
typically  have  lower  unit  costs,  this  suggests  that 
shifting more resources to cash allowances, where 
appropriate, may increase cost-efficiency.  

long-term  care 

Public  expenditure 
is 
for 
projected to pose long-term fiscal sustainability 
concerns. Based on the 2018 Ageing Report, total 
public  expenditure  on  long-term  care  (health  and 
social part) (18) is at 1.9 % of GDP in 2015, above 

(16) For further information on the situation of caring relatives, 
please see the study “Family care in Austria - Insights into 
the  situation  of  caregiving 
the 
development of informal care networks”. 

relatives  and 

into 

(17)  Measures  to  support  family  carers  include  among  others 
carer’s 
leave  and  part-time  working  arrangements, 
entitlement  to  leave  allowance;  financial  contributions  to 
the  cost  of  substitute  care  in  case  of  unavailability  of  the 
primary caregiver; social insurance for caregiving relatives; 
quality  assurance  in  home  care,  dialogue  between  trained 
psychologists and caregiving relatives, financial support of 
24-hour-care; etc.  

(18)  Long-term  care  benefits  can  be  disaggregated  into  health 
related  long-term  care  (including  both  nursing  care  and 
personal  care  services)  and  social  long-term  care  (mainly 
assistance with tasks required for daily living). 

23 

 
                                                           
                                                           
3.1. Public finances and taxation 

In the long term, Austria is considered to have a 
medium  fiscal  sustainability  risk,  according  to 
the  S2  sustainability  gap 
indicator.  This 
indicator  shows  that,  relative  to  the  baseline  no-
policy-change scenario, an improvement of 2.6 pps 
of GDP in the structural primary balance would be 
needed  to  prevent  the  debt-to-GDP  ratio  from 
increasing continuously over the long term. The S2 
value is driven by the projected rise in age-related 
government  expenditure,  in  particular  long-term 
care  (contribution  of  1.4 pps  of  GDP  to  the  S2 
value), healthcare (1 pp) and pensions (0.6 pp) (see 
Annex  B).  Under  a  more  adverse  scenario  in  the 
healthcare  and  long-term  care  areas  (with  non-
demographic  drivers  pushing  up  costs),  the  S2 
indicator rises to 4.1 pps of GDP. The signal from 
the S2 indicator prevails over the more benign debt 
sustainability analysis discussed above. 

increase  over  time. (20)  Indeed,  the  budget  impact 
of  this  measure  hinges  on  whether  the  financial 
relief  awarded  to  long-term  care  dependents  will 
increase  demand  for  formal  inpatient  care,  which 
already represents the main form of long-term care 
provision  in  Austria,  as  well  as  being  more 
expensive 
than  home  care  or  cash  benefits. 
Without  some  changes  to  this  situation,  increased 
use  of  institutional  care  is  likely  to  exacerbate, 
rather than mitigate, fiscal sustainability risks. 

Debt sustainability analysis and fiscal risks 

No  significant  risks  of 
fiscal  stress  are 
anticipated  for  Austria  in  the  short  term,  i.e. 
within one year. The value of the S0 indicator, the 
Commission’s  early-detection  indicator  of  fiscal 
stress,  is  below  its  critical  threshold,  for  both  the 
fiscal  and  financial  competitiveness  sub-indices 
(see  Annex  B). (21)  The  low  spreads  on  sovereign 
to  a 
yields  and  credit-default  swaps  point 
favourable financial market perception.  

Medium-term  fiscal  sustainability  risks  also 
appear  to  be  contained,  both  according  to  the 
S1  sustainability  gap  indicator  and  the  debt 
sustainability  analysis.  With  a  value  of  -0.8 pps 
of  GDP, 
the  medium-term  sustainability  gap 
indicator S1 points to a low risk and indicates that, 
at current policies, no additional fiscal effort would 
be required over the next five years to stay below 
the  60 %  of  GDP  debt  reference  value  in  2033. 
This favourable result is driven by the considerable 
primary  surplus,  which  compensates  for 
the 
government  debt  level  and  ageing  costs  (see 
Annex  B).  The  debt  sustainability  analysis 
confirms  the  S1  signal.  Under  normal  economic 
conditions  and  a  no-policy-change  assumption 
after the  end of the Commission forecast in 2020, 
government  debt  would  continue  to  decrease 
steadily. It is expected to decrease from 74.5 % of 
GDP  in  2018  to  51.2 %  in  2029,  on  the  back  of 
continuing  primary  budget  surpluses  and  a  debt-
reducing  snowball  effect.  Sensitivity  to  possible 
macro-fiscal shocks is low. 

(20)  The  special  subsidy  law  (Zweckzuschussgesetz)  creates  a 
legal  basis  for  the  federal  government  to  provide  the 
Länder  with  additional  EUR 240  million  in  2018  as 
compensation 
the 
Pflegeregress. 

effects  of 

abolishing 

the 

for 

(21)  The  S0  indicator  is  designed  based  on  past  crises  to 
highlight  short-term  fiscal  risks  stemming  from 
the 
financial-competitiveness or the fiscal side of the economy. 

24 

 
                                                           
 
 
3.2.  FINANCIAL SECTOR 

Banking and insurance sectors 

(including 

Banking  sector  resilience  has  continued  to 
improve, albeit at slower pace than in previous 
the 
adequacy 
years.  Capital 
capitalisation  of  subsidiaries  in  Central,  Eastern 
and South-eastern Europe – CESEE) remained flat 
in  the  first  half  of  2018,  compared  to  the  end  of 
International 
implementation  of 
2016.  The 
Financial  Reporting  Standard  9,  which  has 
increased  loan-loss  provisioning  needs,  has  had  a 
limited  impact  on  the  capital  position  of  banks. 
The Austrian banks included in the 2018 EU-wide 
stress  test  performed  better  than  in  the  previous 
exercise,  but  their  results  compared  to  peers 
underscore 
the  capital 
strengthening  process.  Asset  quality  has  also 
improved  supported  by  benign  macroeconomic 
conditions,  with  the  non-performing  loans  ratio 
declining to 2.9% at the end of the second quarter 
2018  (according  to  European  Central  Bank  data). 
Banks’ 
remained 
comfortable,  supported  by  increases  in  deposits. 
Meanwhile, the dependence on market funding has 
declined.  

to  continue 

the  need 

liquidity 

position 

has 

The profit generation capacity and efficiency of 
Austrian banks have continued to improve, but 
further  efforts  are  warranted.  Profitability  of 
Austrian  banks  on  the  local  market  improved 
further  in  2017  and  in  the  first  half  of  2018, 
supported by the acceleration in credit activity and 
the  reduction  in  the  cost  of  risk.  Most  of  the 
significant  credit  institutions  have  also  registered 
an  increase  in  fees  and  commission  income,  but 
their  net  interest  margin  has  slightly  shrunk.  On 
the back of the reduction in operating expenses and 
the  stabilisation  of  revenues,  the  cost-to-income 
ratio improved substantially in 2017, as it declined 
to  roughly  65 %,  down  from  74 %  in  2016. 
However,  Austrian  banks  continue  to  be  less 
their  European  peers,  which 
efficient 
highlights the need to maintain the efforts to adjust 
their  business  models  and  tackle  structural  cost 
issues.  Banks  have 
focused  on 
exploring  opportunities  brought  by  digitalisation, 
whereas 
rationalisation  of  bank 
branches  has  proceeded  at  slower  pace  than  in 
previous years.  

increasingly 

further 

than 

the 

The  share  of  variable  rate  loans  and  foreign 
currency  loans  in  total  loans  has  also  notably 
decreased.  Overall  private  credit  growth  has 

international 

increased  since  2015,  mainly  driven  by 
the 
expansion of lending to non-financial corporations 
(see Graph 3.2.1). Albeit on a declining trend, the 
share  of  loans  with  variable  interest  rates  and 
foreign  currency  denominated  loans,  which  are 
particularly  high  for  mortgage  loans,  still  remains 
above 
(European 
Commission, 2018c). On the back of the prudential 
measures  adopted  by  the  Austrian  supervisors 
since  2008,  the  share  of  foreign  currency  loans 
(mainly  Swiss  franc  loans)  as  percentage  of  total 
domestic  loans  to  Austrian  households  declined 
in  2017. 
from  30.6 % 
Consequently,  the  exposure  of  households  to 
interest rate and currency risks has declined. 

to  10.5 % 

standards 

in  2008 

Graph 3.2.1:  Credit growth y-o-y  % change 

Source: ECB22 

Austrian  banks  continue  to  be  among  the 
largest  players  in  Central,  Eastern  and  South-
eastern  Europe.  In  2017,  the  total  exposure  of 
Austrian  banks  with  international  activities  to  the 
CESEE  region  stood  at  EUR 211 billion,  up  from 
EUR 193 billion in 2016. The most important host 
markets  for  Austrian  banks  continue  to  be  the 
Czech  Republic,  Slovakia,  Romania  and  Croatia. 
Asset  quality  has  further  strengthened  in  most 

(22) The ECB computes annual growth rates as the differences 
in outstanding amounts adjusted for all non-transaction related 
issues,  i.e.  revaluations,  reclassifications,  and  exchange  rate 
adjustments. The ECB’s computation might lead to results that 
differ from the growth rates published by NCBs. Moreover, the 
published growth rates exclude securitised loans that have been 
removed  from  the  balance  sheet  and  thus  they  might  differ 
substantially  from  the  growth  rate  of  lending  received  by  the 
counterparty sector.  

25 

-3-2-101234567Jan-12Jun-12Nov-12Apr-13Sep-13Feb-14Jul-14Dec-14May-15Oct-15Mar-16Aug-16Jan-17Jun-17Nov-17Apr-18Sep-18Total privateNon-financial corporationsHouseholdsMortgage credity-o-y % ch. 
 
 
 
                                                           
 
in 

down 

2017, 

markets  in  the  CESEE  region,  supported  by  the 
expansion in credit activity, as well as the  decline 
of  legacy  assets  and  loan-loss  provisioning  needs. 
The  non-performing  loans  ratio  of  the  CESEE 
subsidiaries  declined  from  4.5 %  in  2017  to  just 
below 4 % in June 2018. Foreign currency loans to 
clients  in  the  CESEE  region  decreased  to  roughly 
from 
EUR 31 billion 
EUR 84.6 billion  in  2010.  Profitability  has  also 
remained robust,  with all major markets including 
Russia  recording  positive  results,  whereas  cost 
efficiency  has 
the 
remained  above 
liquidity 
operations 
transfers to CESEE subsidiaries have significantly 
declined since 2011. The CESEE subsidiaries have 
continued  to  expand  their  financing  on  local 
markets and improved their loan-to-deposit ratios. 
However, the issuance of debt instruments eligible 
to fulfil the Minimum Requirement for Own Funds 
and  Eligible  Liabilities 
targets  may  pose 
challenges for some of the subsidiaries of Austrian 
banking  groups,  which  operate  in  the  CESEE 
countries with less developed capital markets.  

in  Austria. 

Intra-group 

that  of 

to 

the 

insurance 

insurance 

sector  has  continued 

its 
The 
adjustment to challenges posed by the operating 
environment.  In  spite  of  the  efforts  to  adapt 
business  models  and  products  to  current  market 
increase 
conditions  and  several  mergers 
operational  efficiency, 
sector 
continues  to  be  impacted  by  the  prolonged  low 
yield  environment.  Total  earned  premiums  by 
Austrian  insurance  companies  remained  roughly 
flat  in  2017,  while  the  earned  premiums  of  life 
insurance  companies  declined  by  5.1 %  in  2017 
compared to 2016. Life insurance companies have 
shifted  their  business  towards  products  linked  to 
market performance and health insurance products 
to  offset  the  declining  attractiveness  of  traditional 
life insurance. Notwithstanding the challenges they 
have  faced,  investment  returns  of  life  insurance 
companies  have  remained  above  the  average 
guaranteed interest rate on the stock. The Austrian 
insurance sector has continued to be a major player 
in the CESEE region,  which underscores the need 
these 
to  closely  monitor  developments 
countries.  The  gross  premiums  earned  outside 
Austria 
undertakings  with 
international  activities  declined  by  some  5 %  in 
2017, mainly due to the divestment of activities in 
Italy. 

insurance 

by 

in 

3.2. Financial sector 

Nationalised banks 

The risks to public finances stemming from the 
three  public  vehicles  for  impaired  assets  have 
further declined. The winding-down of the assets 
of the  financial defeasance  vehicles (HETA  Asset 
Resolution, KA Finanz and Immigon set up in the 
aftermath of the financial crisis) proceeded further 
in 2017 and the first part of 2018. Also, the risks to 
public finances linked to these vehicles continue to 
be  limited.  The  winding-down  of  HETA’s  assets 
has  advanced  faster  than  planned,  with  80 %  of 
assets  being  disposed  of  in  2017.  By  the  end  of 
2018,  HETA  aims  to  dispose  of  roughly  91 %  of 
its  assets  and  complete  the  entire  winding-down 
process  in  2020.  Due  to  the  high  cash  reserves 
obtained  from  these  disposals  of  impaired  assets, 
HETA  had  a  second  distribution  of  proceeds 
(amounting to EUR 2.4 billion) to satisfy creditors 
before  completing  the  resolution  process (23).  The 
winding-down  of  KA  Finanz  (planned  to  be 
completed  by  2026)  has  been  supported  by  its 
transformation 
asset  management 
an 
company, following the withdrawal of its banking 
licence  in  2017.  The  winding-down  of  Immigon 
has also advanced, albeit with delays compared to 
the  initial  plans.  The  completion  of  the  winding-
down  was  postponed  from  mid-2018  to  2019, 
when 
liquidation 
proceedings. 

Immigon  plans 

to  open 

into 

Housing market and real estate financing 

House  prices  in  Austria  have  been  increasing 
for  the  past  decade,  but  recent  data  point  to  a 
deceleration. Since 2005, nominal house prices in 
Austria  increased  by  more  than  80 %,  surpassing 
those of most euro area 11 (24) countries (European 
Commission, 2018c). More recent data points to a 
relaxation  of  the  situation,  as  house  prices  have 
been  growing  more  moderately,  increasing  by 
5.3 %  in  2017  and  with  nominal  year  on  year 
growth declining to 4.9 % in Q3-2018. 

Indicators  point  to  a  possible  overvaluation  of 
In  2017,  house  prices  were 
house  prices. 
overvalued by 13.8 %. This is somewhat above the 

(23)  Following 

the  second  distribution  of  proceeds  of 
EUR 2.4 billion,  total  payments  to  creditors  made  by 
HETA  amounted  to  EUR 8.2 billion.  In  2017,  HETA 
distributed  EUR 5.8 billion  to  its  creditors  (European 
Commission, 2018c).  

(24)  Euro area 11: Austria, Belgium, Finland, France, Germany, 
Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain. 

26 

 
                                                           
3.2. Financial sector 

below  the  average  of  18.9 %  in  euro  area  11 
countries  in  the  same  year.  The  share  of  actual 
rents  in  final  consumption  expenditure  increased 
by  0.9  percentage  points  between  2005  and  2017 
to 3.8 % and by 1.2 pps for imputed rents (27), both 
remaining  below  the  average  in  euro  area  11 
countries. 

in  Q2-2018 (29),  making 

Risks to financial stability appear limited, as no 
signs  of  excessive  credit  growth  can  be 
observed.  Rising  house  prices  coupled  with  an 
increase  in  mortgage credit  growth  warrants close 
oversight  and  led  to  a  warning  by  the  European 
Systemic Risk Board in 2016 (ESRB, 2016). Since 
2005,  mortgage  loans (28)  grew  on  average  by 
6.4 % annually, with some acceleration since 2015. 
Furthermore, the share of mortgage loans in banks’ 
total  assets  continued  to  increase  and  reached 
14.7 % 
them  more 
vulnerable  to  a  potential  decrease  in  real  estate 
prices.  Nevertheless,  the  share  of  mortgage  loans 
stood  at  27.1 %  of  GDP  in  2018,  still  below  the 
euro area average of 36.5 % for 2017, also due to 
the 
in  Austria. 
Meanwhile,  household  debt  has  been  constantly 
decreasing  after  peaking  in  2010,  reaching  49.8% 
of  GDP  in  Q3-2018,  well  below  the  euro  area 
average  of  57.7 %.  Debt  as  percentage  of  gross 
disposable  income  has  been  relatively  stable, 
reaching  85 %  in  2017,  which  corresponds  to  the 
average since 2005. The increases in house prices 
have  only  led  to  limited  debt  and  credit  growth. 
the  financial  sector  appears 
Overall,  risk 
contained,  but  leaving  it  more  vulnerable  to  an 
economic downturn.  

low  homeownership 

rate 

to 

to 

tools 

limit  systemic 

Several  measures  have  been  taken  to  better 
mitigate risks from real estate financing. At the 
moment,  the  Austrian  Financial  Market  Stability 
Board  has  assessed  that  the  activation  of  macro-
prudential 
in 
connection  with  residential  property  financing  is 
not  needed.  However,  supervisors  have  already 
stepped  up  reporting  requirements  on  residential 
real  estate.  Authorities  indicated  in  autumn  2018, 
that  an  upgraded  reporting  framework  for  real 
estate exposures will be most probably introduced 
in  2019.  In  2018,  a  communication  was  issued 

risks 

(27)  The equivalent costs associated with homeownership. 
(28)  calculated  as  the  year-on-year  increase  in  the  stock  of 
for  house  purchase,  ECB  data,  European 

lending 
Commission calculations. 

(29)  OeNB, Real Estate Data for Austria – November 2018. 

Austrian  National  Bank  (OeNB)  estimate  of 
11.1 %  in  Q2-2018  (see  Graph  3.2.2).  These 
developments mask large regional differences (see 
Section 3.4.3). The price to income ratio and price 
to  rent  ratio  have  also  been  above  long-term 
average  since  2012,  pointing  to  the  decreasing 
affordability  of  homeownership 
(see  Section 
3.4.3).  House  prices  have  increased  considerably 
faster  than  incomes,  though  from  a  low  pre-crisis 
level.  In  2017,  a  100 m²  dwelling  cost  10.6  times 
the  annual  household  income  on  average (25), 
somewhat above that of most euro area countries. 

Graph 3.2.2:  Price developments and valuation gaps 

(1) Overvaluation gap estimated as an average of the 
price/income, price/rent and fundamental model valuation 
gaps.  
Source: European Commission, OeNB 

While  house  prices  and  rents  have  been 
increasing,  the  impact  on  households’  private 
consumption  has  been  limited.  With  55 %, 
Austria has the second lowest homeownership rate 
of  the  EU,  with  a  decreasing  trend.  Out  of  the 
living 
the  population 
45 %  of 
rentals, 
in 
in  public  housing 
live 
approximately  20 % 
apartments  and  40 %  in  homes  of  limited-profit 
organisations with strict rental regulation. Overall, 
18 %  of  the  population  is  directly  affected  by  the 
substantial 
increasing 
increases in prices and rents,  the share of housing 
costs  in  aggregate  disposable  income  has  been 
relatively stable since 2008, declining to 17.9 % in 
2017,  after  peaking  in  2013  at  19.2 %.  It  is  also 

rents (26).  Despite 

the 

(25)  European  Commission  calculations  (for  methodology,  see 

European Commission, 2016)  

(26)  Mikrozensus 2017, STATISTIK AUSTRIA. 

27 

60708090100110120130-20-100102030000102030405060708091011121314151617Q218Index, 2015=100% deviation of current priceOeNB fundamentals indicator for residential property pricesPrice to income vs. hist. avg.Price to rent vs. hist. avg.Overall valuation gapEurostat official MIP deflated house price index (rhs) 
 
                                                           
                                                           
3.2. Financial sector 

Graph 3.2.3:  Distribution of venture funds raised (%) 

against  the  relaxation  of  credit  standards,  and  a 
structured  dialogue  was  introduced  with  banks  on 
sustainable  real  estate 
in 
September  2018  the  Financial  Market  Stability 
Board  issued  a  communication  and  quantitative 
guidance on sustainable real estate lending (30).  

lending.  Moreover, 

SME’s access to finance 

While  funding  conditions  remain  satisfactory 
overall for small and medium-sized enterprises, 
low  availability  of  venture  capital  remains  a 
concern. Highly innovative firms typically rely on 
venture  capital  investments  in  the  seed,  start-up 
and  scale-up  stages  due  to  the  ‘high-risk’  of  their 
products  and  business  models.  However,  the 
availability of venture capital in Austria, compared 
to  other  Strong 
Innovation 
Leaders (31) (32), remains low. Funding sources for 
venture  capital  funds  are  also  less  diverse  than  in 
Innovation  Leaders  (Graph  3.4.4).  The  main 
contributor 
the 
government (33),  while  the  contribution  of  capital 
markets is very low.  

to  venture  capital 

Innovators  and 

funds 

is 

(30)  The Board made the following recommendations: i) down-
payment by borrowers for real  estate loans should not fall 
below  a  benchmark  of  20%;  ii)  the  maturity  of  newly 
originated  mortgage  loans  should  exceed  35  years  only  in 
exceptional cases; iii) debt service should not exceed 30% 
to  40%  of  the  net  income  of  borrowers;  iv)  assessment  of 
the creditworthiness of borrowers should be comprehensive 
and take into account all available information. 

(31)  As defined by the European Innovation Scoreboard 2018 – 
 Innovation leader: SE, DK, FI, NL, UK, LU Strong innovator: 

DE, BE, IE, AT, FR, SI. 

(32)  On  the  volume  of  venture  capital  as  a  share  of  GDP, 

Austria ranked 12th in the EU in 2017. 

(33)  The  Seed  Financing  Programme  of  the  Austrian  Federal 
Promotional Bank (AWS) supports the creation and growth 
of  innovative  firms  in  high  tech  sectors  by  offering  seed 
money specifically tailored to their needs. 

Source: Invest Europe, European Commission 

its  stock  corporation 

Austria  has  further  improved  the  regulatory 
framework  for  other  forms  of  equity  funding. 
law 
Austria  amended 
(Aktiengesetz)  to  remove  obstacles  to  small  and 
medium-sized enterprises listings on the  Viennese 
Stock  Exchange.  The  lack  of  a  specific  segment 
dedicated to small and medium-sized enterprises at 
the Vienna Stock Exchange was a marked contrast 
to other countries. The new segment is expected to 
be  launched  in  early  2019  and  may  include  up  to 
20  small  and  medium-sized  enterprises,  which 
signalled early on interest in a listing. Furthermore, 
the  2015  framework  for  alternative  financing  has 
positively 
of 
crowdfunding.  Funding  volumes  further  increased 
in 2017 with a growing focus on real estate related 
projects.  

availability 

influenced 

the 

28 

0%20%40%60%80%100%2007-20102011-20142015-20172007-20102011-20142015-20172007-20102011-20142015-2017AustriaSwedenFinlandDistribution of venture funds raised (%)Government agenciesCapital marketsCorporate investorsFamily officesFund of fundsPension fundsPrivate individualsBanksOther 
                                                           
 
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

3.3.1.  LABOUR MARKET 

With  stable  economic  growth  and  increasing 
employment, the labour market is continuously 
improving performance. Labour demand and job 
creation  together  with  increased  participation  by 
older  workers  and  women  are  the  main  drivers  of 
rising  employment  and  activity  rates,  reaching 
76.2 %  and  80 %  respectively  in  the  third  quarter 
of  2018.  The  unemployment  rate  fell  to  4.9 %  in 
the  third  quarter  of  2018  from  5.5 %  the  year 
before. 

labour  market 
light  of  the  favourable 
In 
development 
long-term 
of 
the  number 
unemployed  started  decreasing  moderately  in 
2018.  Compared to other EU countries Austria has 
a  lower  share  of  long-term  unemployed  (32  %  in 
2017  vs  an  EU  average  of  44.9 %).  However,  the 
long-term  unemployment  rate 
increased  from 
1.2 % in 2012 to 1.9 % in 2016 (vs EU average of 
4.0 %)  but  after  stabilising  in  2017  at  1.9 %  it 
started  decreasing  except  in  Lower  Austria  and 
Salzburg.  This  phenomenon  also  varies  by  region 
showing  an  increase  in  long-term  unemployment 
in Upper Austria alongside a decline in Vorarlberg 
(Arbeit  plus  –  Soziale  Unternehmen  Österreich 
(Hg.), 2017.) 

Graph 3.3.1:  Beveridge curve Austria 

Source: European Commission 

In  an  environment  of  increasing  demand  for 
labour  and  lower  unemployment,  there  are 
signs  of 
the 
expansionary phase of the business cycle, there  is 

shortages.  Following 

labour 

an overhang of unfilled positions (Graph3.3.1) (34). 
In 2018, the number of vacancies continued to rise, 
reaching 3.0 % in the third quarter. Skills shortages 
are pronounced in the tourism sector, skilled trade, 
information and consulting (Dornmayr H., Winkler 
B.,  2018).  However,  aggregate  national  data  hide 
considerable  regional  variation.  According  to  the 
job 
Public  Employment  Service, 
vacancy  rate  was  registered  in  Tirol  (3.1 %), 
Vorarlberg  (2.5 %)  and  Salzburg  (2.2 %).  To 
counteract 
of 
occupational  shortages  (Mangelberufliste)  was 
expanded  from  11  occupations  in  2017  to  27  in 
2018  and  has  been  extended  to  45  professions  in 
2019 in addition to providing regional information. 
To  improve  the  migration  of  skilled  workers,  the 
and 
government 
simplifying the red-white-red card. (35)  

currently  modernising 

development, 

the  highest 

this 

list 

the 

is 

Regional  disparities  are  pronounced  though 
moderate,  compared  to  other  EU  countries. 
There is a strong east-west divide in the increase of 
unemployment rates over recent years. In 2017 the 
highest  unemployment  rate  was  registered  in  the 
Vienna region, at 10.1 %, as compared to 2.9 % in 
the  Salzburg  region.  Whereas  the  unemployment 
rate  for  people  aged  15-74  years,  amounted  to 
9.3 % in 2017 in cities and to 4.9 % in towns and 
suburbs, it was the lowest in rural areas, with only 
2.9 %. Vienna is particularly affected by long-term 
unemployment (4.1 % in 2017) and has the highest 
youth  unemployment  rate,  which  is  considerably 
higher  than  the  national  average  (16.7 %  versus 
9.8 % in 2017).  

Some groups do not participate up to their full 
potential in the labour market, a challenge that 
may  severely  affect  Austria’s  growth  potential. 
Women (in terms of full-time), older workers, low-
skilled  people  and  workers  with  a  migrant 
background  have  low  labour  market  participation 
the 
demographic 
rates.  With 
underutilisation  of  ‘these  groups’  labour  market 
potential may affect growth potential. 

ageing, 

(34)  The  Beveridge  curve  shows  the  relationship  between  the 
unemployment  and  job  vacancy  rate,  the  number  of 
unfilled jobs expressed as a proportion of the labour force. 
It is the standard tool for assessing whether the process of 
matching  vacant  posts  with  unemployed  people  reflects 
cyclical changes or structural shifts. 

(35)  Non-EU  nationals  who  can  prove  they  have  completed 
vocational training in one of the listed occupations and who 
have  a  binding  job  offer  in  Austria  can  apply  for  a  red-
white-red card and thus receive a residence permit. 

29 

​08q2​​​09q2​​​10q2​​​11q2​​​12q2​​​13q2​​​​​​15q2​​​16q2​​​17q2​​​18q2-202468101214161834567Labour Shortage Indicator (%)Unemployment rate (% of labour force) 
 
 
                                                           
3.3. Labour market, education and social policies 

Box 3.3.1: Monitoring performance in the light of the European Pillar of Social Rights 

The  European  Pillar  of  Social  Rights  is  designed  as  a  compass  for  a  renewed  process  of  upward  convergence 
towards  better  working  and  living  conditions  in  the  European  Union.  It  sets  out  twenty  essential  principles  and 
rights  in  the  areas  of  equal  opportunities  and  access  to  the  labour  market;  fair  working  conditions;  and  social 
protection and inclusion.(1) 

Austria  performs  relatively  well  on  most  indicators  of  the 
Social  Scoreboard  supporting  the  European  Pillar  of  Social 
Rights.  Austria  has  robust  policies  to  facilitate  labour  market 
access  and  to  ensure  fair  working  conditions.  Austria  has  a 
system  of  social  dialogue  and industrial  relations  with  a  proven 
capacity to contribute to balanced socio-economic development. 
However,  recent  government  actions  are  likely  to  reduce  this 
capacity. Positive developments  have been noted with regard to  
the  unemployment  rate  and  share  of  youth  not  in    employment, 
education or training.  

A  high  share  of  part-time  employment  of  women  coincides 
with  a  fairly  large  pay  gap.  There  is  a  strong  gender 
segmentation  of  the  labour  market  and  gender  related  part-time 
employment, among the highest in the EU, hampers the full use 
of  female  labour  market  potential  in  the  context  of  an  ageing 
population.  One  of  the  key  reasons  for  women’s  weaker  labour 
market  participation  is  insufficient  full-time  childcare  provision 
for children below 3 years. 

In  2017,  Austria  recorded  a  clear  improvement  with  regard 
to the share of young people not in employment, education or 
training  (NEETs).  With  just  6.5  %  of  population  affected,  the 
country is well below the EU average, and the decrease by 1.5 pp 
since  2016  was  also  among 
the  most  significant.  This 
development  reflects  an  improved  labour  market  situation,  and 
can be credited to the employment-oriented educational system.  

(1) 

The European Pillar of Social Rights was proclaimed on 17 November 2017 by the European Parliament, the Council 
and  the  European  Commission.  https://ec.europa.eu/commission/priorities/deeper-and-fairer-economic-and-monetary-
union/european-pillar-social-rights/european-pillar-social-rights-20-principles_en 

30 

Early leavers from education and training (% of population aged 18-24)Better than averageGender employment gapOn averageIncome quintile ratio (S80/S20)Better than averageAt risk of poverty or social exclusion (in %)Better than averageYouth NEET (% of total population aged 15-24)Better than averageEmployment rate (% population aged 20-64)Better than averageUnemployment rate (% population aged 15-74)Better than averageLong term unemploymentBetter than averageGDHI per capita growth On averageNet earnings of a full-time single worker earning AWBest performersImpact of social transfers (other than pensions) on poverty reductionBest performersChildren aged less than 3 years in formal childcareTo watchSelf-reported unmet need for medical care Better than averageIndividuals' level of digital skillsBetter than averageSocial protection and inclusionDynamic labour markets and fair working conditionsEqual opportunities and access to the labour marketSOCIAL SCOREBOARD FOR AUSTRIAMembers States are classified according to a statistical methodology agreed with the EMCO andSPCCommittees.ThemethodologylooksjointlyatlevelsandchangesoftheindicatorsincomparisonwiththerespectiveEUaveragesandclassifiesMemberStatesinsevencategories(from"bestperformers"to"criticalsituation").Forinstance,acountrycanbeflaggedas"betterthanaverage"iftheleveloftheindicatorisclosetoEUaverage,butitisimprovingfast.Formethodologicaldetails,pleaseconsultthedraftJointEmploymentReport 2019, COM (2018)761 final.NEET:neitherinemploymentnorineducationandtraining;GDHI:grossdisposablehousehold income.                       
 
 
in 

The  gender  pay  gap  remains  visibly  above  EU 
average  (20.1 %  versus  16.3 %  in  2016).  Graph 
3.3.2  shows  the  components  of  the  unadjusted 
gender  pay  gap  for  Austria. (36)  The  over-
representation  of  women  in  low-paying  sectors  is 
the  main  contributing  factor  to  the  wage  gap, 
followed  by  part-time  work.  Female  part-time 
employment  is  especially  pronounced  in  Austria 
(47.9 %  versus  31.1 %  EU  average  in  2017)  and 
often  due  to  care  responsibilities  for  children  or 
relatives.  It 
lower  hourly 
is  associated  with 
earnings,  weakened  career  prospects,  and  lower 
terms  of  unemployment 
social  protection 
benefits  or  pensions  (see  Section  3.1  on  the 
pension  gap) (European Commission, 2018f). The 
unused  labour  potential  is  significant  and  has 
important  budgetary,  distributional  and  equity 
effects  (see  Box  3.3.2). (37)  Another  driver  of  the 
wage  gap  is  the  type  of  occupation  held  for 
service-related 
example,  management  versus 
tax  system  may 
positions.  Additionally, 
discourage female labour market participation and 
longer  working  hours,  especially  in  the  case  of 
secondary  earners  (see  Section  3.1).  The  Austrian 
income  tax  system  contains  only  a  few  tax 
incentives  for  increasing  female  labour  market 
participation  or  hours  worked,  while  the  majority 
of provisions  has opposing effects of encouraging 
take-up  but  disincentivising  an 
employment 
increase  in  hours  worked  (Schratzenstaller,  M., 
Dellinger, F., 2017). 

the 

(36)  The unadjusted gender pay gap is defined as the difference 
between average gross hourly earnings of male and female 
paid  employees  as  a  percentage  of  average  gross  hourly 
earnings 
employees 
male 
(https://ec.europa.eu/eurostat/web/products-datasets/-
/SDG_05_20).  

paid 

of 

(37)  EUROMOD simulates individuals' and households' benefit 
entitlements  and  tax  liabilities  (including  social  security 
contributions)  according  to  the  rules  in  place  in  each 
Member  State.  Simulations  are  based  on  representative 
survey  data  from  the  European  Statistics  on  Income  and 
Living Conditions (EU-SILC). 

3.3. Labour market, education and social policies 

Graph 3.3.2:  Gender pay gap and components 

Source: Eurostat  

The  current  design  of  childcare  services 
leave  do  not 
provision  and  family-related 
sufficiently  contribute  to  equal  opportunities 
for  men  and  women.  The  proportion  of  children 
aged  below  3  attending  formal  childcare  stood  at 
20.6 %  in  2016,  still  considerably  below  the 
Barcelona  target  of  33 %.  The  share  of  full-time 
enrolment  (i.e.  30h  or  more  per  week)  is  well 
below  EU  average. (38)  There  are  substantial 
regional  differences  in  the  provision  of  and 
demand  for  childcare  due 
to  different  fees. 
Progress in the provision of child care is hampered 
by  the  institutional  set-up  as  the  entitlement  to 
early  childhood  education  and  care  starts  only 
from  the  age  of  five  and  for  only  16  hours  per 
week. Fathers of children born after 1 March 2017, 
who  want  to  take  a  full-time  leave  are  entitled  to 
the  ‘family-time  bonus’  (Familienzeitbonus),  a 
monetary  bonus.  Further  investment  in  childcare 
services  and  all  day  schools  could  help  to  better 
use the labour market potential of women.  

Despite  the  positive  development  of  the  labour 
market,  Austria  has  a  comparatively 
low 
activity  rate  of  older  workers.  Although  the 
employment  of  older  workers  increased  from 
38.8 % in 2008 only 53.6 % of people aged 55- 64 
were on the labour market in 2017, while the EU-
28  average  was  60.6 %.  The  employment  rate  for 

(38)  For  children  under  three  5.6 %  vs  17.9 %  in  the  EU)  and 
for older children (from 3 up to compulsory school age), at 
26 %, the rate is far below the European average of 51.8 % 
in 2017. 

31 

-50510152025UnadjustedExplainedUnexplainedUnadjustedExplainedUnexplainedAgeEducationOccupationWorking timeJob experienceEmploymentcontractEconomic activityEnterprise sizeEnterprise controlATEU  
                                                           
 
                                                           
the 

women  (44.8 %  in  the  third  quarter  of  2018) 
among older workers, remains much below that of 
men (63.6 %.) The relatively high figures for long-
longer  average 
term  unemployment  and 
duration  of  unemployment  (132  days  for  those 
over  50,  compared  with  a  general  average  of  104 
days, and 72 days for people under the age of 25) 
insufficient 
show 
opportunities for this group of workers. This points 
towards  further 
in  elderly-
friendly working environments 

the  vulnerability  of  and 

investment  needs 

3.3. Labour market, education and social policies 

low 
High  unemployment  rates  among  the 
labour  market 
skilled  point  to  underused 
potential.  Unemployment  among 
low  skilled 
workers  has  been  rising  since  2015  and  reached 
13.6 % in 2017. Low qualified (having completed 
only basic schooling, up to lower secondary school 
‘Pflichtschule’)  represent  a  share  of  more  than 
44 %  of  all  unemployed.  This  remains  the  group 
most severely hit by unemployment. Active labour 
market  policies  remain  crucial  for  upskilling 
theselow-skilled  workers. 
in  adult 
learning  could  help  increase  the  employability  of 
older workers and the low skilled.  

Investing 

32 

 
3.3. Labour market, education and social policies 

Box 3.3.2: From part-time to full-time: the budgetary and distributional potential of 
increasing female work intensity 

Standing at 71.5% in 2018Q2, female labour market participation in Austria is well above the EU average of 
67.4 %. However, when considering full-time equivalent employment, the rate drops sharply to 54.0%. The 
reason for this is Austria's high female part-time employment rate (47.1 % versus 31.9 % in the EU in 2016), 
which  is  especially  high  for  women  in  childbearing  age  25-49  (49.1 %  versus  29.2 %  in  the  EU).  (1) 
Additionally,  female  part-time  work  varies  strongly  across  the  Länder,  which  may  also  reflect  regional 
disparities  in  the  provision  of  child  care  services.  Female  part-time  employment  constitutes  a  main 
contributing factor to Austria's pronounced gender pay and pension gap.  

The  following  illustrates  the  budgetary,  distributional  and  equity  effects  of  shifting  female  part-time 
employment to full-time work in order to reach the EU average of part-time employment of 31.9 % (Labour 
Force  Survey  2016).  (²)  Simulations  of  the  effects  of  the  reform  have  been  conducted  by  the  European 
Commission Joint Research Centre, based on the EUROMOD model using 2016 EU-SILC data. 

Graph 1:  Distributional and equity effects of increased female full-time employment 

(1) Poverty line is EUR 14,887.66 (60% of median equivalised annual disposable income). 
Source: European Commission based on the EUROMOD model. 

Overall, the shift would lead to an increase in revenues from personal income taxes and social contributions 
in  the  order  of  roughly  EUR  3  bn,  taking  into  account  slightly  reduced  expenditures  for  means-tested 
benefits.  On  average,  the  reform  increases  mean  equivalised  disposable  income  by  EUR  497  with 
households in the lower and the middle part of the income distribution experiencing higher gains. Poverty is 
affected significantly. Overall, the shift decreases the poverty risk by 0.5 pps from 13.1 % to 12.7 %. The 
At-risk-of-poverty rate is reduced especially for households with one adult and children (i.e., single mothers 
with children).  

(1) 
Of the approximately 1.88 million gainfully employed women, almost 500,000 have children under the age of 
15. The majority of these working women with caring responsibilities work part time (77.1 % in 2016) and only 22.9 % 
work full time (Mayrhuber, C., 2017). Data for 2016 are presented in order to match the year of the EUROMOD input 
data (EU-SILC).  
(²) 
The simulation involves shifting a randomly selected set of women who worked part-time (i.e., between 10 and 
35 hours per week) in 2016 and report to have worked part-time for the entire year 2015. As a result, approximately 70 % 
of  the  women  in  the  sample  are  selected  to  change  from  part-  to  full-time  in  order  to  reach  the  EU  average  part-time 
employment rate of 31.9 %. The distribution of selected women across deciles of equivalised disposable income shows 
that eligible women are concentrated in the middle and the upper part of the income distribution. 

33 

010,00020,00030,00040,00050,00060,00012345678910AllMean annual eq. disp. incomeDecilesBaselineReform+1.0%+1.2%+2.0%+2.2%+2.0%+2.4%+2.6%+1.8%+1.9%+1.1%+1.8%010203040TotalOne adult with childrenTwo adults with childrenAt-risk-of-poverty rateReformBaseline 
 
 
 
 
 
 
3.3. Labour market, education and social policies 

including 

to  business  needs 

measures, 
reducing  unemployment 
insurance  contributions  for  low-wage  earners  (see 
Section  3.1).  The  special  fund  for  integration  of 
apprentices,  which  is  a  minor  part  of  the  overall 
company-based assistance for apprenticeships will 
be  increased  from  EUR 10  million  to  EUR 20 
million.  In  order  to  increase  the  flexibility  of 
the 
workers  and  replying 
government increased the maximum allowed daily 
working  time  to  12  hours.  A  reform  of  the 
unemployment  assistance  is  announced  for  2019. 
Support 
for  programs  assisting  mobility  of 
recognised  refugees  like  “b.mobile”  is  continued. 
Social  partners  play  an 
in 
recognising  skills  needs  and  in  the  design  of 
training  programmes  and 
the  apprenticeship 
system. (European Commission, 2018h). Since the 
government  has  taken  office  in  December  2017, 
the  established  system  of  social  dialogue  and 
involving  social  partners  in  the  decision  making 
process have been challenged. Recent government 
actions are likely to reduce their proven capacity to 
contribute 
socio-economic 
balanced 
development. 

important 

role 

to 

3.3.2.  SOCIAL POLICIES  

Social transfers are effective in reducing income 
inequality  and  protecting  people  from  poverty 
and  social  exclusion  but  vulnerable  groups 
remain.  Spending  on  social  protection  is  among 
the  highest  in  the  EU.  At  42.2 %,  the  poverty 
reducing  impact  of  social  transfers  also  remained 
high  in  2017,  reflecting  the  high  adequacy  of 
minimum  income.  Austria  has  one  of  the  lowest 
share  of  population  at  risk  of  poverty  or  social 
exclusion  (AROPE)  in  the  EU  (18.1 %  versus  an 
EU average of 22.5 % in 2017). However, the risk 
is higher and increasing for vulnerable groups such 
as single parent households (47.9 % versus an EU 
average  of  47 %  in  2017)  as  well  as  population 
living in (quasi-) jobless households whose at risk 
of  poverty  (AROP)  rate  increased  from  50.2 %  in 
2011  to  61 %  in  2017.  Inequality  of  opportunity 
for  children  is  high.  The  AROPE  rate  for  the 
children of low-skilled parents was 57.7 pps higher 
than  for  the  children  of  high-skilled  parents  in 
2017,  a  gap  that  is  greater  than  the  EU  average. 
Appropriate  investment  in  the  employability  and 
social  inclusion  of  these  vulnerable  groups  could 
alleviate this risk. 

People  with  a  migrant  background  continue  to 
struggle  to  get  into  employment  even  when 
attaining  a  high 
level  of  education.  The 
employment  rate  gap  of  non-EU  born  persons  vs 
native-born  was  16.9 pps (39)  (employment  rate  at 
60.9 %)  in  2017  remaining  particularly  high  for 
non-EU born women (21.8 pps) and for those with 
high level of education (18 pps). The employment 
rates  for  highly  skilled  migrants  –  below  the  EU 
average – together with the high over-qualification 
rate  (44 %  non-EUnationals  compared  to  an  EU 
average  of  41.7 %)  point  to  difficulties  for  (non-
EU)  migrants  to  realise  their  full  potential  on  the 
labour  market. 
the 
In  addition, 
employment rate for native-born persons (aged 15-
34)  with  two  foreign  born  parents  was  at  around 
76 %,  14.6 pps  lower  than  among  native-born 
people with a native background (90.5 %) (OECD, 
EU, 2018).  

in  2017, 

levels 

increasing  employment 

the 
Despite 
labour  market  integration  of  refugees  remains 
an issue. The labour market integration of refugees 
remains a challenge with high unemployment rates 
(in  2017:  nationals  from  Syria  61.8 %;  Iraq: 
46.4 %; Afghanistan: 34 %). In the first year since 
the ‘Integrationsgesetz’ entered into force in 2017 
there  was a significant increase in the counselling 
integration  centres  (+70 %) 
the 
provided 
(Österreichischer 
2018). 
Increasing investment in apprenticeships and skills 
upgrades 
refugees  combined  with  other 
integration measures may significantly shorten the 
time needed for their labour market integration. 

Integrationsfonds, 

for 

in 

to 

the 

the 

reduced 

commitment 

government’s 

reducing 
Despite 
unemployment, 
active 
employment  strategy  is  mixed.  The  restrictive 
expenditure  path  underlying  the  government’s 
budgetary  strategy  severely 
targeted 
support  for  some  vulnerable  groups.  In  particular 
the  public  employment 
financial  support  for 
service  was  cut  and  several  programmes  were 
discontinued, which included measures facilitating 
the labour market integration of people entitled to 
asylum and subsidiary protection (Integrationsjahr) 
and  measures  supporting  activation  for  long-term 
unemployed (Aktion 20,000) and elderly. With the 
aim  of  making  work  pay, 
the  government 
introduced  or  announced  recently  several  tax 

(39)  Eurostat 2017. The gap was of 17.1 pps in 2016. Average 

gap in the EU28 is of 10 pps. 

34 

 
                                                           
3.3. Labour market, education and social policies 

arise  from  the  planned  indexation  of  family 
allowances  and  benefits  to  the  price  level  of  their 
country  of  origin  for  people  working  in  Austria 
whose  children  live  abroad.  As  part  of  its  cost-
saving  measures  the  government  agreed  to  index 
the family bonus and child allowances for children 
living  outside  Austria  as  from  January  2019.  The 
distributional  effects  of  the  family  bonus  plus  are 
analysed in Section 3.1. 

employed 

Social  protection  for  employees  and  the  self-
employed  performs  relatively  well.  Austria  has 
one of the highest coverage rates of unemployment 
benefits for the short term unemployed. However, 
marginally 
(geringfügig 
Beschäftigte),  a  majority  of  who  are  women,  are 
not covered by unemployment insurance. They can 
opt  for  other  strands  of  social  insurance,  i.e. 
sickness,  maternity,  pensions  and 
invalidity 
schemes.  The  number  of  this  group  of  marginally 
employed,  alike  those  self-employmed  and  in 
atypical work, is continuously increasing. 

people 

Overall,  Austria’s  pension,  health,  and  long-
term  care  systems  offer  adequate  benefits  and 
high  quality  services.  However,  vulnerable 
groups, 
inefficiencies,  and  sustainability  risks 
remain, which are addressed in Section 3.1. 

3.3.3.  EDUCATION 

rate 

school-leaving 

While  early  school  leaving  is  below  the  EU 
average,  social  and  regional  disparities  persist. 
Austria’s  early 
saw  a 
continuous  decrease  between  2007  and  2016,  but 
increased  again  in  2017  to  7.4 %,  in  particular  in 
towns  and  suburbs.  It  varies  between  4.5 %  in 
Styria (Steiermark) and 9.6 % in Vienna (Wien). In 
rural areas it amounts to 4.9 % compared to 9.5 % 
in towns and suburbs, and 8.4 % in cities. Foreign-
born  pupils  are  still  more  than  three  times  more 
likely to leave school early than native-born pupils 
(18.4 %  vs  5.3 %),  and  this  after  having  already 
reduced the gap (European Commission, 2018f). 

the 

Educational  outcomes  are  disproportionately 
influenced  by 
socio-economic  and/or 
migrant  background  and  basic  skills  remain 
below the EU average. 15.9 % of the variation in 
PISA  2015  science  scores  is  explained  by  the 
parental  background  of  15  year  olds  (2015). 
Education outcomes of first generation immigrants 

Major  differences  exist  in  the  social  situation 
between regions. The national AROPE rate masks 
considerable variation across the nine federal states 
(Länder),  with  Vienna  (26 %)  and  Vorarlberg 
(23.2 %)  having  the  highest  AROPE  rates,  and 
Lower and Upper Austria having the lowest (13 % 
and 14.3 %, respectively).  

Bigger  cities,  especially  inner  city  areas  within 
them, are facing a number of social challenges. 
People  living  in  cities  are  more  at  risk  of  poverty 
or  social  exclusion  (26.3 %  of  the  city-based 
population  in  2017)  compared  to  towns  and 
suburbs (16.4 %) and rural areas (13.0 %). Vienna 
for example shows both a high risk of poverty rate 
(26 % in 2016), as well as slower economic growth 
than the other Austrian regions (GDP per capita in 
Vienna  decreased  from  164 %  of  the  EU  average 
in 2010 to 153 % in 2016). 

In-work poverty among foreign-born workers is 
much  higher  than  for  native-born  Austrians. 
The  gap  between  the  poverty  risk  for  migrant 
workers  and  the  native  born  was  11.9 pps,  one  of 
the  widest  in  the  EU-28.  This  gap  also  reflects  a 
regional  disparity,  as  a  high  percentage  of  the 
population  with  a  migrant  background  resides  in 
bigger  cities,  in  particular  in  Vienna.  In  Vienna, 
24.2 % of the population were foreign nationals in 
2016 
(14 %  Non-EU,  10.2 %  EU),  whilst 
nationally this figure stands at 14.6 % (7.1 % EU, 
7.4 % non-EU). 

Graph 3.3.3:  Percentage of the population at risk of poverty 

or social exclusion by NUTS 2 region 
(Bundesland) 2016 

Source: Eurostat 

Uniform  nationwide  rules  for  the  minimum 
income benefit could help mitigate poverty risks 
for  vulnerable  groups.  However,  a  reduction  of 
the  benefit  (Bedarfsorientierte  Mindestsicherung) 
for  persons  granted  temporary  asylum  has  been 
declared 
law 
(2018/C123/11).  Doubts  about  compatibility  also 

incompatible 

with 

EU 

35 

 
 
3.3. Labour market, education and social policies 

school  heads  will  receive  more  autonomy  but 
without extra resources. 

All-day  schooling  is  increasing  slowly.  The 
proportion of pupils in all-day schooling improved 
on  an  annual  basis  by  1.3 pps  to  24.4 %  in 
2017/2018 and to 25,5 % in 2018/19. However, the 
more  comprehensive  type,  called  'verschränkte 
Form', (40) stalls at about 11 % of all day schools . 
Doubling the implementation period for the recent 
additional 
funding  of  EUR  750  million, 
from2019/20  until  2032/33,  slows  the  expansion 
process. 

Participation  in  early  childhood  education  and 
care  has  increased  but  the  quality  does  not 
challenges.  Early 
the 
sufficiently  match 
childhood  education  and  care  is  administered  at 
local  level,  but  the  provinces  and  the  federal 
government  also  have  responsibilities.  Young 
people  with  low  socio-economic  and/or  migrant 
background, generally participate less often, which 
therefore  cannot  sufficiently  offset  disadvantages 
suffered  at  an  early  age.  The  government 
programme  has  announced  several  measures  to 
improve both participation and its quality. A recent 
four  year  agreement  between  the  government  and 
the regions (15a) guarantees financing of EUR 180 
million per annum between 2018/19 and  2021/22. 
The regions will contribute EUR 38 million of this. 
The agreement foresees the extension of facilities, 
skills and linguistic support are to be improved. It 
improve  qualifications  of  staff  and 
aims 
improve  pupil-teacher  ratios,  but  partly  on  a 
voluntary  basis.  The  agreement  falls  short  of  a 
long-term development perspective.  

to 

Austria  performs  relatively  well  in  tertiary 
education  though  regional  differences  persist. 
Austria  has  met  the  tertiary  education  target  with 
40.8 %  of  30-34  year  olds  in  2017.  Results  in 
Austria’s provinces have converged between 2012 
and  2017,  with  Steiermark  doubling  its  graduates 
(Figure  3.3.4).  However,  it  remains  difficult  for 
children  from  parents  with  medium  and  low 
to  access  higher  education. 
education 
(European Commission, EACE, Eurydice, 2018) 

levels 

(40)  Verschränkte  Form'  means  that  instruction  is  spread  over 
the  whole  school  day,  and  is  not  only  concentrated  in  the 
morning.  

in  PISA  tests  are  almost  3  school  years  behind 
native  born  pupils  –  the  highest  gap  in  the  EU. 
This  major  gap  is  also  confirmed  by  national 
testing  (European  Commission,  2018c).  Recent 
international 
testing  (PIRLS)  showed  even  a 
widening gap in reading for those with weak socio-
economic  or  migrant  background 
(Wallner-
Paschon  et  al.,  2017).  Recent  studies  show  that 
children of  immigrants are  more  likely to join the 
non-academic 
educational 
segregation within the population as early as at the 
age  of  ten  is  very  difficult  to  overcome  later, 
effective  preventive 
unless 
measures  at  an  early  stage.  (OECD,  2018a) 
Investments 
education 
outcomes  due 
to  socioeconomic  or  migrant 
background are thus needed. 

address  unequal 

addressed  with 

stream 

that 

and 

to 

Austria’s 
spending  on  education  remains 
relatively stable but outcomes do not yet match 
levels.  The  share  of  general 
the  spending 
government  expenditure  stood  at  9.7 %  in  2013 
and  9.8 %  in  2016.  Based  on  Purchasing  Power 
Parity, Austria significantly outspends both the EU 
and  the  OECD  average  (OECD,  2018b)  Despite 
the  high  spending  in  education  Austria  achieves 
only  moderate 
outcomes  when 
education 
comparing  basic  skills  internationally  (European 
Commission,  2017a).  Urban  schools,  often  facing 
difficult  socio  economic  environments,  appear  to 
be  at  a  disadvantage 
their 
specificities  seem  not  adequately  addressed  in  the 
current structure of funding (OECD, 2016).  

in  funding,  as 

The  current  government  has  a  comprehensive 
new  reform  agenda,  which  partially  reverses 
the direction of previous reforms. A pedagogical 
package was presented in spring 2018, with limited 
additional  financial  resources.  First  measures  in 
the  area  of  primary  and  new  secondary  schools 
were adopted by the parliament in December 2018. 
The package reintroduces a 5 scale grading scheme 
jointly with grade retention at an earlier stage and 
increased 
and 
differentiation measures in new secondary schools. 
Further  steps  will  revise  criteria  to  enter  primary 
school, 
individual  competence  and 
potential checks  in 3rd and 7th grade and updates 
and  simplify  the  curricula.  Some  of  these  actions 
in  particular  reinforcing  streaming  and  tracking 
combined  with  actions  under  the  government 
programme  override  earlier  reforms.  Schools  and 

possibilities 

streaming  

introduce 

for 

36 

 
                                                           
 
3.3. Labour market, education and social policies 

Commission,  2018c).  While  Austria  registered 
slight  improvements  of  basic  skills  of  internet 
users compared to 2017, the country is behind the 
top  performing  countries  (European  Commission, 
2018i).  43 %  of  Austrian  companies  lack  IT  staff 
and  74 %  fear  that  the  situation  might  deriorate 
further  (Österreichische  Industriellenvereinigung, 
2018). An infrastructure review by the Ministry of 
Education  in  2016  showed  that  35 %  of  schools 
lacked  WLAN  in  at  least  50 %  of  their  premises  
with  significant  differences  between  different 
school types(BMB, 2016).  

3.3.4.  INVESTMENT NEEDS  

improving  productivity  and 

Increased  investment  in  affordable  childcare 
services,  education, and training and the socio-
economic integration of migrants are important 
for 
long-term 
inclusive growth. Insufficient provision of quality 
full-time childcare services contributes to the high 
share  of 
female  part-time  employment  and 
divergent education outcomes. Shortages of skilled 
labour point to the need to invest  more in  general 
education and training, lifelong learning as well as 
in elderly-friendly work environments to better use 
the labour potential of older workers, workers with 
a  migrant  background  and  the  low-skilled.  Using 
the  country’s  full  labour  potential  also  requires 
more investment in the socio-economic integration 
of non-EU nationals. 

and 

The  human  resources  base  in  science  and 
technology  has  expanded  overall  but  shortages 
in  engineering  and  computing 
specialists 
persist.  Austria  increased the share of researchers 
in  the  labour  force  between  2007  and  2015, 
ranking  seventh  in  the  EU.  Almost  2/3  were 
employed in the business sector. New graduates in 
thousand  of 
engineering  per 
science 
population  aged  25-34  have  also 
increased 
significantly  over  the  last  decade.  Graduates  in 
computing  saw  less  expansion.  Academic  jobs  in 
science,  technology,  engineering  and  mathematics 
are  forecast  to  increase  twice  as  much  (25 %) 
between  2013  and  2025  compared  to  the  EU 
average  (CEDEFOP,  2018).  Companies  report 
already  in  2018  that  they  cannot  fill  one  sixth  of 
fields 
their 
(Industriellenvereinigung,  2018).  The  Austrian 
Research  and  Technology  Report  identifies  a 
technical  and 
particular  need 
to  have  more 
IT 
focus  on 
engineering  graduates  with  a 
(BMBWF,  BMDW,  BMVIT,  2018)  Both  the 
Austrian University Development Plan 2019-2024 
and  the  performance  based  funding  agreements 
2019-2022, aim to address these issues. 

positions 

these 

open 

in 

Graph 3.3.4:  Tertiary attainment by NUTS 2 region in per 

cent 

(1) Burgenland and Vorarlberg have been excluded since 
no figures are available for 2012 and 2013 
Source: Eurostat  

Digital  skills 
in  Austria  have  continuously 
improved  and  are  above  the  EU  average, 
though  clearly  behind 
leading 
the  adult 
countries.  Digital 
(European 
population 

skills  among 

average 

remain 

four 

the 

37 

182328333843485320132014201520162017%NiederösterreichWienKärntenSteiermarkOberösterreichSalzburgTirol 
 
 
3.4. COMPETITIVENESS REFORMS AND INVESTMENT 

3.4.1.  PRODUCTIVITY GROWTH AND 

INVESTMENT NEEDS 

Productivity growth 

in  particular 

Contrary  to  other  countries,  Austria’s  total 
factor  productivity  growth  has  stagnated  since 
in 
the  crisis  and  decreased 
information  and  communication  technology 
and  professional  services.  In  growth  accounting, 
economic  growth  can  be  broken  down  into  a 
labour  and  a  capital  component,  as  well  as  total 
factor productivity (OECD, 2018c). In the light of 
a projected reduction of the labour force, the most 
important  contributor 
long-term  economic 
to 
growth  is  total  factor  productivity.  It  measures 
aspects  like  the  efficiency  with  which  labour  and 
capital  are  used  together,  but  also  technological 
progress.  Like  in  most  countries,  total  factor 
productivity  growth  has  been  slowing  for  several 
decades,  but  the  decrease  since  the  crisis  is  more 
pronounced  than  in  most  Innovation  Leaders  and 
Strong  Innovators (41)  (see  Graph  3.4.1).  Since 
2015,  total  factor  productivity  has  been  growing 
again  weakly.  However,  this  might  be  mainly 
driven  by  the  economic  upswing  rather  than  by 
structural  components,  as  total  factor  productivity 
growth  behaves  cyclically  (OECD,  2018c).  Total 
factor productivity for the whole economy follows 
the  developments  in  the  manufacturing  sector, 
where  it  has  been  stagnating  since  the  crisis. 
Negative  Total  factor  productivity  growth 
is 
visible  in  the  construction  sector,  as  well  as  in 
information  and  communication  technology  and 
professional  services,  while 
in 
financial services (42). 

it  stagnated 

Since  the  crisis,  productivity  growth  was  also 
negatively  affected  by  a  decline  in  information 
and communication technology capital per hour 
worked,  as  well  as  increased  inefficiency  of 
the 
information  and 
labour  allocation 
communication 
sector.  Overall, 
technology 
improved labour allocation across sectors and less 
dispersion  in  labour  productivity  between  sectors 
contributed  positively  to  aggregate  productivity 

in 

(41)  As defined by the European Innovation Scoreboard 2018 – 
 Innovation leader: SE, DK, FI, NL, UK, LU Strong innovator: 

DE, BE, IE, AT, FR, SI.  

(42)  European Commission calculations based on EU KLEMS. 
Sectors  according  to  NACE.REV.2.  Financial  services  = 
Financial  and  Insurance  activities;  Professional  services  = 
Professional, scientific, technical service activities. 

and 

technology 

growth (macro-level allocative efficiency) in 2000-
2014.  In  2005-2016,  productivity  growth  in  most 
sectors  was  also  supported  by  an 
increased 
efficiency in the allocation of workers across firms 
within  the  sector,  with  the  exception  of  the 
information  and  communication  technology  and 
the  construction  sector.  This  hints  at  barriers 
making  it  increasingly  difficult  for  workers  to 
move  towards  more  productive  information  and 
communication 
construction 
companies,  such  as  regulations  that  might  not  be 
flexible  enough  to  adapt  to  the  rapid  evolution  in 
information and communication technology sector. 
In certain service sectors, in particular professional 
services, allocative efficiency is even negative (43) 
(2014  data,  though  improving  somewhat  in  2005-
2016), hinting that barriers and regulations act as a 
drag on productivity in these sectors. The decrease 
in  growth  of  information  and  communication 
technology  capital  per  hour  worked  since  shortly 
before  the  crisis  has  also  contributed  to  the 
slowdown  in  productivity  and  economic  growth 
(WIFO, 2019; OECD, 2018c). 

Graph 3.4.1:  TFP developments in selected countries 

(1) DE for data before 1992 linked data for GDR and West 
Germany 
Source: European Commission 

two 

terms: 

the  unweighted  average  of 

(43)  Sectoral labour productivity is written, in logs, as the sum 
of 
firms’ 
productivity  and  the  extent  to  which  the  relatively  more 
productive  firms  have  a  greater  share  of  employment. 
Saying  that  allocative  efficiency  is  negative  means  that 
the  more 
labour 
productive firms. 

is  not  predominantly  allocated 

to 

38 

-0,5%0,0%0,5%1,0%1,5%2,0%2,5%3,0%3,5%ATEU-15DKDENLFISE1961-19701971-19801981-19901991-20002001-20102011-2017 
 
                                                           
 
                                                           
3.4. Competitiveness reforms and investment 

Investment needs 

Research and innovation 

and 

and 
investments. 

The  strong  cyclical  upswing  masks  underlying 
weaknesses  of  the  Austrian  economy  related  to 
insufficient 
rigidities 
regulatory 
productivity-enhancing 
The 
Austrian  economy  has    experienced  a  strong 
economic  upswing  in  2018.  This  has  been  visible 
in  strong  investment  growth,  but  also  other  key 
indicators  of  business  dynamism,  such  as  start-up 
numbers. This positive economic climate however 
masks  structural  challenges  that  bear  down  on 
economic 
continued  growth  prospects 
resilience. These include the only slowly returning 
productivity  growth,  the  still  moderate  innovation 
outcomes  and  insufficient  progress  towards  a 
digital  and  sustainable  Austrian  economy.  In  its 
national  Research,  Technology  and  Innovation 
strategy 2011-2020 (BKA et al., 2011), Austria set 
itself  the  aim  of  becoming  an  Innovation  Leader 
by  2020  (it  is  currently  a  Strong  Innovator;  see 
below).  This  remains  the  crucial  reference  for 
assessing  its  growth-  and  productivity-targeting 
policy measures. The effectiveness of investments 
depends 
restrictive 
regulations,  in  particular  in  Austria’s  services 
(Section  3.4.2),  reducing  administrative  burden 
and  improving  procurement  practices  (Section 
3.4.4).  Austria  has  not  addressed  the  Council 
Recommendation yet but it is planning to appoint a 
National Productivity Board in the coming months. 

addressing 

notably 

on 

In 

on 

parallel, 

investments 

Focussing 
innovation, 
digitalisation  and  sustainability  is  needed  to 
boost  productivity  and  strengthen  growth  in 
Austria.  Untapped  human  capital  hampers 
productivity  and  long-term  growth  (see  Section 
productivity-enhancing 
3.3). 
investments  are  important  to  ensure  sustainable 
growth,  in  particular  measures  addressing  the 
growth and competitiveness of Small and Medium 
Enterprises.  Lack  of  diffusion  of  digital 
technologies  and  business  models  among  such 
firms 
productivity. 
Furthermore, high investments in R&D are not yet 
innovation  outcomes, 
fully 
highlighting  inter  alia  the  need  to  foster  science-
business  links.  Investments  into  eco-innovation, 
the 
efficiency, 
renewables and sustainable mobility are needed for 
more sustainable growth. 

bottlenecks 

translating 

economy, 

circular 

energy 

into 

are 

for 

investments  have  been 

R&D 
increasing 
continuously,  driven  by  the  public  and  private 
sector.  R&D  intensity  in  Austria  has  surpassed 
3 % of GDP since 2014, reaching 3.16 % of GDP 
in 2017. This is still far from the national target of 
3.76 % of GDP for 2020. The private sector is the 
key driving force behind this trend, accounting for 
more  than  70%  of  total  R&D  intensity.  With 
2.22 % of GDP in 2017, Business Expenditure  on 
R&D  is  the  second  highest  in  the  EU.  Business 
Expenditure  on  R&D  as  a  percentage  of  GDP 
performed  by  small  and  medium-sized  enterprises 
has  also  increased  since  2007  and  was  the  third 
highest in the EU in 2015. Austria ranked  fifth in 
the EU with respect to total government support to 
business  R&D  (as  a  percentage  of  GDP)  in  2015, 
with  R&D  tax  incentives  accounting  for  54 %  of 
total  support  (OECD,  2018d).  After  significant 
increases  between  2006  and  2009,  public  R&D 
intensity has stabilised at around 0.93 % of GDP in 
2017.  In  2015,  five  out  of  the  30  most  R&D 
intensive  regions  in  the  EU  were  in  Austria 
(European Commission, 2018j).  

However,  there  is  room  to  improve  the  overall 
effectiveness  of  the  research  and  innovation 
system  by  better  translating  R&D  investments 
into  excellent  science  and  ground-breaking 
innovation.  Despite  the  relatively  high  level  of 
investment  in  the  public  science  base  and  the 
increasing  international  openness  of  the  research 
system (44), Austria has not progressed since 2007 
with  respect  to  the  key  indicators  of  scientific 
excellence  (such  as  scientific  publications  within 
the  top  1 %  or  top  10%  most  cited  scientific 
publications  worldwide).  The  performance  on 
these indicators stays around EU average. Despite 
an  increase  in  its  innovation  performance  since 
2010, Austria is still not an Innovation Leader, but 
remains  in  the  second  rank  category  of  Strong 
Innovator  (European  Commission,  2018k).  In 
particular, concerning employment in fast-growing 
innovative  firms (45),  Austria  performs  poorly, 

(44)  The  country  ranked  fourth  in  international  co-publications 

as a percentage of total publications in 2017. 

(45)  Number  of  employees  in  high-growth  enterprises  in  50 % 
most innovative sectors, as a share of total employment for 
enterprises with 10 or more employees. High growth firms 
are defined as those firms with an average annual growth in 
employees  greater  than  10 %  a  year,  over  a  three-year 
period, and with 10 or more employees at the beginning of 
the observation period. 

39 

 
                                                           
3.4. Competitiveness reforms and investment 

Public  and  private  investments  into  intangibles, 
such as organisational capital, market research and 
training  (as  percentage  of  GDP)  are  below  their 
levels  in  other  Innovation  Leaders  and  Strong 
Innovators (47).  Furthermore,  Austria’s  non-R&D 
innovation  expenditure  is  clearly  below  the  EU 
average (48). 

scientific 

regarding  public-private 

Science-business 
links  are  well-established 
overall,  but  their  full  potential  is  not  yet 
exploited.  In  2017,  Austria  ranked  fourth  in  the 
EU 
co-
publications  as  a  percentage  of  total  publications, 
but  has  not  progressed  since  2007.  It  has  a 
consolidated  and  diverse  landscape  incentivising 
collaboration  and  technology  transfer  between 
public  and  private  sectors.  The  OECD  highlights 
the 
linkages  between 
industry  and  science  targeting  ground-breaking 
innovation  in  strategic  fields.  This  also  requires 
better  strategic  steering  and  coordination  of 
research  and  technology  organisations  (OECD, 
2018e) 

importance  of  stronger 

Austria’s innovation performance would benefit 
from  more cooperation between its  Länder and 
with  other  countries  in  corresponding  Smart 
Specialisation 
fields.  The  Austrian  Smart 
Specialisation  approach  is  based  on  the  national 
RTI strategy and regional strategies at the level of 
the nine Länder. In 2016, a policy framework was 
presented  to  improve  the  interaction  between  the 
national strategy and regional strategies (OEROK, 
2016).  The  progress  in  implementing  the  Smart 
Specialisation Strategy process differs between the 
Länder,  with  some  being  Smart  Specialisation 
pioneers  and  others  still  catching  up.  There  are 
also  important  regional  differences  in  relation  to 
the  R&D  intensity,  which  ranges  from  1 %  of  the 
regional GDP in Burgenland to 5.16 % in Styria in 
2015.  Such  regional  disparities  can  be  addressed 
by strengthening cooperation between the Austrian 
Länder  and  with  regions 
in  other  countries 
(OECD, 2018e). 

(47)  SPINTAN and INTAN data. 
(48)  Non-R&D innovation expenditure includes the acquisition 
of  machinery,  equipment  and  software,  expenditure  for 
acquisition of other external knowledge, ‘training’, ‘market 
introduction  of 
innovations’  and  ‘other  preparations 
expenditures’. 

ranking in the bottom three of EU Member States 
in 2015 (see Graph 3.4.2). Unicorn companies (46) 
are  also  rare  in  Austria  with  only  Tricentis,  a 
software  testing  solutions  company  from  Vienna, 
reaching unicorn status in 2018 (Dealroom, 2018). 
Despite  significant  increases  in  R&D  investments 
in 
tech 
manufacturing  sectors  over  the  last  decade,  the 
shares of these sectors in total value added slightly 
decreased.  

and  medium-high 

high-tech 

the 

Graph 3.4.2:  Employment in fast-growing enterprises in 

innovative sectors (% of total employment) 

(1) Greece: no data 
Source: European Innovation Scoreboard, Eurostat 

innovation 

capacity  and 

Further  investing  into  small  and  medium-sized 
in 
enterprises’ 
complementary intangible assets could generate 
productivity  gains.  The  share  of  small  and 
medium-sized  enterprises  innovating  in-house  is 
below  the  one  of  Innovation  Leaders  such  as 
Finland,  Sweden  and  the  Netherlands,  while  the 
sales  of  new-to-market  and  new-to-firm  product 
innovations  are  even  below  the  EU  average 
(European Commission, 2018k). This is related to 
a  dominant  focus  on 
innovation 
(OECD,  2018e).  Besides  R&D  investments,  it  is 
increasingly important to invest in other intangible 
assets  (such  as  e.g.  software  and  databases,  but 
also  training,  design,  organizational  capital,  etc.) 
which  are  complementary  and 
increasingly 
essential  for  business  success  and  productivity 
growth in Austria (European Commission, 2019a). 

incremental 

(46)  Privately  held  start-up  company  valued  at  over  USD 

1 billion. 

40 

024681012EUELHUSKIEBGCZUKMTPLSELVPTNLESDELUDKFRHREESIITFIBEROLTATCY% of total employment20152008 
 
                                                           
                                                           
3.4. Competitiveness reforms and investment 

the 

information 

Correspondingly, 
and 
communication  technology  producing  sector  in 
Austria  has  a  comparatively  low  share  in  total 
is  most 
valued  added.  (WIFO,  2019).  This 
problematic 
early-mover 
advantages  are  at  play  (OECD,  2017).  Austria 
support for research and innovation in information 
and  communication  technology  companies  is  part 
of wider R&D- and business-support programmes. 

fields  where 

in 

Graph 3.4.3:  Share of ICT sector in GDP 

(1) Data for Ireland refers to 2014 
Source: European Commission 

of 

the 

there 

is  a  key  priority  for 
While  digitalisation 
Austria, 
on 
uncertainty 
is 
implementation,  monitoring  and  budget  for 
many 
intended  measures.  The 
effectiveness  of  Austria’s  policy  framework  for 
digitalisation  has  for  a  long-time  suffered  from 
fragmentation (WIFO, 2019). In addition, there is a 
growing  risk  of  a  digital  divide  between  its 
regions.  To  address  these  issues,  Austria  adopted 
in January 2017 the Digital Roadmap Austria as its 
first  nationwide  comprehensive  digital  strategy. 
elected  government  has 
The 
incorporated many of the strategy’s measures in its 
government  programme.  Work  on  a  new  digital 
strategy  is  ongoing.  In  addition,  a  new  digital 
agency  has  been  established  at  the  Austrian 
However, 
Research 
implementation, 
and 
budgetary 
monitoring tools for Austria’s digitalisation policy 
are not yet defined. 

subsequently 

allocations 

Promotion 

Agency. 

Digital transformation 

in 

lag 

invest 

technology 

Austria’s  firms 
information  and 
communication  technology  but  notably  smaller 
in  adopting  new  digital 
businesses 
technologies and business models. Austria's share 
of  information  and  communication  technology  
investments (as a percentage  of total investments) 
is  above  the  EU  average  (WIFO,  2019).  In  terms 
of  digital  intensity  Austria's  large  businesses  rank 
relatively well in EU comparison. However, this is 
not  the  case  for  its  small  and  medium-sized 
enterprises, as41.7 % are considered to have a very 
low level of digital intensity (using less than three 
information  and 
digital  technologies).  Among 
communication 
adoption  proxies 
relevant  for  smaller  businesses,  Austria  ranks  low 
in 
(European 
Commission, 2018i). Austrian businesses also face 
an 
cyber-crimes 
(Bundeskanzleramt, 2018a). In early 2018, 61 % of 
businesses reported in a survey to be  victims of a 
smaller  businesses  being 
cyber-attack,  with 
particularly  vulnerable 
(KPMG,  2018).  The 
considerable  take-up  of  the  programme  ‘KMU 
Digital’  shows  demand  and  interest  among  small 
and medium-sized enterprises in getting advice on 
digitalisation.  The  program  ends  in  Spring  2019. 
Austria  plans  to  extend  it.  A  call  to  establish 
Digital  Innovation  Hubs  in  the  regions  has  been 
launched.  These  hubs  will  support  small  and 
medium-sized 
and 
municipalities in the uptake of digital technologies.  

universities 

enterprises, 

computing 

increasing 

services 

number 

cloud 

of 

and 

communication 
Its 

information  and  communication 
Austria’s 
technology  sector 
is  comparatively  small. 
Austria  is  not  performing  on  par  with  Innovation 
Leaders  in  the  field  of  producing  (tradeable) 
technology 
information 
products  and  services. 
information  and 
communication technology producing sector (49) is 
smaller  than  in  Innovation  Leaders  and  has 
stagnated  both  in  terms  of  GDP  as  well  as 
employment share (see Graph 3.4.3). This notably 
holds 
communication 
technology  services,  where  significant  growth 
could  be  observed  in  other  Innovation  Leaders. 

information 

and 

for 

(49)  The information and communication technology producing 
sector  would  comprise  notably  the  manufacturing  of 
information and communication technology components as 
technology 
information  and  communication 
well  as 
services, 
information  and  communication 
such  as 
technology    consulting,  data  processing,  maintenance. 
(OECD 2006 based on Eurostat NACE 2 codes). 

41 

0%2%4%6%8%10%12%IE(1)LUSEMTROHUCZFINLEELVUKBGFRSKDECYDKHRESSIPLBEITATLTELPTEU 
                                                           
 
3.4. Competitiveness reforms and investment 

to 

Commission's 
2018  Retail  Restrictiveness 
Indicator  (European  Commission,  2018l).  As 
regards  operational  restrictions,  Austria  is  among 
the  four  worst  performing  countries.  This  is  inter 
alia  due 
limited  shop-opening  hours  and 
restrictions on the distribution of specific products, 
such as non-prescription medicines. Shop opening 
inflexible,  with 
hours  remain  restricted  and 
extensive rules on opening hours. As regards retail 
establishment,  the  complexity  of  the  procedure  to 
open  a  shop  differs  between  the  regions  (Länder) 
and  depends  largely  on  the  local  authority.  Shops 
with a  floor surface of over 800 m² are in  general 
subject  to  an  in-depth  scrutiny  by  authorities. 
Municipalities  specify  the  type  of  assortment  that 
only  shops  in  city  centres  can  sell.  Territorial 
supply  constraints  also  represent  a  significant 
challenge  for  retailers,  notably  in  the  food  sector 
(Handelsverband Österreich, 2018). 

E-commerce is growing, including cross border, 
but  Austrian  sellers  and  retailers  are  lagging 
behind  their  peers 
in  other  countries.  E-
commerce is on the rise in Austria. Around 60.3 % 
of  Austrians  are  ordering  goods  and  services 
online,  which  is  better  than  the  EU  average  of 
59.5%.  Almost  49 %  of  Austrians  order  from 
sellers  from  other  EU  countries,  which  is  topped 
only  by  Luxembourg.  These  numbers  are  not 
matched  on  the  seller  side,  where  Austrian  firms 
are  slightly  below  the  EU  average  as  regards 
online sales (14.4 % compared to 17.2 %). Among 
Austrian small and medium-sized enterprises, only 
6.6 % of their turnover resulted from e-commerce 
in  2017,  which  is  well  below  the  EU  average  of 
10.1%. The  Austrian  retail  sector  is  also  trying  to 
benefit  more  from  the  shift  to  e-commerce.  The 
number of online shops almost tripled from 3 200 
to  9 000  in  2006-2017,  with  20.8 %  of  retail 
companies  having  their  own  online  shop  in  2018, 
compared  to  24.2%  EU  average.  Turnover  from 
online sales by Austrian retailers is lower than for 
their  European  counterparts  (5.3 %  in  Austria 
compared  to  10.7 %  in  the  EU).  Part  of  the 
explanation  is  the  strong  e-commerce  position  of 
German retailers in Austria. 

Austria’s  tourism  sector  is  booming  but  faces 
labour  shortages  and  structural  change  due  to 
digitalisation.  Austria’s  large  tourism  industry  is 
currently  experiencing  a  strong  boom  with  record 
numbers  of  visitors.  This  boom,  coupled  with  a 
generally tight labour  market, has resulted in skill 

3.4.2.  MARKET FUNCTIONING AND THE 

SERVICES SECTOR 

Service sector regulation 

Austria's  service  sector  regulation  remains 
restrictive,  notably  in  the  area  of  business 
services  and  professions.  The  level  of  services 
trade  restrictiveness  in  Austria  is  higher  than  the 
EU  average 
in  sectors  such  as  accounting, 
architecture,  engineering,  computer  services  as 
well  as  construction  services  and  wholesale  and 
the 
retail  services  (OECD,  2019).  In  2017, 
Commission  identified  specific  restrictions  on 
seven  key  professions.  Austria  has  so  far  not 
sufficiently  addressed 
restrictions.  The 
government programme, while acknowledging the 
on 
regulatory 
businesses,  has  neither 
specific 
measures to address the identified restrictions nor a 
wider  review  of  service  sector  restrictions.  The 
2017 
act 
the 
(Gewerbeordnung)  brought  benefits  for  certain 
trades,  for  example  in  the  form  of  ancillary 
(Nebenrechte),  but  has  not 
exercise 
significantly  reduced  overall  restrictiveness.  The 
government has announced a further review of the 
trade licence act by 2020. 

administrative 

revision  of 

announced 

licence 

burden 

rights 

these 

trade 

and 

is 

sector 

The  economic  development  of  the  Austrian 
retail 
lagging  behind  EU-wide 
developments.  Sales  by  the  Austrian  retail  sector 
increased  by  0.8 %  in  2016  and  1.1 %  in  2017, 
thus  much less than the EU average of 2.6 % and 
2.4 % respectively. The decrease in the number of 
retail stores slowed in 2017 compared to previous 
years  (i.e.  1 %  decrease  or  400  stores)  (WKÖ, 
2018a).  At  the  same  time,  the  retail  sales  area 
remained  stable  at  a  high  level.  Retail  prices  in 
supermarkets  remain  higher  than  in  neighbouring 
Member 
Price 
differences  of  up  to  28 %  exist  for  the  identical 
products, notably in the food sector, despite similar 
value-added  tax  rates  (20  or  10 %  in  Austria 
compared 
in  Germany) 
or 
(Arbeiterkammer  Wien,  2018).  In  other  words, 
differences  in  quality  or  tax-rates  cannot  explain 
the price level differences. 

notably  Germany. 

States, 

7 % 

19 

to 

The  regulatory  environment  in  particular,  but 
also  territorial  supply  constraints,  are  an 
obstacle  for  the  development  of  the  Austrian 
the 
retail 

sector.  Austria 

ranks  high 

in 

42 

 
3.4. Competitiveness reforms and investment 

Leaders.  Further  reductions  of  the  administrative 
burden  linked  to  starting  a  business  would  also 
help (European Commission, 2018m). 

Scaling  up  however  remains  a  problem  for 
Austrian companies. The country´s share of high-
growth  firms  in  2015  was  well  below  the  EU 
average  and  in  the  ‘bottom  5’.  Furthermore, 
Austria ranked 19th in the EU in 2015 in terms of 
the  share  of  start-ups  in  firms  having  at  least  one 
employee.  A  key  factor  influencing  the  scale-up 
rate  of  Austria’s  smaller  firms  is  their  innovation 
capacity notably as regards innovation that is more 
than  incremental  (see  Section  3.4.1).  Austria’s 
Research  Promotion  Agency  is  allocating  roughly 
30 %  of  its  funding  to  research  in  small  and 
high-growth 
enterprises.  For 
medium-sized 
innovative  companies  in  particular,  the  lack  of 
venture  capital  and  other  sources  of  equity 
financing is a major barrier to growth (see Section 
3.2). 

Circular  economy,  renewables  and  resource 
efficiency 

Austria is on track to meet the renewable target 
for 2020 but risks missing the energy efficiency 
and greenhouse gas emission reduction targets. 
Progress was made in increasing energy efficiency 
through  measures  under  the  Energy  Efficiency 
Law.  However  consumption  in  primary  and  final 
energy  continued  to  increase  in  2016,  putting 
further pressure on the attainment of the EU 2020 
energy efficiency target. Austria will also fall short 
of  its  2020  emission  reduction  target  in  sectors 
outside  the emission trading  system, not least due 
to  increasing  emissions  from  the  transport  sector 
(details  in  Annex  A).  Austria  has  set  goals  for 
2030  regarding  the  reduction  of  greenhouse  gas 
emissions,  energy  intensity,  limitation  of  primary 
energy consumption, increase of renewable energy 
share  and  a  full  decarbonisation  of  the  energy 
sector  by  2050  in  its  policy  document  ‘Mission-
2030’ (Bundeskanzleramt, 2018b). However, none 
of  these  targets  will  be  met  without  additional 
efforts  (Umweltbundesamt,  2017).  Such  efforts 
could take the form of identifying concrete steps in 
the  context  of  achieving  the  goals  set  by  the 
#mission2030.  On 
the  other  hand,  necessary 
investments  in  building  renovation,  energy-saving 
technologies,  renewable  electricity  generation  and 
transport  infrastructure  could  provide  significant 
impetus to the Austrian economy. 

digitalisation 

and  labour  supply  shortages,  notably  in  the  West 
of  the  country.  Furthermore,  tourism  in  Austria  is 
strongly impacted by new online business models. 
Austria  is  reacting  with  a  policy  initiative  as 
regards 
(Tourismus-
Digitalisierungsstrategie).  The  new  government 
programme  2017-2022  furthermore  foresees  an 
overall tourism strategy with annual monitoring. A 
first specific measure to strengthen the profitability 
of the tourism sector is a reduction of value-added 
tax on accommodation from 13 % to 10 %. 

in 

to 

including 

in  Austria,  notably 

Austria has only started to adapt its regulatory 
framework 
the  emerging  collaborative 
economy. The collaborative economy has a strong 
growth  potential 
the 
transportation and accommodation fields. Austria's 
authorities, 
its  municipalities,  have 
adopted  different  regulatory  frameworks.  For 
example,  Vienna,  has  adopted  pioneering  rules 
concerning  the  collection  of  the  tourist  tax  from 
collaborative accommodation providers (European 
Commission,  2018c).  Implementation  of  these 
is  ongoing.  Vienna  has  concluded  an 
rules 
significantly 
agreement  with  one  platform, 
reducing 
the 
for 
the  administrative  burden 
collection of this tax. In the case of other platforms 
(which  refused  to  provide  information  as  well  as 
similar  agreement),  an 
negotiations 
administrative  decision  imposing  a  fine  for  non-
compliance  with  the  information  obligation  is 
currently  under  evaluation  by  Austria’s  highest 
court. 

for  a 

Start-up and scale-up  

Austria’s  start-up  environment  benefits  from 
the  strong  business  cycle.  Austria  is  seeing  a 
continued  increase  in  start-up  numbers  after  a 
record  high  already  in  2017  (WKÖ,  2018b). 
Survival  rates  are  also  higher  than  in  other 
Member  States.  These  positive  developments  are 
partly  the  result  of  Austria’s  substantial  efforts  to 
improve the start-up climate and partly a reflection 
of  the  good  business  cycle.  Among  the  more 
education 
structural 
remains  a  problem.  Using  data  from  the  Global 
Entrepreneurship  Monitor  2016, 
it  becomes 
evident  by  both  overall  entrepreneurial  intention 
and  opportunity-driven  entrepreneurship  that  in 
Austria, 
is  not  a 
professional career choice that is as attractive as in 
Innovation 
other  EU  countries 

the  entrepreneurial 

entrepreneurship 

including 

issues, 

route 

in 

43 

 
3.4. Competitiveness reforms and investment 

among  environment 
networks would mitigate these issues. 

technology  clusters  and 

is  advancing 

towards  a  circular 
Austria 
economy, but progress is slowed by the lack of a 
overall  strategy  and  below-average  investment 
by  businesses.  Austria  has  one  of  the  highest 
recycling  rates  in  the  EU.  Per  capita  municipal 
waste  generation  rates  are  also  among  the  highest 
and  have  fallen  only  marginally  over  the  last  few 
years.  The  circular  (secondary)  use  of  material  in 
Austria was at 10.6% and below the EU average of 
11.7 %  in  2016.  Private  sector  investments  into 
circular  economy-related  activities  are  below  the 
EU  average,  particularly  in  Austria’s  large  small 
and  medium-sized  enterprises  sector.  Further 
technological 
social 
progress 
innovation and strategic implementation across all 
value  chains.  An  overarching  strategy  to  ensure 
this, including eco-design, secondary raw materials 
use,  recycling  processes  and  industrial  symbiosis, 
does not yet exist in Austria.  

requires 

and 

3.4.3.  REGIONAL ISSUES AND INFRASTRUCTURE 

Regional and urban challenges 

in 

its 
faces  regional  disparities 
Austria 
demographic  and  economic  structure.  Despite 
its  relatively  small  size,  Austria  has  a  diverse 
settlement  structure  (see  also  Section  1).  Almost 
two thirds of the overall population of 8.8 million 
live  in  urban  areas  (31 %  in  cities,  predominantly 
in  the  bigger  cities  including  Vienna,  Linz,  Graz 
and Salzburg, and 30 % in towns and suburbs) and 
39 %  in  rural  areas.  Between  2005  and  2015,  the 
population  decreased  in  most  districts  in  the 
southern  part  of  the  country,  except  for  the 
regional  capitals  and  the  South-West  of  Styria, 
while  it  increased  in  most  of  the  rest  of  Austria. 
Population  growth  in  this  period  was  particularly 
high (equal or above 7 %) in the agglomerations of 
Innsbruck,  Graz,  as  well  as  Vienna  and  its  wider 
catchment area.  

Air  pollution  and  congestion  continue  to  be  a 
challenge  in  urban  areas.  Growing  cities  and 
urban  sprawl  in  certain  regions  in  Austria  have 
resulted  in  conflicts  of  land  use,  air  pollution  and 
congestion.  Between  1990  and  2016,  CO2 
emissions from transport increased by 68 %, being 
the  main  reason  for  the  8.2 %  increase  in  overall 

and 

innovation, 

Increased  energy  efficiency  and  a  higher 
renewables  share  in  Austria’s  business  sector 
are important for reaching its 2030 climate and 
energy  targets.  Even  if  the  greenhouse  gas 
intensity of the Austrian economy is below the EU 
average, it is still considerably higher than the one 
of  leading  EU  Member  States  such  as  Sweden  or 
Denmark  (European  Commission,  2017b).  The 
market  uptake  of  available  energy  efficiency 
solutions 
in 
technological 
particular  in  small  and  medium-sized  enterprises 
has  the  potential  to  drive  the  energy  efficiency 
market further. In its National Energy and Climate 
Plan,  to  be  adopted  by  31 December  2019  in  line 
with  the  Regulation  on  the  Governance  of  the 
Energy Union and Climate Action (50), Austria will 
provide  an  overview  of  its  investment  needs  until 
2030  for  the  different  dimensions  of  the  Energy 
Union, 
renewable  energy,  energy 
efficiency,  security  of  supply,  and  climate 
information 
mitigation  and  adaptation.  The 
provided, including in the draft plan submitted on 
27 December  2018,  will  further  contribute  to  the 
identification  and  assessment  of  energy  and 
climate-related investment needs for Austria. 

including 

by 

the 

government 

eco-innovation 
impacted  by 

performance 
is 
Austria’s 
negatively 
only  moderate 
investment  in  environmental  and  energy  R&D 
and 
insufficient  structures  for  cooperation 
between eco-innovators. Austria ranked eighth on 
the  2017  Eco-innovation  Scoreboard  thanks  to  a 
flourishing  environmental  technology  sector  and 
several  environment-related  financial  incentives 
offered 
(European 
Commission,  2017c)  However,  with  0.02 %  of 
GDP, 
budgetary 
appropriations  allocated  to  R&D  in  the  area  of 
environment  and  energy  were  below  the  EU 
average  (0.04 %)  in  2016  and  less  than  half 
compared 
leading  countries  Germany, 
Finland and Portugal  with 0.07 % each (European 
Commission,  2017c).  The  supplier  structure  of 
environmental 
and 
dominated by small and medium-sized enterprises, 
meaning  that  financial  and  human  resources  are 
limited. This often hampers R&D activities as well 
as  its  market  success.  Better  interconnectedness 

technologies 

government 

Austria´s 

small 

the 

to 

is 

(50)  Regulation  (EU)  2018/1999  of  the  European  Parliament 
the 

the  Council  of  11 December  2018  on 
and  of 
Governance of the Energy Union and Climate Action. 

44 

 
                                                           
3.4. Competitiveness reforms and investment 

by  a  fragmented  two-tier-structure (52).  Austria’s 
well  developed  electricity  infrastructure  is  facing 
pressure  for  further  enhancements  from  the  fast 
growing  share  of  renewable  electricity  as  well  as 
from  Austria’s  unique  economic  potential  of 
utilising  hydro-pumped  storage  across  borders  for 
balancing purposes. 

still 

limited  market 

Austria’s  progress  towards  competitive  rail 
transport  markets  is  slow.  In  passenger  rail 
transport,  the  incumbent  ÖBB  maintains  around 
90 % market share in the market for public service 
its  nine  competitors  have 
contracts,  while 
increasing  but 
shares 
(European Commission, 2019b). This is partly the 
result  of  Austria’s  practice  of  attributing  public 
service  contracts,  constituting  around  70 %  of  the 
passenger  rail  market,  by  direct  award  (European 
Commission, 2019b). In the rail freight market, the 
market  shares  for  all  but  the  principal  freight  rail 
undertaking  reached  26 %  in  2016,  compared  to 
14 %  in  2011.  While  this  represents  a  higher 
degree of market opening than in passenger rail, it 
is  modest  compared  to  other  EU  countries  which 
opened the rail freight market to competition (up to 
63%  market  share  for  non-incumbents;  European 
Commission, 2019b).  

Housing supply and demand 

Together  with  house  prices,  rents  increased 
strongly,  notably  in  Vienna.  The  increase  in 
house prices and rents in Austria in the past decade 
has  been  largely  driven  by  developments  in 
Vienna.  Since  2015  however,  prices  have  also 
picked  up  in  the  rest  of  the  country.  While  in 
Vienna,  house  prices  are  estimated 
to  be 
overvalued  by  21.4 %  for  Q2-2018,  overvaluation 
for  the  whole  of  Austria  is  estimated  at  only 
11.1 % (53)  (see  Section  3.2).  Similarly,  rents 
increased by 50 % in Vienna since 2005, which is 
above the aggregate in the rest of the country (54). 
The increase in rents is problematic for the capital, 
as  more  than  three  quarters  of  its  market  is  made 
up  by  rentals  with  a  high  share  or  private  rentals: 
34 %  versus  an  average  of  14 %  in  the  rest  of 
Austria (55).  Additionally,  rising  construction  and 

(52)  E-Control recently consulted about changes to the Austrian 
regime to produce a single integrated set of arrangements, 
consistent with the Balancing Network Code (BAL NC). 

(53)  OeNB, Real estate data for Austria – November 2018. 
(54)  OeNB, Real estate data for Austria – November 2018. 
(55)  Mikrozensus 2017, STATISTIK AUSTRIA. 

CO2  emissions  in  Austria  (Umweltbundesamt, 
2018). Seven air quality zones do not meet EU air 
quality  standards  for  nitrogen  dioxide  in  2017, 
including  all  bigger  Austrian  agglomerations. 
Although 
traffic 
management  are  being  developed  and  tested (51), 
more effort and investment in sustainable mobility 
solutions is required to tackle mobility and related 
air quality challenges.  

innovative 

solutions 

for 

Network infrastructure 

Austria  made  progress  on  its  connectivity,  but 
remains  behind  in  the  roll-out  and  take-up  of 
(ultra)  fast  broadband,  in  particular  in  rural 
areas.  Austria’s  aim  is  nation-wide  coverage  of 
ultrafast broadband and 5G mobile connections by 
2025.  In  2017,  66 %  of  households  were  covered 
by  ultrafast  broadband  (of  up  to  100 Mbps),  but 
only 4.9 % subscribed to it. Country-wide, Austria 
achieved  90 %  coverage  for  fast  next  generation 
access  networks,  but  this  drops  to  45 %  in  rural 
areas.  20%  of  primary  schools  have  no  internet 
connection and information technology equipment 
varies considerably between school types (see also 
Section  3.3).  Investment  efforts  such  as  the 
‘broadband 
funding 
and 
programmes  to  support  the  deployment  of  fibre 
have  led  to  some  progress.  Austria  operated  a 
small  number  of  5G  test  pilots  and  made  the 
preparations for its first auction of ‘5G spectrum’. 
Austria has maintained its rank among the medium 
performing EU countries. 

adapting 

billion’ 

require 

improvements 

Cross-border  gas  and  electricity  connections  to 
Austria’s  neighbouring  countries  remain  an 
issue.  Domestic  gas  and  electricity  infrastructure 
in  Austria  is  well-developed,  while  cross  border 
connections 
(European 
Commission, 2017b). In gas infrastructure, Austria 
acts  as  a  regional  hub.  It  has  invested  in  new 
pipeline  connections  with  neighbouring  countries 
in  Central  Europe.  The  progressing  liberalisation 
of  the  energy  markets  in  South-East  Europe  will 
recreate pressure to enable effective  reverse flows 
and  to  enhance  connections,  notably  to  the  Czech 
Republic,  Slovenia  and  Hungary.  This  will 
contribute  to  regional  market  integration.  Gas 
market  functioning  is  furthermore  weighed  down 

(51)  10 %  of  all  EU  Smart  City  projects  are  based  in  Austria; 

BMNT, (2019) 

45 

 
                                                           
                                                           
3.4. Competitiveness reforms and investment 

land prices are putting pressure on the availability 
of  social  housing,  especially  in  the  low  and 
medium-price  sector  (GBV,  2018a).  In  November 
2018, the city of Vienna adopted an amendment to 
the Vienna Building Code (new construction areas 
will have a legal two-thirds quota for the building 
of  subsidised  dwellings),  with 
the  aim  of 
increasing  the  availability  of  affordable  housing 
(RIS, 2018).  

Housing demand was particularly strong in the 
past  decade,  exceeding  housing  supply  and 
contributing  to  price  increases.  Demand  for 
housing  increased  strongly  after  2011.  This  holds 
especially  for  Vienna,  where  population  growth 
was particularly high. Until 2010, housing demand 
was  mostly  driven  by  decreasing  household  sizes. 
Since  then,  net  migration  has  been  the  main 
contributor. 
In  contrast,  housing  supply,  as 
measured  by  the  completion  of  new  dwellings, 
the  crisis.  This 
dropped  considerably  after 
accumulated  an  estimated  excess  demand  since 
2009,  reaching  55 000  dwellings  in  2016.  This 
likely contributed to the strong increase in housing 
prices;  demand  is  estimated  to  have  peaked  in 
2016.  In  2017,  building  completion  increased 
again  and  investment  in  construction  also  picked-
up.  Investment  in  construction  includes  not  only 
investment  in  new  buildings  but  also  renovations. 
Rising  number  of  building  permits  hint  at  an 
increase  in  housing  supply  in  the  coming  years. 
This  should  help  to  decrease  the  pressure  on  the 
housing  market. Demand and supply are expected 
to be in line again in 2020 (Schneider, 2019).  

An  increase  in  the  share  of  privately  financed 
dwellings and constructions costs contributed to 
rising  house  prices  and  rents.  The  evolution  in 
the  housing  market  has  been  accompanied  by  a 
change  in  the  structure  of  housing  supply.  Since 
2005, the share of completion of privately financed 
housing  has  increased,  while  the  completion  of 
publicly funded housing decreased (GBV, 2018b). 
Due  to  strict  rental  regulations  linked  with  public 
funding  and  subsidies,  the  share  of  buildings  that 
likely 
are  without 
contributing  to  increasing  rents.  The  decrease  in 
construction  of  publicly  financed  buildings  is 
linked  to  the  relative  decline  in  real  housing 
assistance  expenditure  by  20%  since  2010.  While 
housing 
capita 
decreased  in  all  regions,  the  largest  decrease  can 
be  found  in  Vienna  and  Lower  Austria  (OeNB, 

rental  control 

expenditure 

increased, 

assistance 

per 

2017).  The  regional  differences  and  overall 
decrease in public investment in housing assistance 
and  social  housing  can  be 
the 
abolishment of the earmarking of housing funds in 
2008. This allows for the use of the redemption of 
housing  loans  for  non-housing  purposes  (Mundt, 
A., Amann, W., 2010, pp 35-44). 

linked 

to 

3.4.4.  INSTITUTIONAL QUALITY AND 

GOVERNANCE 

for 

Administrative  burden  remains  a  pressing 
concern  for  Austrian  businesses.  The  cost  of 
complying  with  regulatory  frameworks  is  among 
the  main  barriers  to  investment  and  growth  cited 
by  companies  (WKÖ,  2018c).  The  government 
programme for 2017-2021 acknowledges problems 
the  business 
of  administrative  burden 
environment.  Seeking 
this  burden, 
Austria  adopted  a  new  ‘clearing’  law  (Zweites 
Bundesrechts-bereingungsgesetz), 
to 
which  all  federal  laws  adopted  before  2000  were 
repealed on 31 December 2018 unless listed in the 
law’s  annex.  This  will  concern  about  5 000  laws, 
half of which are expected to be repealed. Austria 
has started reviewing national rules that implement 
EU  directives,  going  beyond  what  is  required  by 
the directives (so-called gold plating). 

to  reduce 

pursuant 

Austria has revised its public procurement rules 
as a start to address its low performance on key 
aspects  of  effective  procurement.  Austria 
adopted in April 2018 a revision of its procurement 
rules.  The  scope  for  improvement  is  large  and 
trends over recent years were not always positive. 
The share of public contracts for works, goods and 
services published by the  Austrian authorities and 
entities under EU procurement legislation was only 
1.9 % of GDP. This is a reduction of 0.3 pps from 
2015  and  is  less  than  half  the  EU  average  of 
4.21 %.  In  17 %  of  contract  awards  the  tendering 
authority (always at  federal level) received only a 
single bid in 2018. This is identical to 2017 but an 
increase  over  11 %  of  2015,  indicating  less 
competition between bidders. In 2018 Austria used 
central  purchasing  bodies  and  joint  procurement 
among  public  authorities  for  only  6 %  of  tenders, 
which constitutes a slight improvement over 2011 
and is below the EU average of 8 %. 42 % of  the 
contract  awards  have  gone  to  small  and  medium-
sized  enterprises,  which  is  below  the  EU  average 
of 54 %. 

46 

 
3.4. Competitiveness reforms and investment 

Box 3.4.1: Investment challenges and reforms in Austria 

Section 1. Macroeconomic perspective  

In  the  aftermath  of  the  crisis,  investment  in  Austria  declined,  leading  to  a  backlog.  Along  with  the  economic 
upswing, it picked up again in 2015, mostly in investment equipment. Investment in the construction sector grew 
strongly  in  2017,  after  being  subdued  for  several  years,  despite  the  accumulation  excess  housing  demand  (see 
section 1). Equity funding remains underdeveloped, posing an obstacle to firm’s growth (see Section 3.4).  

Section 2. Assessment of barriers to investment and ongoing reforms 

Barriers to investment in Austria exist but are relatively modest overall. Continued efforts to reduce the tax wedge 
(see section 3.1), improve the business environment, support the availability of risk capital and reduce regulatory 
barriers will help strengthen overall investment and boost productivity in Austria (see section 3.4). 

Selected barriers to investment and priority actions underway: 

1. While the tax wedge on labour is among the highest in the EU, several recently implemented measures aim at 
reducing  the  burden  both  on  the  side  of  employees  and  employers  (see  Section  3.1).  There  remains  scope  for 
shifting the tax burden to more growth-friendly sources of revenue, which can incentivise investment activities.  

2. The high degree of regulation of the services sector constitutes a barrier to investment and competition in services 
but  also  for  manufacturing  firms.  Administrative  burden  constitute  a  main  barrier  to  investment  for  Austria’s 
business. As a key initiative, Austria notably adopted a new “clearing” law. A new segment  on the Vienna Stock 
Exchange  has  been  create  for  small  and  medium-sized  enterprises,  but  risk  capital  is  still  lacking  and  hindering 
business growth (see Section 3.4). 

Austria Wirtschaftsservice GmbH (AWS) is Austria’s federal promotional bank for company-related financing. The 
AWS offers Austrian companies financial assistance as well as consultancy services from the start-up to expansion 
phase. It uses both its own resources and EU financial instruments e.g. European Investment Funds.  

Austria  is  rolling  out  e-procurement  but,  more 
generally,  risks  losing  its  frontrunner  position 
on e-government. Austria remains one of the best 
performing EU countries in terms of availability of 
public  services,  to  be  completed  online,  i.e.  via 
mobile  devices  and  by  pre-filled  online  forms. 
However,  Austria  only  ranks  around  average  in 
terms  of  online  availability  of  public  services 
needed  for  starting  a  business  and  for  conducting 
regular business operations. The 2018 online  one-
stop-shop  has  made  it  easier  to  create  one-person 

companies. Such companies are the most common 
businesses in Austria. While Austria is developing 
an  open-data  strategy,  it  recently  reached  EU 
average in terms of open-data policies. As regards 
e-procurement, Austria implemented the respective 
EU  directives  only 
in  April  2018.  Austrian 
authorities  have  adopted  different  e-procurement 
systems.  Ensuring  interoperability  between  these 
systems  would  prevent  unnecessary  burden  for 
bidders. 

47 

Regulatory/ administrative burdenTaxationCSRPublic administrationAccess to financeCSRPublic procurement /PPPsCooperation btw academia, research and businessJudicial systemFinancing of R&D&IInsolvency frameworkBusiness services / Regulated professionsCSRCompetition and regulatory frameworkRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomEducation, skills, lifelong learning EnergyTransportLegend:No barrier to investment identifiedSome progressCSRInvestment barriers that are also subject to a CSRSubstantial progressNo progressFully addressedLimited progressNot assessed yetPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
ANNEX A: OVERVIEW TABLE 

Commitments  

Summary assessment (56) 

2018 country-specific recommendations (CSRs)  

Austria  has  made  Limited  Progress  in  addressing 
CSR 1  

CSR  1:  Achieve 
the  medium-term  budgetary 
objective in 2019, taking into account the allowance 
linked  to  unusual  events  for  which  a  temporary 
deviation  is  granted.  Ensure  the  sustainability  of  the 
health  and  long-term  care  and  the  pension  systems, 
including  by  increasing  the  statutory  retirement  age 
and  by  restricting  early  retirement.  Make  public 
services  more  efficient,  including  through  aligning 
financing and spending responsibilities.  

Achieve  the  medium-term  budgetary  objective  in 
2019,  taking  into  account  the  allowance  linked  to 
unusual  events  for  which  a  temporary  deviation  is 
granted.  

The  compliance  assessment  with  the  Stability  and 
Growth  Pact  will  be  included  in  Spring  when  final 
data for 2018 is available.  

Ensure the sustainability of the health  

Some  Progress  Public  expenditure  remains  below 
legislated  ceilings  and  structural  measures 
the 
contribute  to  dampen  expenditure  growth  but  fiscal 
sustainability  issues  persist.  The  announced  merger 
of social security funds will bring about high upfront 
costs of yet unknown magnitude.  

(56)  The following categories are used to assess progress in implementing the 2017 country-specific recommendations (CSRs): 

No progress: The Member State has not credibly announced nor adopted any measures to address the CSR. This category covers a 
number  of  typical  situations,  to  be  interpreted  on  a  case-by-case  basis  taking  into  account  country-specific  conditions.  They 
include the following: 

-no legal, administrative, or budgetary measures have been announced  
-in the national reform programme, 
-in any other official communication to the national Parliament/relevant parliamentary committees or the European Commission,  
-publicly (e.g. in a press statement or on the government’s website);  
-no non-legislative acts have been presented by the governing or legislative body;   
-the  Member  State  has  taken  initial  steps  in  addressing  the  CSR,  such  as  commissioning  a  study  or  setting  up  a  study  group  to 
analyse possible measures to be taken (unless the CSR explicitly asks for orientations or exploratory actions). However, it has 
not proposed any clearly-specified measure(s) to address the CSR. 

Limited progress: The Member State has: 
-announced certain measures but these address the CSR only to a limited extent; and/or 
-presented  legislative  acts  in  the  governing  or  legislative  body  but  these  have  not  been  adopted  yet  and  substantial  further,  non-

legislative work is needed before the CSR is implemented;  

-presented non-legislative acts, but has not followed these up with the implementation needed to address the CSR. 

Some progress: The Member State has adopted measures  
-that partly address the CSR; and/or  
-that address the CSR, but a fair amount of work is still needed to address the CSR fully as only a few of the measures have been 
implemented. For instance, a measure or measures have been adopted by the national Parliament or by ministerial decision, but 
no implementing decisions are in place. 

Substantial progress: The Member State has adopted measures that go a long way towards addressing the CSR and most of them 

have been implemented. 

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately. 

48 

 
 
                                                           
 
 
 
 
 
 
A. Overview Table 

and long-term care  

Limited  Progress  Implemented  measures  generally 
support  the  de-institutionalisation  of  long-term  care. 
However, the abolishment of the ‘Pflegeregress’ may 
have  the  opposite  effect  in  addition  to  requiring 
higher  public  spending  with  negative  effects  for  the 
fiscal sustainability of the system.  

and the pension systems, including by increasing the 
statutory  retirement  age  and  by  restricting  early 
retirement.  

Limited  Progress  The  focus  is  on  increasing  the 
effective retirement age by restricting access to early 
retirement.  No  measures  have  been  adopted  to 
increase the statutory retirement age.  

Make  public  services  more  efficient, 
through 
responsibilities.  

financing 

aligning 

and 

including 
spending 

increased 

Limited  Progress  The  Intergovernmental  Fiscal 
Relations  Act  2017  has 
introduced  numerous 
changes  but  cannot  be  considered  a  major  step 
towards 
tax  autonomy  or  a  more 
transparent  assignment  of  competences.  Work  in 
these  areas  is  still  ongoing  and  several  initiatives 
such as task-oriented financing and spending reviews 
are  at  risk  of  being  delayed.  A  comprehensive 
transparent 
constitutional 
assignment  of  competences  is  high  on  the  political 
agenda.  The  "Kompetenzbereinigungspaket"  can  be 
seen  as  a  first  step  into  the  right  direction  but  more 
needs to be done.  

for  a  more 

reform 

Austria has made Some Progress in addressing CSR 
2  

CSR  2:  Reduce  the  tax  wedge,  especially  for  low-
income earners, by shifting the tax burden to sources 
of  revenue  less  detrimental  to  growth.  Improve 
labour  market  outcomes  of  women.  Improve  basic 
skills  for  disadvantaged  young  people  and  people 
with  a  migrant  background.  Support  productivity 
growth  by  stimulating  digitalisation  of  businesses 
and  company  growth  and  by  reducing  regulatory 
barriers in the service sector.  

Reduce  the  tax  wedge,  especially  for  low-income 
earners,  by  shifting  the  tax  burden  to  sources  of 
revenue less detrimental to growth.  

Some  Progress  While  several  measures  have  been 
implemented  that  contribute  to  reducing  the  tax 
wedge  on  labour,  the  overall  tax  structure  remains 
basically  unchanged.  The  potential  to  shift  the  tax 
burden 
or 
bases 
environmentally  harmful  activities)  still  remains 
under-utilized.  

(e.g.,  wealth 

other 

to 

Improve labour market outcomes of women.  

Some Progress  Labour  market outcomes of  women 
improved  mainly  as  a  result  of  implementing  the 
Agreement (in accordance to  Art 15a  of the Federal 
Constitution  Act)  of 
the 
provinces on early childhood education and care  for 
to 
the  years  2018/19  until  2021/22.  This 
expansion  of  formal  childcare  opportunities  for 
children under the age of 3 years and an increase of 

the  government  with 

led 

49 

 
A. Overview Table 

full-day  school  forms.  In  the  absence  of  other 
measures,  female  employment  rates  still  increased 
mainly  due  to  part  time  employment  the  share  of 
which remains high together with a high gender pay 
and  employment  gap.  The  Barcelona  target  has  still 
not  been  reached  and  there  are  disparities  in  child-
care provision between the regions. 

Improve basic skills for disadvantaged young people 
and people with a migrant background.  

the 

implementation  period  of 

Limited Progress Expansion of all day schools risks 
to  slow  as 
the 
additional funding (EUR 750 million)that has already 
been  made  available  has  been  doubled,  now  until 
2032. Reforms intentened and implemented partially 
counteract previous reforms. They are not always in 
line  with  best  practice  in  the  OECD  and  the  EU, 
therefore their positive impact has still to materialize. 
This  is  also  the  case  for  the  pedagogical  package 
(Pädagogikpaket  2018).  Positive  is  that  formerly 
temporary funding for German language support has 
now  been  integrated  into  the  education  budget. 
However  this  was  done  without  making  available 
additional resources for the education budget. 

Support 
digitalisation of businesses  

productivity 

growth 

by 

stimulating 

Some  Progress  The  “KMU  Digital”  programme  to 
support business digitalisation has been prolonged by 
three  months.A  new  digital  agency  has  been 
established  which  will  develop  policies  in  five  key 
areas,  including  business  digitalisation.  A  call  for 
proposal  to  establish  Digital  Innovation  Hubs  in  the 
regions  has  been  launched.  These  hubs  will  support 
small and medium-sized enterprises, universities and 
municipalities in the uptake of digital technologies.  

and  company  growth  and  by  reducing  regulatory 
barriers in the service sector.  

Limited  Progress  As  a  key  measure  to  improve 
(fast)  growing  companies’  access  to  the  necessary 
funding,  Austria  adopted  a  revision  of  its  stock 
corporation law to remove obstacles to SME listings 
on the Viennese stock market. The lack of a specific 
segment  dedicated  to  SME  at  the  Vienna  Stock 
Exchange  was  a  marked  contrast  to  other  countries. 
Service  sector  companies  profit  from  Austria’s 
administrative  burden  reduction  efforts,  such  as  the 
2018  law  to  repeal  roughly  half  of  the  federal  laws 
adopted  before  2000.  Austria  has  however  not 
addressed 
restrictions  on  key  professions 
the  Commission.  The 
identified 
government  programme  has  neither  announced 
specific  measures 
identified 
restrictions  nor  a  wider  review  of  service  sector 
restrictions.  

the 
in  2017  by 

address 

the 

to 

50 

 
A. Overview Table 

Austria's  employment  rate  reached  76.2 %  in  Q3  of 
2018,  thus  reaching  the  Europe  2020  target.  Given 
the current trend in the Austrian employment rate, the 
country is on track to meet the national target of 77-
78 % by 2020. 

Austria  has  surpassed  the  EU’s  2020  target  since 
2014, reaching an  R&D  intensity of 3.16 % of GDP 
in  2017,  the  second  highest  in  the  EU.  However,  it 
remains below the national target of 3.76 % of GDP. 
Business  enterprise  R&D  expenditure  is  the  key 
driving force, with around 2/3 of total R&D intensity. 

Austria will fall more than 2 percentage points short 
of  meeting  its  2020  emission  reduction  target  for 
greenhouse  gases  in  the  sectors  not  covered  by  the 
EU Emission Trading System. 

The  transport  sector  is  the  biggest  contributor, 
accounting  for  45 %  of  total  emissions.  Emissions 
are constantly increasing due to increasing traffic.  

Austria  is  well  on  track  and  close  (2016:  33.5 %, 
estimation 
its 
renewable  energy  target  for  2020  (EEA  Report  No 
16/2018). 

for  2017:  33.7 %) 

to  attaining 

primary 

consumption 

Austria's 
is 
energy 
continuously increasing. It is estimated that in 2017 it 
reached 32.8 Mtoe, an increase by more than 1 Mtoe 
compared to 2016 (31.7 Mtoe).Austria's final energy 
consumption  increased  by  over  1 %  compared  with 
the 2016 figure (28.13 Mtoe).  

Europe 2020 (national targets and progress)  

Employment rate target set in the NRP: 77-78%.  

R&D target set in the NRP: 3.76 % of GDP  

National greenhouse gas (GHG) emissions target:  

16 %  in  2020  compared  with  2005  (in  sectors  not 
included in the EU emissions trading system) 

2020 renewable energy target: 34 % 

Energy efficiency, 2020 energy consumption targets: 

Austria’s 2020 energy efficiency target is  31.5 Mtoe 
expressed 
consumption 
(25.1 Mtoe expressed in final energy consumption).  

primary 

energy 

in 

Early school/training leaving target: 9.5 %.  

ESL  was  at  7.4 %  in  2017  below  both  the  national 
target of 9.5% and the EU target. While the rate fell 
also  for  foreign-born  students  they  are  still  twice  as 
likely to leave school early.  

Tertiary  education  target:  38%  of  population  aged 
30-34.  

Tertiary  education  attainment  has  at  40.8 %  in  2017 
surpassed the EU average and the national target  

Target  for  reducing  the  number  of  people  at  risk  of 
poverty or social exclusion, expressed as an absolute 
number of people: -235 000  

 In  the  baseline  year  2008,  the  number  of  people  at 
risk  of  poverty  and  social  exclusion  was  1  699  000. 
The respective  number  for 2017  was 1 563 000, i.e. 
136 000 less, requiring additional efforts to meet the 
target 

51 

 
 
 
 
 
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

52 

General Government debt projections under baseline, alternative scenarios and sensitivity tests2017201820192020202120222023202420252026202720282029Gross debt ratio78.374.571.067.865.262.960.758.656.654.853.352.151.2Changes in the ratio (-1+2+3)-4.7-3.8-3.5-3.2-2.6-2.4-2.2-2.1-2.0-1.8-1.5-1.2-0.9of which(1) Primary balance (1.1+1.2+1.3)1.01.31.51.61.51.41.31.31.21.11.00.90.6(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)1.00.81.01.31.31.31.31.31.21.11.00.90.6(1.1.1) Structural primary balance (bef. CoA)1.00.81.01.31.31.31.31.31.31.31.31.31.3(1.1.2) Cost of ageing0.00.00.00.10.20.30.50.60.9(1.1.3) Others (taxes and property incomes)0.00.10.10.10.20.20.20.30.2(1.2) Cyclical component0.10.50.50.30.20.10.00.00.00.00.00.00.0(1.3) One-off and other temporary measures0.00.00.00.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-1.2-1.7-1.3-1.1-1.1-0.9-0.9-0.9-0.8-0.6-0.5-0.3-0.3(2.1) Interest expenditure1.81.61.51.41.41.31.31.31.41.41.41.51.5(2.2) Growth effect-2.0-2.1-1.4-1.2-1.2-1.0-1.0-1.0-1.0-0.9-0.8-0.8-0.8(2.3) Inflation effect-1.0-1.2-1.4-1.3-1.2-1.2-1.2-1.2-1.1-1.1-1.1-1.0-1.0(3) Stock-flow adjustments-2.5-0.9-0.7-0.60.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Fiscal Sustainability Report (FSR) 2018. b. For the medium-term, the risk category (low/medium/high) is based on the joint use of the S1 indicator and of the DSA results. The S1 indicator measures the fiscal adjustment required (cumulated over the 5 years following the forecast horizon and sustained thereafter) to bring the debt-to-GDP ratio to 60 % by 2033. The critical values used are 0 and 2.5 pps. of GDP. The DSA classification is based on the results of 5 deterministic scenarios (baseline, historical SPB, higher interest rate, lower GDP growth and negative shock on the SPB scenarios) and the stochastic projections. Different criteria are used such as the projected debt level, the debt path, the realism of fiscal assumptions, the probability of debt stabilisation, and the size of uncertainties. c. For the long-term, the risk category (low/medium/high) is based on the joint use of the S2 indicator and the DSA results. The S2 indicator measures the upfront and permanent fiscal adjustment required to stabilise the debt-to-GDP ratio over the infinite horizon, including the costs of ageing. The critical values used are 2 and 6 pps. of GDP. The DSA results are used to further qualify the long-term risk classification, in particular in cases when debt vulnerabilities are identified (a medium / high DSA risk category). [2]Thechartspresentaseriesofsensitivitytestsaroundthebaselinescenario,aswellasalternativepolicyscenarios,inparticular:thehistoricalstructuralprimarybalance(SPB)scenario(wheretheSPBissetatitshistoricalaverage),theStabilityandGrowthPact(SGP)scenario(wherefiscalpolicyisassumedtoevolveinlinewiththemainprovisionsoftheSGP),ahigherinterestratescenario(+1pp.comparedtothebaseline),alowerGDPgrowthscenario(-0.5pp.comparedtothebaseline)andanegativeshockontheSPB(calibratedonthebasisoftheforecastedchange).Anadversecombinedscenarioandenhancedsensitivitytests(ontheinterestrateandgrowth)arealsoincluded,aswellasstochasticprojections. Detailed information on the design of these projections can be found in the FSR 2018.AT - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangerates in some countries). Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[3] The second table presents the overall fiscal risk classification over the short, medium and long-term. a. For the short-term, the risk category (low/high) is based on the S0 indicator. S0 is an early-detection indicator of fiscal stress in the upcoming year, based on 25 fiscal and financial-competitiveness variables that have proven in the past to be leading indicators of fiscal stress. The critical threshold beyond which fiscal distress is signalled is 0.46. 404550556065707580859020162017201820192020202120222023202420252026202720282029Debt as % of GDP -ATBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario40506070809020162017201820192020202120222023(% of GDP)Stochastic debt projections 2019-2023 -ATp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline404550556065707580859020162017201820192020202120222023202420252026202720282029Debt as % of GDP -ATBaselineHistorical SPB scenarioSGP scenario404550556065707580859020162017201820192020202120222023202420252026202720282029Debt as % of GDP -ATBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryLOWLOWLOWLOWLOWLOWDebt level (2029)51.255.954.553.653.5Debt peak year20182018201820182018Percentile rank35.0%44.0%Probability debt higher11.7%Dif. between percentiles26.3MEDIUMLong termDSALOWDebt sustainability analysis (detail)Medium termLOWLOWShort termLOW(S0 = 0)(S1 = -0.8)S2MEDIUM(S2 = 2.6)S1 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3  2018. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2  2018. 
(3) Quarterly values are annualised 
* Measured in basis points. 
Source:  European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

53 

201320142015201620172018Total assets of the banking sector (% of GDP)1)282.1263.0248.1236.6219.9216.2Share of assets of the five largest banks (% of total assets)36.736.835.834.536.4-Foreign ownership of banking system (% of total assets)2)27.630.431.923.923.722.7Financial soundness indicators:2)              - non-performing loans (% of total loans)-7.56.55.13.52.9              - capital adequacy ratio (%)15.415.616.218.218.918.4              - return on equity (%)3)-0.71.17.67.18.79.0Bank loans to the private sector (year-on-year % change)1)-1.00.50.62.24.05.4Lending for house purchase (year-on-year % change)1)2.23.04.34.44.74.8Loan to deposit ratio2)-105.1102.098.797.898.4Central Bank liquidity as % of liabilities1)-1.82.11.83.13.0Private debt (% of GDP)127.1124.8124.2124.1122.5-Gross external debt (% of GDP)2) - public66.474.169.265.960.156.9    - private33.034.836.437.738.236.8Long-term interest rate spread versus Bund (basis points)*44.032.425.028.726.528.7Credit default swap spreads for sovereign securities (5-year)*19.820.116.418.011.67.5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.2: 

Headline Social Scoreboard indicators 

(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation (SMD) and/or living in households with zero or very low work intensity (LWI). 
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks.   
(3) Long-term unemployed are people who have been unemployed for at least 12 months. 
(4) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019. 
(5) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation). 
(6) Average of first three quarters of 2018 for the employment rate, long-term unemployment rate and gender employment 
gap. Data for unemployment rate is annual (except for DK, EE, EL, HU, IT and UK data based on first three quarters of 2018). 
Source: Eurostat. 

54 

201320142015201620172018 6Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)7.57.07.36.97.4:Gender employment gap (pps)9.18.28.27.88.09.0Income inequality, measured as quintile share ratio (S80/S20)4.14.14.04.14.3:At-risk-of-poverty or social exclusion rate1 (AROPE)18.819.218.318.018.1:Young people neither in employment nor in education and training (% of population aged 15-24)7.37.77.57.76.5:Dynamic labour markets and fair working conditions†Employment rate (20-64 years)74.674.274.374.875.476.1Unemployment rate2 (15-74 years)5.45.65.76.05.54.9Long-term unemployment rate3 (as % of active population)1.31.51.71.91.81.5Gross disposable income of households in real terms per capita4 (Index 2008=100) 96.496.495.296.396.1:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)24755253792603926859::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)-0.5-0.10.52.1::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction544.444.545.746.442.2:Children aged less than 3 years in formal childcare17.016.022.220.518.2:Self-reported unmet need for medical care0.40.10.10.20.2:Individuals who have basic or above basic overall digital skills (% of population aged 16-74)::64.065.067.0: 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
(1) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as ‘unadjusted’, as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included.       
(2) PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
(3) Impact of socio-economic and cultural status on PISA (OECD) scores.       
(4) Average of first three quarters of 2018 for the activity rate, employment growth, employment rate, part-time employment, 
fixed-term employment. Data for youth unemployment rate is annual (except for DK, EE, EL, HU, IT and UK data based on first 
three quarters of 2018). 
Source: Eurostat, OECD. 

55 

Labour market indicators201320142015201620172018 4Activity rate (15-64)75.575.475.576.276.476.8Employment in current job by durationFrom 0 to 11 months13.913.414.014.314.8:From 12 to 23 months9.49.39.09.59.6:From 24 to 59 months16.316.616.916.616.2:60 months or over60.460.760.159.659.4:Employment growth* (% change from previous year)0.31.00.61.31.71.8Employment rate of women(% of female population aged 20-64)70.070.170.270.971.471.6Employment rate of men (% of male population aged 20-64)79.178.378.478.779.480.6Employment rate of older workers* (% of population aged 55-64)43.845.146.349.251.353.7Part-time employment* (% of total employment, aged 15-64)26.026.927.327.827.927.3Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)9.29.29.19.09.29.1Participation in activation labour market policies(per 100 persons wanting to work)25.223.821.221.6::Transition rate from temporary to permanent employment(3-year average)45.847.945.946.943.3:Youth unemployment rate (% active population aged 15-24)9.710.310.611.29.89.4Gender gap in part-time employment (aged 20-64)37.037.838.137.437.437.5Gender pay gap1 (in undadjusted form)22.322.221.720.119.9:Education and training indicators201320142015201620172018Adult participation in learning(% of people aged 25-64 participating in education and  training)14.114.314.414.915.8:Underachievement in education2::21.8:::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)27.140.038.740.140.8:Variation in performance explained by students' socio-economic status3::15.9::: 
 
 
 
  
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.4: 

Social inclusion and health indicators 

* Non-scoreboard indicator       
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.        
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone.       
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation.       
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months.       
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59.       
(6) Fixed broadband take up (33 %), mobile broadband take up (22 %), speed (33 %) and affordability (11 %), from the Digital 
Scoreboard. 
Source: Eurostat, OECD. 

56 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare7.37.37.37.47.5:Disability2.12.12.01.91.9:Old age and survivors14.214.514.714.714.6:Family/children2.82.82.72.82.8:Unemployment1.51.61.61.61.7:Housing0.10.10.10.10.1:Social exclusion n.e.c.0.40.40.50.60.8:Total28.428.829.029.029.4:of which: means-tested benefits2.32.42.52.62.8:General government expenditure by function (% of GDP, COFOG)Social protection20.921.321.521.421.6:Health7.77.87.87.98.0:Education5.05.04.94.94.9:Out-of-pocket expenditure on healthcare (% of total health expenditure)18.719.219.119.018.9:Children at risk of poverty or social exclusion (% of people aged 0-17)*20.922.923.322.320.023.0At-risk-of-poverty  rate1 (% of total population)14.414.414.113.914.114.4In-work at-risk-of-poverty rate (% of persons employed)8.17.97.27.98.37.7Severe material deprivation rate2  (% of total population)4.04.24.03.63.03.7Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan1.01.41.20.70.60.7Tenant, rent at market price9.49.510.010.09.310.8Proportion of people living in low work intensity households4 (% of people aged 0-59)7.77.89.18.28.18.3Poverty thresholds, expressed in national currency at constant prices*117301157611920117741189812309Healthy life years (at the age of 65)Females9.58.87.77.77.4:Males8.98.98.47.98.2:Aggregate replacement ratio for pensions5 (at the age of 65)0.60.60.60.60.60.6Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::50.857.961.463.5GINI coefficient before taxes and transfers*49.749.549.949.849.950.4GINI coefficient after taxes and transfers*27.627.027.627.227.227.9 
 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

(1) Value added in constant prices divided by the number of persons employed. 
(2) Compensation of employees in current prices divided by value added in constant prices. 
(3) The methodologies, including the assumptions, for this indicator are shown in detail at: 
http://www.doingbusiness.org/methodology.  
(4) Average of the answer to question Q7B_a. ‘[Bank loan]: If you applied and tried to negotiate for this type of financing 
over the past six months, what was the outcome?’. Answers were scored as follows: zero if received everything, one if 
received most of it, two if only received a limited part of it, three if refused or rejected and treated as missing values if the 
application is still pending or if the outcome is not known. 
(5) Percentage population aged 15-64 having completed tertiary education. 
(6) Percentage population aged 20-24 having attained at least upper secondary education. 
(7) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail at:  http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm 
(8) Aggregate OECD indicators of regulation in energy, transport and communications. 
Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation indicators); SAFE (for outcome of SMEssmall and medium-sized enterprises’ applications for 
bank loans). 

57 

Performance indicators201220132014201520162017Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry1.121.320.770.883.313.73Labour productivity growth in construction-1.58-0.04-3.53-1.81-0.860.81Labour productivity growth in market services-1.18-0.710.190.690.26-0.07Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry3.491.311.590.57-0.65-1.70ULC growth in construction4.603.456.564.773.13-0.49ULC growth in market services3.893.731.861.532.371.70Business environment201220132014201520162017Time needed to enforce contracts3 (days)397397397397397397Time needed to start a business3 (days)25.025.022.022.021.021.0Outcome of applications by SMEs for bank loans40.230.350.410.490.310.35Research and innovation201220132014201520162017R&D intensity2.912.953.083.053.133.16General government expenditure on education as % of GDP5.005.004.904.904.90:Employed people with tertiary education and/or people employed in science and technology as % of total employment394146474848Population having completed tertiary education5171827282930Young people with upper secondary education6868790899087Trade balance of high technology products as % of GDP0.130.190.500.10-0.26-0.16Product and service markets and competition200320082013OECD product market regulation (PMR)7, overall1.611.371.19OECD PMR7, retail3.503.302.40OECD PMR7, professional services3.213.082.71OECD PMR7, network industries82.471.841.55 
 
 
 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices) 
Energy intensity: gross inland energy consumption (Europe 2020-2030)(in kgoe) divided by GDP (in EUR)  
Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR) 
Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR) 
Waste intensity: waste (in kg) divided by GDP (in EUR) 
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Weighting of energy in HICP: the proportion of ‘energy’ items in the consumption basket used for the construction of the HICP 
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change) 
Real unit energy cost: real energy costs as % of total value added for the economy 
Industry energy intensity: final energy use in industry (in kgoe) divided by gross value added of industry, including construction 
(in 2010 EUR)  
Real unit energy costs for manufacturing industry excluding refining : real costs as % of value added for  manufacturing 
sectors 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP 
Electricity and gas prices for medium-sized industrial users: consumption band 500-20 00 mWh and 10 000-100 000 GJ; figures 
excl. VAT.   
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste 
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP 
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions (excl 
land use, land use change and forestry) as reported by Member States to the European Environment Agency. 
Transport energy intensity: final energy use in transport sector including international aviation, (in kgoe) divided by transport 
industry gross value added (in 2010 EUR) 
Transport carbon intensity: GHG emissions in transport sector divided by gross value added of the transport activities 
Energy import dependency: net energy imports divided by gross inland energy consumption plus consumption of 
international maritime bunkers  
Aggregated supplier concentration index:  Herfindahl-Hirschman index for net imports of crude oil and NGL, natural gas and 
hard coal. Smaller values indicate larger diversification and hence lower risk. 
Diversification of the energy mix: Herfindahl-Hirschman index of the main energy products in the gross inland consumption of 
energy 
* European Commission and European Environment Agency 
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes); Eurostat (all other indicators) 

58 

Green growth performance201220132014201520162017MacroeconomicEnergy intensity kgoe / €0.110.110.110.110.110.10Carbon intensity kg / €0.260.260.250.250.25-Resource intensity (reciprocal of resource productivity)kg / €0.580.570.570.560.560.56Waste intensity kg / €0.16-0.18-0.19-Energy balance of trade % GDP-3.9-3.5-3.0-2.3-1.9-2.1Weighting of energy in HICP%9.099.419.758.868.428.06Difference between energy price change and inflation %1.1-0.1-1.8-3.0-2.8-2.8Real unit of energy cost% of value added15.113.912.312.713.2-Ratio of environmental taxes to labour taxesratio0.100.100.100.100.10-Environmental taxes% GDP2.42.42.42.42.42.4Sectoral Industry energy intensity kgoe / € 0.090.100.100.090.090.09Real unit energy cost for manufacturing industry excl. refining% of value added15.213.612.713.213.7-Share of energy-intensive industries in the economy% GDP10.110.310.310.310.810.9Electricity prices for medium-sized industrial users€ / kWh0.110.110.110.100.100.10Gas prices for medium-sized industrial users€ / kWh0.040.040.040.040.030.03Public R&D for energy % GDP0.010.020.020.030.030.03Public R&D for environmental protection% GDP0.020.020.010.010.010.01Municipal waste recycling rate%57.757.756.356.957.657.7Share of GHG emissions covered by ETS*%37.837.336.837.436.4-Transport energy intensitykgoe / €0.570.590.580.600.600.59Transport carbon intensitykg / €1.451.531.451.481.51-Security of energy supplyEnergy import dependency%64.561.565.760.662.564.4Aggregated supplier concentration indexHHI40.525.236.323.230.5-Diversification of energy mixHHI0.270.270.270.270.270.27 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX D: INVESTMENT GUIDANCE ON COHESION POLICY 

FUNDING 2021-2027 FOR AUSTRIA 

Building  on  the  Commission  proposal  for  the  next  Multi-Annual  Financial  Framework  for  the  period 
2021-2027  of  2  May  2018  (COM(2018)  321),  this  Annex  D  presents  the  preliminary  Commission 
services views on priority investment areas and framework conditions for effective delivery for the 2021-
2027  Cohesion  Policy. (57)  These  priority  investment  areas  are  derived  from  the  broader  context  of 
investment  bottlenecks,  investment  needs  and  regional  disparities  assessed  in  the  report.  This  Annex 
provides  the  basis  for  a  dialogue  between  Austria  and  the  Commission  services  in  view  of  the 
programming of the cohesion policy funds (European Regional  Development Fund and European Social 
Fund Plus). 

Policy Objective 1: A Smarter Europe – Innovative and smart industrial transformation 

Despite  a  very  high  research  and  development  intensity,  Austria  is  not  yet  on  par  with  Europe's 
Innovation Leaders as regards innovation outcomes, which points to a need for improving the efficiency 
of  the  research  and  innovation  system  and  to  fully  exploit  the  potential  of  science-business  links. 
Therefore,  priority  investment  needs(58)  have  been  identified  to  enhance  research  and  innovation 
capacities  and  the  uptake  of  advanced  technologies,  within  the  framework  of  regional  smart 
specialisation  strategies  that  identify  priority  areas  based  on  regional  needs  and  potential,  and  in 
particular to: 

strengthen the science-business links, inter alia, by supporting collaborative research, development and 
innovation and technology transfer. Support investments in research and development infrastructure that 
allows small and medium-sized enterprises to participate in the research and development process;  

encourage cooperation activities on corresponding smart specialisation priorities and new value chains 
between  different  Austrian  regions  and  with  other  countries,  including  in  the  context  of  the  EU 
Strategies for the Alpine and Danube regions;  

strengthen  eco-innovation  and  research  and  development  focusing  on  low-carbon  technologies  and  on 
making the economy more circular.   

Scaling  up,  innovation  capacity  and  the  availability  of  venture  capital  remain  an  issue  for  Austria's 
smaller  firms.  Therefore,  priority  investment  needs  have  been  identified  to  enhance  growth  and 
competitiveness of small and medium-sized enterprises, and in particular to: 

strengthen the innovation capabilities of small and medium-sized enterprises. Encourage investments in 
product, process and service development, and upgrading technological capacities;  

encourage the entrepreneurial eco-system by providing support for clusters and networks and promote 
the entrepreneurial spirit; 

consolidate  the  favourable  start-up  climate  and  improve  the  conditions  for  scaling  up  innovative 
businesses, inter alia, by providing support for access to finance, for start-up accelerators and incubators 
and related consultancy services. Provide support for developing prototypes, demonstrators and proof of 
concept. 

(57)  This Annex is to be considered in conjunction with the EC Proposal for a Regulation of the European Parliament and of the 
Council on the European Regional Development Fund and on the Cohesion Fund COM(2018) 372 and the EC Proposal for a 
Regulation of the European Parliament and of the Council on the European Social Fund Plus COM(2018) 382, in particular as 
regards the requirements for thematic concentration and urban earmarking outlined in these proposals. 

(58)  The intensity of needs is classified in three categories in a descending order – high priority needs, priority needs, needs. 

59 

 
 
                                                           
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for AUSTRIA 

Austria  lags  behind  in  developing  information  and  communications  technology  products  and  services, 
and in particular the small and medium-sized enterprise sector in adopting new digital technologies and 
business  models.  Therefore,  priority  investment  needs  have  been  identified  to  reap  the  benefits  of 
digitisation for companies, and in particular to:  

increase information and communications technology  up-take and the adoption of new business models 
in small and medium-sized enterprises, inter alia, by improving digital skills and by supporting digital 
innovation hubs as service-providers to small and medium-sized enterprises; 

offer risk-reduced environments for small and medium-sized enterprises to develop digital products and 
services, for example by supporting test environments for early trials and market adaptation of emerging 
technologies and digital applications. 

Policy Objective 2: A low carbon and greener Europe  – Clean and fair energy transition, green 
and blue investment, circular economy, climate adaptation and risk prevention 

Increased  efforts  are  required  to  meet  Austria's  climate  and  energy  targets  for  2030,  and  a  stronger 
market  uptake  of  available  energy  efficiency  solutions,  technological  innovation  and  increased 
renewable  energy  use,  in  particular  in  small  and  medium-sized  enterprises,  can  contribute  to  this. 
Therefore,  investment  needs  have  been  identified  to  promoting  energy  efficiency  measures  and 
renewable energy, and in particular to: 

reduce  energy  consumption  by  improving  energy  efficiency  in  small  and  medium-sized  enterprises, 
including in their premises, installations and processes; 

encourage  the  use  of  renewable  energy  (for  the  generation  of  electricity  as  well  as  for  heating  and 
cooling) in small and medium-sized enterprises. 

There is room to improve the circularity of the  Austrian economy and to increase resource efficiency, 
particularly  in  the  small  and  medium-sized  enterprise  sector.  Therefore,  investment  needs  have  been 
identified to promote the transition to a circular economy, and in particular to: 

increase resource efficiency and promote the circular economy in small and medium-sized enterprises, 
e.g.  by  supporting  small  and  medium-sized  enterprises  in  implementing  circular  economy  solutions, 
including through demonstrations of new technologies or processes, and by advisory services, training 
on business-to-business circular procurement, or 'circular hubs'. 

Policy Objective 4: A more social Europe – Implementing the European Pillar of Social Rights 

Insufficient provision of full-time childcare services and all-day schools, varying strongly between the 
Länder,  is  one  of  the  determinants  behind  the  high  share  of  female  part  time-employment.  Priority 
investment  needs  have  therefore  been  identified  to  promote  women’s  labour  market  participation, 
and in particular to:  

enhance  access  to  affordable,  accessible  and  high-quality  full-time  childcare  and  all  day  schools  and 
support the development and implementation of a quality framework in early childhood education and 
care; 

support social partners and enterprises to raise awareness and address gender segregation in the labour 
market and the gender pay gap. 

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D. Investment Guidance on Cohesion Policy Funding 2021-2027 for AUSTRIA 

Older workers,  workers  with  migrant background as  well as the low-skilled do not participate  fully  in 
the  labour  market,  while  basic  skills  are  below  EU-average,  socio-economic  and  migrant  background 
continues to affect educational outcomes and the socio-economic integration of recently arrived refugees 
presents a specific challenge. Priority investment needs have therefore been identified to promote equal 
access to, and completion of, quality and inclusive education and training; and to promote lifelong 
learning,  notably  flexible  upskilling  and  reskilling  for  all,  taking  into  account  digital  skills, 
facilitate career transitions and promote professional mobility, and in particular to: 

improve educational chances and basic skills attainment of disadvantaged people and under-represented 
groups; 

develop and implement access to life-long learning and  to continuing vocational education;    

promote elderly-friendly forms of work organisation involving intergenerational learning.   

improve  access  to  employment  through  support  for  labour  market  integration,  access  to  vocational 
education and training and support for transition from school to employment. 

Policy  Objective  5  –  A  Europe  closer  to  citizens  by  fostering    the  sustainable  and  integrated 
development of urban, rural and coastal areas and local initiatives 

The  increasing  concentration  of  the  population,  economic  activities  and  traffic  in  certain  regions, 
generates amongst others land use and environmental pressures, in particular in the urban-rural context, 
while inner city areas are facing social and environmental challenges. Therefore, investment needs have 
been  identified  to  fostering  the  integrated  social,  economic  and  environmental  development  in 
urban  and  surrounding  rural  areas,  also  through  community-led  local  development,  and  in 
particular to: 

support  the  regeneration  of  deprived  urban  neighbourhoods  in  an  integrated,  participatory  manner, 
including through social innovation;  

improve the inclusion of communities at risk of social exclusion, in particular migrants, with a focus on 
their long-term integration in the workforce; 

encourage sustainable mobility and support measures to reduce air pollution; 

support Smart City initiatives;  

support urban-rural development; 

promote  cooperation  between  cities,  also  across  regional  and  national  borders  and  within  the  EU 
Strategies for the Alpine and Danube regions.  

Factors for effective delivery of Cohesion policy 

improve public procurement performance, in particular in the areas flagged as weaknesses in the Single 
Market Scoreboard;  

continue  to  strengthen  the  capacity  of  beneficiaries,  stakeholders,  social  partners,  civil  society 
organisations and other bodies; 

broader use of financial instruments and/or contribution to an Austrian compartment under InvestEU for 

61 

 
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for AUSTRIA 

revenue-generating and cost-saving activities; 

reduce  the  administrative  burden  for  Austrian  businesses.  The  cost  of  complying  with  regulatory 
frameworks is one of the main barriers to investment and growth.  

62 

 
 
 
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