Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Austria and delivering a Council opinion on the 2020 Stability Programme of Austria
Date: 2020-05-20
Institutions: European Commission, Secretariat-General
Subjects: Austria, aid to undertakings, economic policy, economic recovery, economic reform, epidemic, health policy, infectious disease, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 20.5.2020  COM(2020) 520 final  Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Austria and delivering a Council opinion on the 2020 Stability Programme of Austria  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2020 National Reform Programme of Austria and delivering a Council opinion on 
the 2020 Stability Programme of Austria 

THE COUNCIL OF THE EUROPEAN UNION, 

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

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

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

On  17  December  2019,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Strategy,  marking  the  start  of  the  2020  European  Semester  for  economic  policy 
coordination. It took due account of the European Pillar of Social Rights, proclaimed 
by the European Parliament, the Council and the Commission on 17 November 2017. 
On  17  December  2019,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  also  adopted  the  Alert  Mechanism  Report,  in  which  it  did  not  identify 
Austria  as  one  of  the  Member  States  for  which  an  in-depth  review  would  be  carried 
out. On the same date, the Commission also adopted a recommendation for a Council 
recommendation on the economic policy of the euro area. 
The 2020 country report for Austria2 was published on 26 February 2020. It assessed 
Austria’s progress in addressing the country-specific recommendations adopted by the 
Council  on  9  July  20193,  the  follow-up  given  to  the  recommendations  adopted  in 
previous years and Austria’s progress towards its national Europe 2020 targets. 

(3) 

On 11 March 2020, the World Health Organization officially declared the COVID-19 
outbreak  a  global  pandemic.  It  is  a  severe  public  health  emergency  for  citizens, 

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OJ L 209, 2.8.1997, p. 1. 
SWD(2020) 519 final. 
OJ C 301, 5.9.2019, p. 117. 

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societies  and  economies.  It  is  putting  national  health  systems  under  severe  strain, 
disrupting  global  supply  chains,  causing  volatility  in  financial  markets,  triggering 
consumer  demand  shocks  and  having  negative  effects  across  various  sectors.  It  is 
threatening  people’s  jobs,  their  incomes  and  companies’  business.  It  has  delivered  a 
major  economic  shock  that  is  already  having  serious  repercussions  in  the  European 
Union. On 13 March 2020, the Commission adopted a Communication4 calling for a 
coordinated economic response to the crisis, involving all actors at national and Union 
level. 

Several Member States have declared a state of emergency or introduced emergency 
measures.  Any  emergency  measures  should  be  strictly  proportionate,  necessary, 
limited in time, and in line with European and international standards. They should be 
subject to democratic oversight and independent judicial review. 

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of 
the general escape clause of the Stability and Growth Pact5. The clause, as set out in 
Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and Articles 3(5) and 
5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in 
times  of  severe  economic  downturn.  In  its  Communication,  the  Commission  shared 
with the Council its view that, given the expected severe economic downturn resulting 
from the COVID-19 outbreak, the current  conditions  permit activation of the clause. 
On  23  March  2020,  the  Ministers  of  Finance  of  the  Member  States  agreed  with  the 
assessment of the Commission. The activation of the general escape clause allows for 
a temporary departure from the adjustment path towards the medium-term budgetary 
objective,  provided  that  this  does  not  endanger  fiscal  sustainability  in  the  medium 
term. For the corrective arm, the Council may also decide, on a recommendation from 
the  Commission,  to  adopt  a  revised  fiscal trajectory.  The  general escape  clause  does 
not suspend the procedures of the Stability and Growth Pact. It allows Member States 
to depart from the budgetary requirements that would normally apply while enabling 
the  Commission  and  the  Council  to  undertake  the  necessary  policy  coordination 
measures within the framework of the Pact. 

Continued  action  is  required  to  limit  and  control  the  spread  of  the  pandemic, 
strengthen  the  resilience  of  the  national  health  systems,  mitigate  the  socio-economic 
consequences through supportive measures for business and households and to ensure 
adequate  health  and  safety  conditions  at  the  workplace  with  a  view  to  resuming 
economic  activity.  The  Union  should  fully  use  the  various  tools  at  its  disposal  to 
support  Member  States’  efforts  in  those  areas.  In  parallel,  Member  States  and  the 
Union should work together to prepare the measures necessary to get back to a normal 
functioning of our societies and economies and to sustainable growth, integrating inter 
alia the  green  transition and  the  digital  transformation,  and  drawing  all  lessons  from 
the crisis. 

The  COVID-19  crisis  has  highlighted  the  flexibility  that  the  single  market  offers  to 
adapt  to  extraordinary  situations.  However,  in  order  to  ensure  a  swift  and  smooth 
transition to the recovery phase and the free movement of goods, services and workers, 
exceptional measures  that  prevent  the  single  market  from  functioning  normally  must 
be removed as soon as they are no longer indispensable. The current crisis has shown 
the need for strong crisis preparedness plans in the health sector in particular,  which 
include  in  particular  improved  purchasing  strategies,  diversified  supply  chains  and 

(4) 

(5) 

(6) 

(7) 

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COM(2020) 112 final. 
COM(2020) 123 final. 

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(8) 

(9) 

strategic reserves of essential supplies. They are key elements for developing broader 
crisis preparedness plans. 
The  Union  legislator  has  already  amended  the  relevant  legislative  frameworks6  to 
allow  Member  States  to  mobilise  all  unused  resources  from  the  European  Structural 
and  Investment  Funds  so  they  can  address  the  exceptional  effects  of  the  COVID-19 
pandemic. Those amendments will provide additional flexibility, as well as simplified 
and streamlined procedures. To alleviate cash flow pressures, Member States can also 
benefit  from  a  100%  co-financing  rate  from  the  Union  budget  in  the  2020-2021 
accounting year. Austria is encouraged to make full use of those possibilities to help 
the individuals and sectors most affected by the challenges. 

The  socio-economic  consequences  of  the  pandemic  are  likely  to  be  unevenly 
distributed  across  regions  due  to  different  specialisation  patterns  in  particular  in 
regions  markedly  relying  on  tourism.  This  entails  the  risk  of  widening  regional 
disparities  within  Austria.  Combined  with  the  risk  of  a  temporary  unravelling  of  the 
convergence  process  between  Member  States,  the  current  situation  calls  for  targeted 
policy responses. 

(10)  On 14 April 2020, Austria submitted its 2020 National Reform Programme and, on 30 
April  2020,  its  2020  Stability  Programme.  In  order  to  take  account  of  their 
interlinkages, the two programmes have been assessed at the same time. 

(11)  Austria is currently in the preventive arm of the Stability and Growth Pact and subject 

to the debt rule.  

(12) 

(13) 

In  its  technical  update  to  the  2020  Stability  Programme,  the  government  plans  the 
headline balance to deteriorate from a surplus of 0,7% of GDP in 2019 to a deficit of 
8,0%  of  GDP  in  2020.  The  deficit  is  projected  to  decline  to  1,9%  of  GDP  in  2021. 
After decreasing to 70,4% of GDP in 2019, the general government debt-to-GDP ratio 
is expected to increase to 81,4% in 2020 according to the 2020 Stability Programme. 
The  macroeconomic  and  fiscal  outlook  is  affected  by  high  uncertainty  due  to  the 
COVID-19 pandemic. 

In response to the COVID-19 pandemic, and as part of a coordinated Union approach, 
Austria has adopted budgetary measures to increase the capacity of its health system, 
contain  the  pandemic,  and  provide  relief  to  those  individuals  and  sectors  that  have 
been  particularly  affected.  According  to  the  2020  Stability  Programmes,  those 
budgetary  measures  amounted  to  5,0%  of  GDP.  The  measures  include  strengthening 
health  care  services,  emergency  aid  for  distressed  companies  and  short-time  work 
arrangements.  In  addition,  Austria  has  announced  measures  that,  while  not  having  a 
direct  budgetary  impact,  will  contribute  to  support  liquidity  to  businesses,  which  the 
2020  Stability  Programme  estimates  at  5,0%  of  GDP.  Those  measures  include  tax 
deferrals for personal and corporate income taxes (2,6% of GDP) and loan guarantees 
(2,4% of GDP). Overall, the measures taken by Austria are in line with the guidelines 

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Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending 
Regulations  (EU)  No  1301/2013,  (EU)  No  1303/2013  and  (EU)  No  508/2014  as  regards  specific  measures  to 
mobilise  investments  in  the  healthcare  systems  of  Member  States  and  in  other  sectors  of  their  economies  in 
response to the COVID-19 outbreak (Coronavirus Response Investment Initiative) (OJ L 99, 31.3.2020, p. 5) and 
Regulation  (EU)  2020/558  of  the  European  Parliament  and  of  the  Council  of  23  April  2020  amending 
Regulations  (EU)  No  1301/2013  and  (EU)  No  1303/2013  as  regards  specific  measures  to  provide  exceptional 
flexibility for the use of the European Structural and Investments Funds in response to the COVID-19 outbreak 
(OJ L 130, 24.4.2020, p. 1). 

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set out in the Commission Communication on a coordinated economic response to the 
COVID-19 outbreak. Full implementation of those measures, followed by a refocusing 
of  fiscal  policies  towards  achieving  prudent  medium-term  fiscal  positions  when 
economic  conditions  allow,  will  contribute  to  preserving  fiscal  sustainability  in  the 
medium term.  

(14)  Based  on  the  Commission  2020  spring  forecast  under  unchanged  policies,  Austria’s 
general government balance is forecast at -6,1% of GDP in 2020 and -1,9% in 2021. 
The  general  government  debt  ratio  is  projected  to  reach  78,8%  of  GDP  in  2020  and 
75,8% in 2021. 

(15)  On 20 May 2020, the Commission issued a report prepared in accordance with Article 
126(3)  of  the  Treaty  due  to  Austria’s  planned  breach  of  the  3%  of  GDP  deficit 
threshold in 2020. Overall, the analysis suggests that the deficit criterion as defined in 
the Treaty and in Regulation (EC) No 1467/1997 is not fulfilled.   

(16)  The Austrian government has taken unprecedented measures to control the spread of 
COVID-19. It  has  introduced  strict  quarantine  and  social  distancing  rules  and  made 
substantial funds available for the health system to purchase equipment and supplies, 
reinforce  laboratory  capacity,  and  strengthen  staffing  capability.  Primary  health  care 
has come under exceptional pressure from an unprecedented increase in the need for 
teleconsultations,  medical  appointments  and  requests  for  home  visits.  The  rapid 
COVID-19  outbreak  has  strongly  affected  Austria’s  economy.  National  and 
international  containment  measures  against  the  virus  have  hit  both  the  demand  and 
supply side, leading to a broad-based downturn. GDP is therefore projected to contract 
by  5½%  in  2020,  more  than  during  the  economic  and  financial  crisis  in  2008-2009. 
Given the relatively rapid fall in new infections, Austria was one of the first European 
countries  to  announce  a  relaxation  of  containment  measures  beginning  in  mid-April. 
To  avoid  long-lasting  economic  damage  and  to  cushion  the  employment  and  social 
impacts  of  the  crisis,  the  government  has  adopted  a  comprehensive  package  of 
measures to support the Austrian economy (currently EUR 43 billion, approximately 
10%  of  GDP).  The  package  includes  a  short-time  work  scheme  (Kurzarbeit),  where 
working  hours  can  be  reduced  by  up  to  90%  on  average  over  a  given  period  and 
employers are reimbursed 80% to 90% of the employee’s last net income, dependent 
on  last  gross  income.  The  comprehensive  set  of  measures  for  businesses  aims  to 
prevent temporarily liquidity problems and provides direct support especially to hard-
hit  enterprises  and  industries  with  a  particular  focus  on  small  and  medium  sized 
enterprises  (SME).  These 
loans, 
transfers, 
guarantees,  equity  injections  and  tax  deferrals.  In  the  process  of  designing  and 
implementing  these  measures  the  resilience  of  the  banking  sector  needs  to  be  taken 
into account.  

liquidity  support 

through 

include 

(17)  The  Austrian  health  system  has  so  far  dealt  successfully  with  the  COVID-19 
pandemic.  Expanding  primary  and  ambulatory  care  services  with  a  focus  on  health 
promotion  and  disease  prevention  would  help  to  further  improve  population  health. 
While maintaining high quality standards, cost efficiency could be increased by more 
effective  public  procurement  and  generic  medicines.  Also,  Austria’s  long-term  care 
system  faces  structural  and  fiscal  challenges,  which  have  so  far  not  been  thoroughly 
addressed. The system delivers comparatively high-quality services, but faces staffing 
challenges, which become even more perceptible and evident in the current crisis. The 
long-term care sector relies strongly on care provided by workers from other Member 
States,  pointing  to  the  need  to  secure  free  flow  of  cross-border  workers.  In  addition, 
adequate remuneration could help to make the job of nursing staff more attractive.  

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(18)  Tax  policy  is  playing  an  important  role  in  supporting  households  and  businesses 
during containment and will be key in fostering economic recovery in the aftermath of 
the  crisis.  Austria’s  tax  mix  is  characterised  by  a  high  burden  on  labour,  while  the 
revenue potential of wealth-related and environmental taxes remains largely untapped 
and consumption taxes could be made more efficient. Tax reforms could help to shift 
the  tax  mix  towards  sources  that  are  less  detrimental  to  inclusive  and  sustainable 
growth, and provide a solid basis for recovery. In particular, insufficiently used taxes 
on  alcohol  and  tobacco,  pollution  and  resource  consumption  imply  unused  steering 
effects and revenue potential. The uneven, but generally low level of energy taxation 
undermines 
incentivise 
environmentally  beneficial  consumption.  In  particular,  consistent  taxation  of  CO2 
emissions would make climate-friendly energy sources more competitive and provide 
fiscal  space  for  reducing  more  distortive  taxes.  Higher,  CO2-related  energy  taxes 
would help to internalise the social costs of pollution, lead consumers to rely more on 
renewable sources and encourage investors to invest in climate-friendly technologies. 
Finally, greater use of wealth-related taxes could make the tax system fairer, especially 
in  view  of  Austria’s  persistently  high  wealth  inequality.  In  particular,  recurrent 
property  and  inheritance  taxes  have  proven  to  be  relatively  growth-friendly  and 
progressive and should not be overlooked when it comes to generating tax revenues to 
restore public finances. 

its  efficiency  and  effectiveness  as  a  policy 

tool 

to 

important.  Disadvantaged  students, 

(19)  While Austria performed well on the Social Scoreboard supporting the European Pillar 
of  Social  Rights,  gaps  in  coverage  may  mean  a  lack  of  income  protection  for 
vulnerable groups during the COVID-19 crisis and may require additional measures. 
While  youth  unemployment  rises,  the  unemployed,  long-term  unemployed,  non-
standard  workers  and  foreign  born  people  are  particlarly  at  risk  of  poverty.  Active 
labour  market  policies  providing  lifelong  learning  opportunities  and  upskilling  will 
learners  with 
remain  crucially 
disabilities,  suffer  particularly  in  circumstances  that  require  distance  learning.  While 
some  10%  of  pupils  under  15  have  no  access  to  a  virtual  learning  environment,  the 
Austrain  government,  in  response  to  the  COVID-19  crisis,  has  taken  mitigating 
measures by providing pupils at risk with computers. Already existing inequalities in 
educational  attainment,  linked  to  socio-economic  and  migrant  backgrounds,  risk 
however  to  be  exacerbated.  A  recovery  strategy  that  improves  access  to  inclusive, 
good-quality  early  childhood  education  and  care  which  have  been  shown  to  redress 
social disadvantages, would produce socioeconomic benefits in the medium and long 
term  and  provide  opportunities  for  women  to  fully  access  the  labour  market.  The 
overall employment rate of women was high before the crisis but almost half of them 
worked  part-time  (linked  to  short  opening  hours  of  schools  and  childcare  facilities) 
causing a significant unadjusted gender pay gap. 

including 

(20)  The  effectiveness  of  COVID-19  support  measures  in  relieving  hard-pressed  firms, 
preserving  business  environments,  and  avoiding  insolvencies  depends  on  their  swift 
and un-bureaucratic implementation by public authorities and intermediaries. Start-ups 
and  scale-ups  may  need  specific  support,  e.g.  in  the  form  of  public  institutions 
purchasing  equity  stakes  and  incentives  for  venture  capital  funds  to  invest  more  in 
these  firms.  This  is  to  strengthen  those  companies  that  are vital  for  the  recovery  but 
also to avoid fire sales of strategically important European firms. As well as funding 
support,  hard-pressed  firms,  in  particular  smaller  ones,  need  a  supportive  business 
environment.  Administrative  burden  and  regulatory  density  impose  costs  that  firms 
can  now  afford  less  than  ever.  Efforts  to  reduce  unnecessary  burdens  and  provide 
efficient  digital  public  services  are  an  effective  way  of  providing  businesses  with 

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immediate, tangible relief without burdening the taxpayer. The insolvency framework 
should  be  geared  to  prevention  but  also  to  speedy  unwinding  and  allowing  for  a 
‘second  chance’.  Dispute  resolution  networks,  such  as  SOLVIT,  help  companies  in 
times of disruption to the single market and need adequate resources. 

(21)  To  foster  the  economic  recovery,  it  will  be  important  to  front-load  mature  public 
investment  projects  and  promote  private  investment,  including  through  relevant 
reforms.  This  investment  will  be  most  effective  when  focused  on  innovation, 
digitalisation  and  the  green  transition  so  as  to  increase  productivity  and  ensure 
sustainable competitiveness. Austria’s research and development (R&D) intensity has 
been  one  of  the  highest  in  the  Union  but  the  country  has  lagged  behind  innovation 
leaders in terms of innovation outcomes. With many businesses’ research budgets now 
under  pressure,  it  is  even  more  important  to  translate  Austria’s  R&D  efforts  into 
excellent  science  and  cutting-edge  innovation,  maintain  public  investment  in  basic 
research,  and  ensure  equity  funding  for  innovative  scale-ups.  Digitalisation  remains 
essential  for  opening  up  the  economy  and  preparing  for  the  ‘new  normal’  after  the 
lockdown.  The  weak  diffusion  of  digital  technologies  and  business  models  among 
smaller  companies  represents  a  bottleneck  for  productivity  growth.  While Austrians’ 
digital  skills  are  in  general  above  the  EU  average,  not  enough  students  graduate  in 
computing to fill all available positions. Higher levels of e-commerce, working from 
home and e-government (for example) will require more investment in infrastructure 
(including 5G and rural broadband), equipment and skills.  

(22)  Austria’s transformation to a climate neutral economy will require sizeable private and 
public investment over a sustained period. Austria’s national energy and climate plan 
identifies  significant  challenges  in  reaching  its  2030  target  for  greenhouse  gas 
emissions  not  covered  by  the  Union  emissions  trading  system.  Improving  resource 
productivity  is  a  key  driver  for  future  growth  while  minimising  impacts  on  the 
environment. Reducing transport-related emissions is essential for meeting air quality 
standards and climate goals. Frontloading and pursuing new investments to support the 
green  transition  will  help  to  create  new  green  jobs  and  kick-start  the  economy  as  it 
emerges from crisis management mode. Investments in eco-innovation would trigger 
productivity  growth  while  reducing  Austria’s  ecological  footprint.  The  programming 
of  the  Just  Transition  Fund  for  the  period  2021-2027  could  help  Austria  to  address 
some  of  the  challenges  posed  by  the  transition  to  a  climate  neutral  economy,  in 
particular  in  the  territories  covered  by  Annex  D  to  the  country  report.  This  would 
allow Austria to make the best use of that fund.   

to  address  medium- 

(23)  While the present recommendations focus on tackling the socio-economic impacts of 
the  pandemic  and  facilitating  the  economic  recovery,  the  2019  country-specific 
recommendations adopted by the Council on 9 July 2019 also covered reforms that are 
essential 
structural  challenges.  Those 
recommendations remain pertinent and will continue to be monitored throughout next 
year’s  European  Semester  annual  cycle.  That  also  applies  to  recommendations 
regarding investment-related economic policies. The latter recommendations should be 
taken  into  account  for  the  strategic  programming  of  cohesion  policy  funding  post-
2020, including for mitigating measures and exit strategies with regard to the current 
crisis. 

long-term 

to 

(24)  The  European  Semester  provides  the  framework  for  continuous  economic  and 
employment  policy  coordination  in  the  Union,  which  can  contribute  to  a  sustainable 
economy.  Member  States  have  taken  stock  of  progress  regarding United  Nations’ 
Sustainable  Development  Goals  (SDGs)  implementation  in  their  2020  National 

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Reform  Programmes.  By  ensuring  the  full  implementation  of  the  recommendations 
below,  Austria  will  contribute  to  the  progress  towards  the SDGs and  to  the  common 
effort of ensuring competitive sustainability in the Union.  

(25)  Close coordination between economies in the economic and monetary union is key to 
achieve a swift recovery from the economic impact of the COVID-19. Austria should, 
as  a  Member  State  whose  currency  is  the  euro  –  and  taking  into  account  political 
guidance by the Eurogroup – ensure its policies remain consistent with the euro area 
recommendations and coordinated with those of the other euro area Member States. 

(26) 

In  the  context  of  the  2020  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Austria’s  economic  policy  and  published  it  in  the  2020 
country  report.  It  has  also  assessed  the  2020  Stability  Programme  and  the  2020 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 
addressed  to  Austria  in  previous  years.  It  has  taken  into  account  not  only  their 
relevance  for  sustainable  fiscal  and  socioeconomic  policy  in  Austria,  but  also  their 
compliance with Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions.  

(27) 

In  the  light  of  that  assessment,  the  Council  has  examined  the  2020  Stability 
Programme and its opinion is reflected in particular in recommendation (1) below,  

HEREBY RECOMMENDS that Austria take action in 2020 and 2021 to: 

1. 

2. 

3. 

4. 

In  line  with  the  general  escape  clause,  take  all  necessary  measures  to  effectively 
address the pandemic, sustain the economy and support the ensuing recovery. When 
economic  conditions  allow,  pursue  fiscal  policies  aimed  at  achieving  prudent 
medium-term  fiscal  positions  and  ensuring  debt  sustainability,  while  enhancing 
investment.  Improve  the  resilience  of  the  health  system  by  strengthening  public 
health and primary care.  

Ensure equal access to education and increased digital learning. 

Ensure an effective implemention of liquidity and support measures, in particular for 
small  and  medium-sized  enterprises,  and  reduce  administrative  and  regulatory 
investment  projects  and  promote  private 
burden.  Front-load  mature  public 
investment  to  foster  the  economic  recovery.  Focus  investment  on  the  green  and 
digital  transition,  in  particular  on  innovation,  sustainable  transport,  clean  and 
efficient production and use of energy. 

Make  the  tax  mix  more  efficient  and  more  supportive  to  inclusive  and  sustainable 
growth. 

Done at Brussels, 

For the Council 
The President 

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