Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Austria and delivering a Council opinion on the 2022 Stability Programme of Austria
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: Austria, economic policy, economic recovery, economic reform, energy policy, fiscal policy, labour market, participation of women, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 23.5.2022  COM(2022) 601 final  Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Austria and delivering a Council opinion on the 2022 Stability Programme of Austria {SWD(2022) 601 final} - {SWD(2022) 640 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2022 National Reform Programme of Austria and delivering a Council opinion on 
the 2022 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) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council2,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021.  The  Recovery  and  Resilience  Facility  provides  financial  support  for  the 
implementation of reforms and investment, entailing a fiscal impulse financed by the 
Union.  It  contributes  to  the  economic  recovery  and  to  the  implementation  of 
sustainable and growth-enhancing reforms and investment, in particular to promote the 
green and digital transition, while strengthening the resilience and potential growth of 
the Member States’ economies. It also helps strengthen sustainable public finances and 
boost growth and job creation in the medium and long term. The maximum financial 
contribution  per  Member  State  under  the  Recovery  and  Resilience  Facility  [was] 
updated on [XX] June 2022, in line with Article 11(2) of Regulation (EU) 2021/241.  

On  24  November  2021,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Survey,  marking  the  start  of  the  2022  European  Semester  for  economic  policy 
coordination.  It  took  due  account  of  the  reaffirmed  joint  commitment  of  the  Porto 
Social Summit of May 2021 to further implement the European Pillar of Social Rights, 
proclaimed  by  the  European  Parliament,  the  Council  and  the  Commission  on  17 
November  2017.  The  European  Council  endorsed  the  priorities  of  the  2022  Annual 
Sustainable Growth Survey on 25 March 2022. On 24 November 2021, on the basis of 

1  OJ L 209, 2.8.1997, p. 1. 
2  Regulation (EU) 2021/241 of the  European Parliament and of the Council of 12 February 2021  stablishing 

the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

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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 review3 would be needed. On the same date, the Commission also adopted a 
recommendation  for  a  Council  recommendation  on  the  economic  policy  of  the  euro 
area, which was adopted on 5 April 2022 by the Council, as well as the proposal for 
the 2022 Joint Employment Report analysing the implementation of the Employment 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  was 
adopted by the Council on 14 March 2022. 

Russia’s  invasion  of  Ukraine,  in  the  wake  of  the  global  pandemic,  has  significantly 
altered the geopolitical and economic context. The impact of the invasion on Member 
States’ economies has been felt, for example, through higher energy and food prices, 
the inflow of refugees from Ukraine and weaker growth prospects. The higher energy 
prices weigh particularly on the most vulnerable households experiencing or at risk of 
energy  poverty.  The  EU  is  also  seeing  an  unprecedented  inflow  of  people  fleeing 
Ukraine.  In  this  context,  on  4  March  2022,  the  Temporary  Protection  Directive  was 
triggered4  for  the  first  time,  granting  displaced  persons  from  Ukraine  the  right  to 
legally  stay  in  the  EU,  as  well  as  access  to  education  and  training,  labour  market, 
healthcare,  housing  and  social  welfare.  Exceptional  support  is  made  available  to 
Austria  under  the  Cohesion’s  Action  for  Refugees  in  Europe  (CARE)  initiative  and 
through additional pre-financing under the Recovery Assistance for Cohesion and the 
Territories  of  Europe  (REACT-EU)  programme  to  urgently  address  reception  and 
integration needs for those fleeing Ukraine.  

Taking  account  of  the  rapidly  changing  economic  and  geopolitical  situation  the 
European Semester resumes its broad economic and employment policy coordination 
in 2022, while evolving in line with the implementation requirements of the Recovery 
and  Resilience  Facility,  as  outlined  in  the  2022  Annual  Sustainable  Growth  Survey. 
The  implementation  of  the  adopted  recovery  and  resilience  plans  is  essential  for  the 
delivery of the policy priorities under the European Semester, as the plans address all 
or a significant subset of the relevant country-specific recommendations issued in the 
2019 and 2020 country-specific Semester cycles. The 2019 and 2020 country-specific 
recommendations  remain  equally  relevant  also  for  recovery  and  resilience  plans 
revised, updated or amended in accordance with Articles 14, 18 and 21 of Regulation 
(EU) 2021/241, in addition to any country-specific recommendations issued up to the 
date of submission of the modified plan.  
The General Escape Clause has been active since March 20205. In its Communication 
of  3  March  20216,  the  Commission  set  out  its  view  that  the  decision  on  the 
deactivation or continued application of the general escape clause should be taken as 
an overall assessment of the state of the economy, with the level of economic activity 
in the EU or euro area compared to pre-crisis levels (end-2019) as a key quantitative 
criterion.so that  

Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 
on the prevention and correction of macroeconomic imbalances, OJ L 306, 23.11.2011, p. 25. 
Council Implementing Decision (EU) 2022/382 of 4 March 2022 establishing the existence of a mass 
influx of displaced persons from Ukraine within the meaning of Article 5 of Directive 2001/55/EC, and 
having the effect of introducing temporary protection, OJ L 71, 4.3.2022, p. 1.   
Communication from the Commission to the Council on the activation of the general escape clause of 
the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final. 

Communication  from  the  Commission  to  the  Council  on  one  year  since  the  outbreak  of  COVID-19: 
fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final. 

(3) 

(4) 

(5) 

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(6) 

(7) 

Following the approach in the Council opinion of 18 June 2021 on the 2021 Stability 
Programme,  the  fiscal  stance  is  currently  best  measured  as  the  change  in  primary 
expenditure  (net  of  discretionary  revenue  measures),  excluding  COVID-19  crisis-
related  temporary  emergency  measures  but  including  expenditure  financed  by  non-
repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other  EU 
funds,  relative  to  medium-term  potential  growth7.  Going  beyond  the  overall  fiscal 
stance, in order to assess whether national fiscal policy is prudent and its composition 
is conducive to a sustainable recovery consistent with the green and digital transitions, 
attention  is  also  paid  to  the  evolution  of  nationally-financed8  primary  current 
expenditure  (net  of  discretionary  revenue  measures  and  excluding  COVID-19  crisis-
related temporary emergency measures) and investment. 

On  2  March  2022,  the  Commission  adopted  a  Communication  providing  broad 
guidance  for  fiscal  policy  in  2023,  aiming  at  supporting  the  preparation  of  Member 
States’  Stability  and  Convergence  Programmes  and  thereby  strengthening  policy 
coordination9.  The  Commission  noted  that,  based  on  the  macroeconomic  outlook  of 
the  2022  winter  forecast,  transitioning  from  an  aggregate  supportive  fiscal  stance  in 
2020-2022  to  a  broadly  neutral  aggregate  fiscal  stance  would  appear  appropriate  in 
2023,  while  standing  ready  to  react  to  the  evolving  economic  situation.  The 
Commission announced that the fiscal recommendations for 2023 should continue to 
differentiate  across  Member  States  and  take  into  account  possible  cross-country 
spillovers. The Commission invited the Member States to reflect the guidance in their 
Stability  and  Convergence  Programmes.  The  Commission  committed  to  closely 
monitor  the  economic  developments  and  adjust  its  policy  guidance  as  needed  and  at 
the latest in its Semester spring package of late May 2022. 

(8)  With  respect  to  the  fiscal  guidance  provided  on  2  March  2022,  the  fiscal 
recommendations  for  2023  take  into  account  the  worsened  economic  outlook,  the 
heightened uncertainty and further downside risks, and the higher inflation compared 
to the winter forecast. Against these considerations, the fiscal response has to expand 
public investment for the green and digital transition and energy security, and sustain 
the purchasing power of the most vulnerable households so as to cushion the impact of 
the energy price hike and help limit inflationary pressures from second round effects 
via targeted and temporary measures; fiscal policy has to remain agile so as to adjust 
to the rapidly evolving circumstances, and be differentiated across countries depending 
on their fiscal and economic situation, including as regards the exposure to the crisis 
and the inflow of displaced persons from Ukraine. 

(9) 

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On  30  April  2021,  Austria  submitted  its  national  recovery  and  resilience  plan  to  the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 
effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 
accordance with the assessment guidelines of Annex V to that Regulation. On 13 July 
2021,  the  Council  adopted  its  Decision  on  the  approval  of  the  assessment  of  the 

The  estimates  on  the  fiscal  stance  and  its  components  in  this  recommendation  are  Commission 
estimates  based  on  the  assumptions  underlying  the  Commission  2022  spring  forecast.  The 
Commission’s estimates of medium-term potential growth do not include the positive impact of reforms 
that are part of the Recovery and Resilience Plan and that can boost potential growth.  

Not financed by grants from the Recovery and Resilience Facility and other EU funds. 

Communication  from  the  Commission  to  the  Council:  Fiscal  policy  guidance  for  2023,  Brussels, 
2.3.2022, COM(2022) 85 final. 

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recovery and resilience plan for Austria10. The release of instalments is conditional on 
a decision by the Commission,  taken in  accordance with  Article 24(5)  of  Regulation 
(EU)  2021/241,  that  Austria  has  satisfactorily  fulfilled  the  relevant  milestones  and 
targets  set  out  in  the  Council  Implementing  Decision.  Satisfactory  fulfilment 
presupposes  that  the  achievement  of  preceding  milestones  and  targets  has  not  been 
reversed. 

(10)  On  27  April  2022,  Austria  submitted  its  2022  National  Reform  Programme  and  its 
2022 Stability Programme. To take account of their interlinkages, the two programmes 
have  been  assessed  together.  In  accordance  with  Article  27  of  Regulation  (EU) 
2021/241,  the  2022  National  Reform  Programme  also  reflects  Austria’s  bi-annual 
reporting on the progress made in achieving its recovery and resilience plan.  
(11)  The Commission published the 2022 country report for Austria11 on 23 May 2022. It 
assessed  Austria’s  progress 
country-specific 
recommendations adopted by the Council in 2019, 2020 and 2021, and  took stock of 
Austria’s  implementation  of  the  recovery  and  resilience  plan,  building  on  the 
Recovery  and  Resilience  Scoreboard.  Based  on  this  analysis,  the  country  report 
identified gaps with respect to those challenges that are not addressed or only partially 
by the recovery and resilience plan, as well as new and emerging challenges, including 
those emerging from Russia’s invasion of Ukraine. It also assessed Austria’s progress 
on  implementing  the  European  Pillar  of  Social  Rights  and  on  achieving  the  EU 
headline  targets  on  employment,  skills  and  poverty  reduction,  as  well  as  progress  in 
achieving the UN’s Sustainable Development Goals. 

addressing 

relevant 

the 

in 

(12)  On  27  April  2022,  Austria  submitted  its  2022  Stability  Programme,  in  line  with  the 

deadline established in Article 4 of Regulation (EC) No 1466/97. 

(13)  On  23  May  2022,  the  Commission  issued  a  report  under  Article  126(3)  TFEU.  This 
report discussed the budgetary situation of Austria, as its general government deficit in 
2021 exceeded the 3% of GDP Treaty reference value. The report concluded that the 
deficit  criterion  was  not  fulfilled.  In  line  with  the  Communication  of  2  March  2022, 
the  Commission  did  not  propose  to  open  new  excessive  deficit  procedures  in  spring 
2022  and  it  will  re-assess  the  possible  opening  of  excessive  deficit  procedures  in 
autumn 2022. 

the  economy  and  support 

(14)  On  20  July  2020,  the  Council  recommended  Austria  to  take  in  2020  and  2021  all 
necessary measures, in line with the general escape clause, to  effectively address the 
pandemic,  sustain 
the  ensuing  recovery.  It  also 
recommended  Austria  to  pursue,  when  economic  conditions  allow,  fiscal  policies 
aimed  at  achieving  prudent  medium-term  fiscal  positions  and  ensuring  debt 
sustainability,  while  enhancing  investment.  In  2021,  based  on  data  validated  by 
Eurostat, Austria’s general government deficit fell from 8.0% of GDP in 2020 to 5.9% 
in  2021.  The  fiscal  policy  response  by  Austria  supported  the  economic  recovery  in 
2021,  while  temporary  emergency  support  measures  declined  from  4.8%  of  GDP  in 
2020 to 4.3% in 2021. The measures taken by Austria in 2021 have been in line with 
the Council Recommendation of 20 July 2020. The discretionary budgetary measures 
adopted by the government in 2020 and 2021 were mostly temporary or matched by 
offsetting measures. At the same time, some of the discretionary measures adopted by 

10  Council  Implementing  Decision  of  6  July  2021  on  the  approval  of  the  assessment  of  the  recovery  and 

resilience plan for Austria (ST 10159/2021) 

11  SWD(2022) 601 final. 

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the  government  over  the  period  2020  to  2021  were  not  temporary  or  matched  by 
offsetting  measures,  mainly  consisting  of  a  significant  tax  relief  provided  to 
households  and  corporations  through  the  so  called  eco-social  tax  reform.  Based  on 
data validated by Eurostat, general government debt stood at 82.8% of GDP in 2021. 

(15)  The  macroeconomic  scenario  underpinning  the  budgetary  projections  in  the  2022 
Stability Programme is realistic. The government projects real GDP to grow by 3.9% 
in  2022  and  2.0%  in  2023.  By  comparison,  the  Commission’s  2022  spring  forecast 
projects a real GDP growth of 3.9% in 2022 and 1.9% in 2023.  In its 2022 Stability 
Programme, the Government expects that the headline deficit will decrease to 3.1% of 
GDP in  2022  and to  1.5% in  2023. The decrease in  2022, mainly  reflects  the strong 
growth in  economic  activity and the unwinding  of most emergency measures.  In the 
absence of other measures, such as those related to elevated energy prices, the deficit 
would  have  decreased  even  further.  According  to  the  Programme,  the  general 
government  debt-to-GDP  ratio  is  expected  to  decrease  to  80.0%  in  2022,  and  to 
decline to 77.1% in 2023. Based on policy measures known at the cut-off date of the 
forecast, the Commission 2022 spring forecast projects a government deficit for 2022 
and  2023  of  3.1%  of  GDP  and  1.5%  respectively.  This  is  in  line  with  the  deficit 
projected  in  the  2022  Stability  Programme.  The  Commission  2022  spring  forecast 
projects a similar general government debt-to-GDP ratio, of 80.0% in 2022 and 77.5% 
in 2023.  

(16) 

Based on the Commission spring 2022 forecast, the medium-term (10-year average) 
potential output growth is estimated at 1.2%. However, this estimate does not include 
the impact of the reforms that are part of the Recovery and Resilience Plan and can 
boost Austria’s potential growth. 

In 2022, the government phased out the majority of measures taken in response to the 
COVID-19 crisis, such that the temporary emergency support measures are projected 
to  decline  from  4.3%  of  GDP  in  2021  to  1.1%  in  2022.  The  government  deficit  is 
impacted  by  the  measures  adopted  to  counter  the  economic  and  social  impact  of  the 
increase in energy prices, which in the Commission spring 2022 forecast are estimated 
at 0.4% of GDP in 2022 and 0.2% of GDP in 2023.12 These measures mainly consist 
of social transfers to poorer households, cuts to indirect taxes on energy consumption, 
and temporary relief measures for commuters in the context of personal income taxes. 
These  measures  have  been  announced  as  temporary.  However,  in  case  energy  prices 
remain  elevated  also  in  2023,  some  of  these  measures  could  be  continued.  The 
government  deficit  is  also  impacted  by  the  costs  to  offer  temporary  protection  to 
displaced  persons  from  Ukraine,  which  in  the  Commission  2022  spring  forecast  are 
projected at 0.3% of GDP in 2022 and 0.4% in 202313.  

(17)  On  18  June  2021,  the  Council  recommended  that  in  2022  Austria14  maintain  a 
supportive  fiscal  stance,  including  from  the  impulse  provided  by  the  Recovery  and 

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14 

The figures represent the level of annual budgetary costs of those measures taken since autumn 2021, 
including current revenue and expenditure as well as – where relevant – capital expenditure measures. 
The total number of displaced persons from Ukraine to the EU is assumed to gradually reach 6 million 
by  the  end  of  2022,  and  their  geographical  distribution  is  estimated  based  on  the  size  of  the  existing 
diaspora, the relative population of the receiving Member State, and the actual distribution of displaced 
persons from  Ukraine across the EU as of March 2022. For budgetary costs per person, estimates are 
based on the Euromod microsimulation model of the Commission’s Joint Research Centre, taking into 
account both cash transfers people may be eligible for as well as in-kind benefits such as education and 
healthcare. 
Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Stability 
Programme of Austria, OJ C 304, 29.7.2021, p. 93.  

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(18) 

(19) 

Resilience  Facility,  and  preserves  nationally-financed 
It  also 
recommended  Austria  to  pursue,  when  economic  conditions  allow,  a  fiscal  policy 
aimed  at  achieving  prudent  medium-term  fiscal  positions  and  ensuring  fiscal 
sustainability  in  the  medium  term,  and  at  the  same  time,  to  enhance  investment  to 
boost growth potential. 

investment. 

In  2022,  based  on  the  Commission’s  2022  spring  forecast  and  including  the 
information  incorporated  in  Austria’s  2022  Stability  Programme,  the  fiscal  stance  is 
projected to be supportive at -1.2% of GDP as recommended by the Council.15 Austria 
plans to provide continued support to the recovery by making use of the Recovery and 
Resilience Facility to finance additional investment as recommended by the Council. 
The  positive  contribution  to  economic  activity  of  expenditure  financed  by  Recovery 
and  Resilience  Facility  grants  and  other  EU  funds  is  projected  to  increase  by  0.1 
percentage point of GDP in 2022 compared to 2021. Nationally-financed investment is 
projected to provide an expansionary contribution to the fiscal stance of 0.3 percentage 
points in 2022.16 Therefore, Austria plans to preserve nationally financed investment, 
as recommended by the Council. At the same time, the growth in nationally-financed 
primary  current  expenditure  (net  of  new  revenue  measures)  in  2022  is  projected  to 
provide  an  expansionary  contribution  of  0.5  percentage  points  to  the  overall  fiscal 
stance.  This  includes  the  additional  impact  of  the  measures  to  address  the  economic 
and social impact of the increase in energy prices (0.4% of GDP) as well as the costs 
to offer temporary protection to displaced persons from Ukraine (0.3% of GDP).  

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2022  spring  forecast  at 
0.4%% of GDP on a no-policy change assumption.17 Austria is projected to continue 
using  the  grants  from  the  Recovery  and  Resilience  Facility  in  2023  to  finance 
additional  investment  in  support  of  the  recovery.  The  positive  contribution  to 
economic activity of expenditure financed by Recovery and Resilience Facility grants 
and  other  EU  funds  is  projected  to  remain  stable  compared  to  2022.  Nationally-
financed investment is projected to provide a contractionary contribution to the fiscal 
stance of 0.4 percentage points in 2023.18 At the same time, the growth in nationally-
financed  primary  current  expenditure  (net  of  new  revenue  measures)  in  2023  is 
projected  to  provide  a  broadly  neutral  contribution  of  0.0  percentage  point  to  the 
overall  fiscal  stance.  This  includes  the  impact  from  the  phasing  out  of  the  measures 
addressing  the  increased  energy  prices  (0.2  %  of  GDP)  and  additional  costs  to  offer 
temporary protection to displaced persons from Ukraine (0.1% of GDP).  

(20) 

In  the  2022  Stability  Programme,  the  general  government  deficit  is  expected  to 
gradually decline to 0.7% of GDP in 2024 and to 0.3% by 2025. Therefore, the general 
government deficit is planned to remain below 3% of GDP  from 2023 onwards until 
the  end  of  the  Programme  period.  These  projections  assume  a  decrease  in  public 
expenditures for this time horizon (from 50.4% of GDP in 2023 to 49.6% in 2024 and 

15 

16 

17 

18 

A negative (positive) sign of the indicator corresponds to an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 
Other  nationally-financed  capital  expenditure  is  projected  to  provide  an  expansionary  contribution  of 
0.4 percentage points of GDP. This is mainly due to the setup of a strategic gas reserve as also set out in 
the Stability Programme. 
A negative (positive) sign of the indicator corresponds to an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 
Other nationally-financed capital expenditure is projected to provide a neutral contribution. 

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49.4%  in  2025).  According  to  the  Programme,  the  general  government  debt-to-GDP 
ratio is expected to decrease by 2025, specifically with a decrease to 74.5% in 2024, 
and  a  decline  to  72.1%  in  2025.  Based  on  the  Commission’s  analysis,  debt 
sustainability risks appear medium over the medium term. 

(21)  Austria faces medium risks to fiscal sustainability in the medium and long term, which 
are mainly due to budgetary pressures stemming from population ageing. The ratio of 
older adults dependent on the working-age population is expected to increase from two 
pensioners  to  roughly  three  pensioners  per  worker  in  the  next  50  years.  Overall, 
according  to  the  Ageing  Working  Group  risk  scenario  of  the  Ageing  Report,  public 
expenditure for long-term care is expected to soar by up to 30% in the next eight years. 
In addition to demographic developments, the need for more intensive care due to old-
age-related  illnesses  is  also  expected  to  play  a  role  in  pushing  up  the  costs  of  long-
term care. A comprehensive reform of the long-term care system was announced but is 
still pending. So far, a dedicated task force has summarised the main takeaways from a 
public  consultation.  According  to  the  task  force’s  report,  one  priority  of  the  reform 
will be to set up a coordinated control of the system. This includes a clear assignment 
of responsibilities across levels of government and transparency about the origin and 
use of funds. 

(22)  Austria’s  fiscal  federalism  is  characterised  by  a  significant  mismatch  of  expenditure 
and revenue-raising responsibilities at the subnational level. Rather than relying on tax 
autonomy,  subnational  budgets  are  fed  by  a  complex  system  of  tax  sharing  and 
intergovernmental 
transparency  and  political 
accountability, and provides few incentives for efficient public spending. As the need 
for  reform  persists,  it  should  be  addressed  in  the  negotiations  for  the  next 
Intergovernmental Fiscal Relations Act, which are expected to start in December 2022. 
Besides  reforming  the  national  fiscal  framework,  making  better  use  of  spending 
reviews  can  improve the effectiveness  and efficiency of public expenditures as these 
help scrutinise financial allocations against political priorities. 

transfers.  This  hampers 

fiscal 

(23)  Austria’s  tax  system  continues  to  have  scope  to  improve  fairness  and  growth-
friendliness.  The  tax  system  is  characterised  by  a  high  burden  on  labour  stemming 
from payroll taxes and social security contributions, with social-security contributions 
being borne both by employees and employers. This hinders job creation. At the same 
time, high marginal tax rates act as a disincentive for people to work especially at the 
lower end of the income distribution and for second earners in a family. The recently 
adopted eco-social tax reform is a step in the right direction and the introduction of a 
CO2 price for non-ETS sectors is an important project within Austria’s recovery and 
resilience  plan.  Nevertheless,  structural  challenges  persist.  There  is  scope  to  further 
reduce non-wage labour costs to  boost job  creation and labour supply, especially  for 
low-income  earners.  Making  better  use  of  more  growth  friendly  taxes  could  help 
create the necessary budgetary space and improve the fairness of the tax system. 

(24) 

In accordance with Article 19(3), point (b), and Annex V, criterion 2.2, to Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. These help address 
all  or  a  significant  subset  of  the  economic  and  social  challenges  outlined  in  the 
country-specific  recommendations  addressed  to  Austria  by  the  Council  in  the 
European  Semester 
to  any  country-specific 
recommendations  issued  up  to  the  date  of  adoption  of  a  plan.  In  particular,  the 
measures  in  the  plan  contribute  to  addressing  a  significant  subset  of  the  country-
specific  recommendations  identified  in  recent  years  in  the  context  of  the  European 

in  2019  and  2020, 

in  addition 

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Semester.  Planned  changes  to  the  tax  system  will  help  reduce  greenhouse  gas 
emissions,  while  also  contributing  to  shifting  taxes  away  from  labour  while  taking 
account  of  ecological  and  social  aspects.  The  labour  market  participation  of  women 
may  benefit  from  the  improved  availability  of  quality  early  childcare  facilities.  The 
long-recognised challenge related to the gender pension gap is also partially addressed. 
The  green  transition  will  be  promoted  by  investment  in  (i)  energy  efficiency,  (ii) 
renewables,  (iii)  the  decarbonisation  of  industry,  (iv)  biodiversity  and  (v)  circular 
economy,  accompanied  by  related  reforms,  including  the  overhaul  of  the  support 
framework for renewables and the phase-out of oil heating systems. The plan will also 
help  substantially  increase  the  digital  capacity  of  enterprises.  The  administrative 
burden for businesses will be lowered by means of digital ‘single access’ points.  

(25)  The  implementation  of  the  recovery  and  resilience  plan  of  Austria  is  expected  to 
contribute  to  making  further  progress  on  the  green  and  digital  transition.  Measures 
supporting  climate  objectives  account  for  58.7%  of  the  plan’s  total  financial 
allocation,  while  measures  supporting  digital  objectives  account  for  52.8%  of  the 
plan’s total financial allocation. The fully fledged implementation of the recovery and 
resilience  plan,  in  line  with  the  relevant  milestones  and  targets,  will  help  Austria 
recover  swiftly  from  the  fallout  of  the  COVID-19  crisis,  while  strengthening  its 
resilience.  The  systematic  involvement  of  social  partners  and  other  relevant 
stakeholders remains important for the successful implementation of the recovery and 
resilience plan, as well as other economic and employment policies that go beyond the 
plan, to ensure broad ownership of the overall policy agenda. 

(26)  The  Commission  approved  the  Austrian  Partnership  Agreement  on  2  May  2022. 
Austria  submitted  its  European  Regional  Development  Fund  (ERDF)  and  Just 
Transition  Fund  (JTF)  programming  documents19  on  21  October  2021,  which  the 
Commission  services  returned  with  observations  on  4  January  2022.  Austria  has  not 
yet submitted its European Social Fund Plus programme. In line with Regulation (EU) 
2021/1060  of  the  European  Parliament  and  of  the  Council  of  24  June  2021,  Austria 
shall  take  into  account  the  relevant  country-specific  recommendations  in  the 
programming  of  the  2021-2027  cohesion  policy  funds.  This  is  a  prerequisite  for 
improving the effectiveness  and maximising the added value of the financial support 
to  be  received  from  cohesion  policy  funds,  while  promoting  the  coordination, 
complementarity and coherence between these funds and other Union instruments and 
funds.  The  successful  implementation  of  the  Recovery  and  Resilience  Facility  and 
cohesion policy programmes also depends on the removal of bottlenecks to investment 
to support the green and digital transition and a balanced territorial development. 

(27)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan,  Austria  faces  a  number  of  additional  challenges  related  to  its  labour  market. 
Austria’s strong social protection system and extensive policy measures have limited 
the  social  impact  of  the  COVID-19  pandemic.  Austria  performs  well  on  most 
dimensions  of  the  European  Pillar  of  Social  Rights,  but  some  challenges  remain.  In 
particular,  these  challenges  include  the  underused  potential  of  women,  low-qualified 
workers,  older  workers  and  people  with  a  migrant  background.  This  is  particularly 

19 

Regulation  (EU)  2021/1060  of  the  European  Parliament  and  of  the  Council  of  24  June  2021  laying 
down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social  Fund 
Plus,  the  Cohesion  Fund,  the  Just  Transition  Fund  and  the  European  Maritime,  Fisheries  and 
Aquaculture Fund and financial rules for those and for the Asylum, Migration and Integration Fund, the 
Internal  Security  Fund  and  the  Instrument  for  Financial  Support  for  Border  Management  and  Visa 
Policy. OJ L 231, 30.6.2021, p. 159. 

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problematic  in  view  of  the  shortage  of  skilled  labour.  Unlocking  the  underused 
potential of these groups could reduce the pressure on the Austrian labour market. 

(28)  While  the  female  employment  rate  stands  well  above  the  EU  average,  Austria  ranks 
second highest in the EU regarding part-time employment of women. In 2021, 49.9% 
of  Austrian  women  worked  part-time,  compared  to  an  EU  average  of  28.3%.  This 
leaves considerable potential for strengthening the full-time participation of women in 
the  labour  market.  A  limited  supply  of  affordable,  high-quality  childcare  makes  it 
difficult for mothers to participate more actively in the labour market. Only 21.1% of 
children under 3 years of age are in formal childcare, one of the lowest rates in the EU 
and far from the EU’s Barcelona target of having 33% of children under the age of 3 in 
formal  childcare.  The  high  share  of  part-time  work,  together  with  the  over-
representation  of  women  in  low-paying  sectors,  are  the  main  contributing  factors  to 
Austria’s high gender pay gap and relatively high gender pension gap. The pandemic 
has  further  amplified  these  gender-related  inequalities,  with  a  significant  share  of 
women  combining  work  and  care  obligations.  Increasing  the  supply  of  quality 
childcare by raising quality standards, offering longer opening hours for childcare and 
tackling disincentives to increase working hours (e.g. by improving tax incentives) are 
key to ensuring a better use of the labour market potential of women. 

(29)  Several  disadvantaged  groups  could  be  better  integrated  into  the  labour  market,  in 
particular  low-skilled  and  older  workers,  and  workers  with  a  migrant  background. 
Almost  half  of  the  long-term  unemployed  in  Austria  have  completed  at  most  lower 
secondary  school  (Pflichtschule).  The  labour  market  participation  of  people  with  a 
migrant  background  remains  low,  with  an  employment  level  12.7  percentage  points 
lower  than  native-born  residents  in  2020.  This  is  especially  problematic  since 
educational  outcomes,  job  opportunities  and  future  income  levels  of  children  in 
Austria  tend  to  be  particularly  determined  by  those  of  their  parents.  The  ‘Promoting 
re-skilling  and  up-skilling’  measures  of  Austria’s  recovery  and  resilience  plan  will 
address these challenges by supporting training for low-skilled workers and the long-
term  unemployed.  At  the  same  time,  the  planned  measures  do  not  fully  address  the 
underlying participation  problem among people with a migrant background and low-
skilled workers. Moreover, education outcomes for these groups need to be improved 
much  earlier  in  life.  There  remains  a  need  for  additional  retraining  and  lifelong 
learning opportunities for workers of all ages. 

(30)  The growing skills shortage (Fachkräftemangel) is becoming an increasing challenge 
for  companies  that  rely  on  highly  qualified  professionals,  such  as  information 
technology (IT) experts. The reasons for the skilled-labour shortages are manifold and 
the  pandemic  has  increased  them.  Expanding  opportunities  for  highly  skilled  talent 
from abroad for positions which cannot be filled by Austrian or EU labour force could 
ease  these  shortages.  Currently,  the  procedures  in  place  entail  a  significant 
administrative  burden  on  companies  who  wish  to  hire  workers  from  outside  the  EU, 
making  it  hard  to  attract  necessary  foreign  talent.  This  hinders  productivity  growth, 
especially for the services sector and most notably in the IT sector. The recent reform 
of Austria’s ‘fast-track’ scheme for skilled labour from non-EU countries (Rot-Weiß-
Rot-Karte)  has  not  proven  effective  in  dealing  with  the  overall  challenge.  Further 
measures  could  therefore  be  taken  to  better  enable  companies  to  hire  skilled  labour 
from  abroad.  This  includes  making  the  procedures  faster  and  more  targeted  towards 
companies’ individual needs. 

(31) 

In  response  to  the  mandate  by  the  EU  Heads  of  State  or  Government,  set  out  in  the 
Versailles Declaration, the REPowerEU plan aims to phase out the European Union’s 

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dependence  on  fossil  fuel  imports  from  Russia as  soon  as  possible.  For  this  purpose 
the most suitable projects, investments and reforms at national, regional and EU level 
are being identified in dialogue with the Member States. These measures aim to reduce 
overall reliance on fossil fuels, and shift fossil fuel imports away from Russia.  

(32)  The  geopolitical  developments  triggered  by  Russia’s  invasion  of  Ukraine  have 
exposed risks for Austria’s security of energy supplies. Austria is highly dependent on 
gas  imports  from  Russia.  In  2020,  Austria  imported  around  80%  of  its  total  gas 
imports  from  Russia,  compared  to  an  EU  average  of  44%.  Gas  also  accounts  for  a 
significant share of Austria’s energy demand (22.7%, slightly below the EU average of 
24.4%),  mostly  for  industrial  consumption  and  heating.  However,  Austria  is  less 
dependent  on  Russia  for  oil  (10%  of  its  crude  oil  comes  from  Russia,  significantly 
lower  than  the  EU  average  of  26%).20  Diversifying  energy  supplies  and  increasing 
flexibility  and  reverse-flow  capacity  for  the  already  extensive  interconnectivity  with 
other  Member  States  will  be  key  to  reducing  dependency  on  Russian  gas.  However, 
new  infrastructure  and  network  investments  related  to  gas  are  recommended  to  be 
future-proof where possible, in order to facilitate their long-term sustainability through 
future  repurposing  for  sustainable  fuels.  Reducing  dependency  on  Russian  gas  also 
includes investing in the production of renewable gases, (such as renewable hydrogen 
and  sustainable  bio-methane)  thus  making  it  possible  to  replace  natural  gas,  in 
particular  in  sectors  and  regions  that  are  most  vulnerable  to  supply  disruptions. 
Moreover,  additional  renewable  energy  sources,  such  as  geo-thermal  energy,  remain 
underused and could be explored further.  

(33) 

In  2020,  the  share  of  renewables  in  Austria’s  final  energy  consumption  was  37%, 
above the 34% target  for the same  year. The 2021 reform of support for renewables 
included in the recovery and resilience plan has created the necessary framework for 
increasing the share of renewable energy in electricity consumption. The reform will 
enable 27 TWh of yearly electricity generation capacity from renewables by 2030 and 
will thus help contribute to reaching the 100% target by 2030 (from currently 81% in 
2020).  However,  investment  in  renewable  energy  is  hampered  by  lengthy  spatial 
planning  and  permitting  procedures,  a  problem  that  is  also  partly  due  to  a  complex 
division  of  powers  between  the  federal  and  regional  government  levels,  and  staffing 
problems in the administration. To accommodate the planned expansion of renewables 
power  generation,  Austria  could  consider  to  increase  significantly  investment  in 
network infrastructure (such as storage, distribution and transmission) and ensure the 
timely deployment of this infrastructure. Stepping up the level of ambition for energy 
efficiency  in  the  building  and  industry  sectors  will  reduce  reliance  on  fossil  fuels. 
Austria’s  long-term  renovation  strategy  sets  clear  milestones  for  2050  and  seeks  to 
achieve an 80% decarbonisation of its building stock. Its recovery and resilience plan 
will accelerate the phasing out of fossil fuel boilers in the building sector and replace 
them with renewable heating technology or district heating. Yet Austria’s 2030 energy 
efficiency targets are low in  ambition and the country could accelerate investment in 
deep  renovation  of  buildings,  replacement  of  fossil  fuel  with  renewable  heating  and 
better management of energy consumption through utility digitalisation (such as smart 
meters  and  thermostats).  At  the  same  time,  further  efforts  to  decarbonise  industry 
processes,  including  through  renewable  gases  would  help  reduce  gas  demand  and 
protect  business  from  price  volatility.  Further  increase  in  ambition  for  reducing 

20 

Eurostat  (2020),  share  of  Russian  imports  over  total  imports  of  natural  gas  and  crude  oil.  The  EU27 
average is based on extra-EU27 imports.  

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greenhouse  gas  emissions  and  increasing  renewables  and  energy  efficiency  will  be 
needed to be in line with the ‘Fit for 55’ objectives. 

(34)  While  the  acceleration  of  the  transition  towards  climate  neutrality  and  away  from 
fossil fuels in some sectors will create significant restructuring costs in several sectors, 
Austria can make use of the Just Transition Mechanism in the context of cohesion to 
alleviate the socio-economic impact  of the transition  in  the most  affected  regions.  In 
addition,  Austria  can  make  use  of  the  European  Social  Fund  Plus  to  improve 
employment opportunities and strengthen social cohesion. 

(35) 

(36) 

In  the  light  of  the  Commission’s  assessment,  the  Council  has  examined  the  2022 
Stability Programme and its opinion21 is reflected in recommendation (1) below.  

In view of the close interlinkages between the economies of euro area Member States 
and  their  collective  contribution  to  the  functioning  of  the  Economic  and  Monetary 
Union,  the  Council  recommended  that  the  euro  area  Member  States  take  action, 
including 
the 
recommendation on the economic policy of the euro area. For Austria, this is reflected 
in particular in recommendations (1), (2) and (3) below. 

resilience  plans, 

recovery  and 

implement 

through 

their 

to 

HEREBY RECOMMENDS that Austria take action in 2022 and 2023 to:  

1. 

2. 

3. 

In 2023, ensure that the growth of nationally-financed current expenditure is in line 
with  an  overall  neutral  policy  stance,  taking  into  account  continued  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and 
to  people  fleeing  Ukraine.  Stand  ready  to  adjust  current  spending  to  the  evolving 
situation.  Expand  public  investment  for  the  green  and  digital  transition  and  for 
energy  security,  including  by  making  use  of  the  RRF,  RePowerEU  and  other  EU 
funds. For the period beyond 2023, pursue a fiscal policy aimed at achieving prudent 
medium-term  fiscal  positions.  Ensure  the  adequacy  and  fiscal  sustainability  of  the 
long-term  care  system.  Simplify  and  rationalise  fiscal  relations  and  responsibilities 
across  layers  of  government  and  align  financing  and  spending  responsibilities. 
Improve the tax mix to support inclusive and sustainable growth. 

Proceed with the implementation of its recovery and resilience plan, in line with the 
milestones  and  targets  included  in  the  Council  Implementing  Decision  of  13  July 
2021.  Swiftly  finalise  the  negotiations  with  the  Commission  of  the  2021-2027 
their 
cohesion  policy  programming  documents  with  a  view 
implementation.  

to  starting 

Boost  labour  market  participation  of  women,  including  by  enhancing  quality 
childcare services, and improve labour market outcomes for disadvantaged groups. 

21 

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

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4. 

Reduce  overall  reliance  on  fossil  fuels,  and  diversify  imports  of  fossil  fuels,  by 
accelerating the deployment of renewable energy and of the necessary infrastructure, 
notably by simplifying planning and further streamlining permitting procedures, and 
enhancing  energy  efficiency,  in  particular  in  the  industry  and  building  sectors,  and 
diversifying  energy  supplies  as  well  as  increasing  flexibility  and  reverse  flow 
capacity of interconnections.  

Done at Brussels, 

For the Council 
The President 

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