Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Austria
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Austria, budget policy, economic policy, economic recovery, economic reform, employment policy, energy diversification, labour market, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 19.6.2024  COM(2024) 620 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Austria  {SWD(2024) 600 final} - {SWD(2024) 620 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the economic, social, employment, structural and budgetary policies 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 (EU) 2024/1263 of  the European Parliament and of the 
Council of 29 April 2024 on the effective coordination of economic policies and multilateral 
budgetary surveillance and repealing Council Regulation (EC) No 1466/971, and in particular 
Article 3(3) 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) 

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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 to the Member 
States  for  the  implementation  of  reforms  and  investments,  entailing  a  fiscal  impulse 
financed by the EU. In line with the European Semester priorities, it helps achieve to 
the economic and social recovery and implement sustainable reforms and investments, 
in particular to promote the green and digital transitions and make the Member States’ 
economies  more  resilient.  It  also  helps  strengthen  public  finances  and  boost  growth 
and job creation in the medium and long term, improve territorial cohesion within the 
EU and support the continued implementation of the European Pillar of Social Rights.  
The  REPowerEU  Regulation3,  adopted  on  27  February  2023,  aims  to  phase  out  the 
European Union’s dependency on Russian fossil fuel imports. This would help achieve 

the  Recovery  and  Resilience  Facility 

OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
(OJ  L  57,  18.2.2021,  p.  17),  ELI: 
establishing 
http://data.europa.eu/eli/reg/2021/241/oj. 
Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1), ELI: http://data.europa.eu/eli/reg/2023/435/oj. 

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energy security and diversify the EU’s energy supply, while increasing the uptake of 
renewables,  energy  storage  capacities  and  energy  efficiency.  Austria  added  a  new 
REPowerEU chapter to its national recovery and resilience plan in order to finance key 
reforms and investments that will help achieve the REPowerEU objectives. 

On  16  March  2023,  the  Commission  issued  a  Communication  on  the  ‘Long-term 
competitiveness of the EU: looking beyond 20304, in order to inform policy decisions 
and  create  the  framework  conditions  for  increasing  growth.  The  Communication 
frames competitiveness along nine mutually reinforcing drivers. Among these drivers, 
access to private capital, research and innovation, education and skills, and the Single 
market emerge as paramount policy priorities for reforms and investments to address 
current productivity challenges as well as to build up the long-term competitiveness of 
the EU and its Member States.  On 14 February  2024, the Commission  followed this 
Communication  with  the  Annual  Single  Market  and  Competitiveness  Report5.  The 
report  details  the  competitive  strengths  and  challenges  of  Europe's  Single  Market, 
tracking yearly developments according to the nine competitiveness drivers identified.   

On 21 November 2023, the Commission adopted the 2024 Annual Sustainable Growth 
Survey6, marking the start of the 2024 cycle of the European Semester for economic 
policy coordination. The European Council endorsed the priorities of the 2024 Annual 
Sustainable  Growth  Survey  around  the  four  dimensions  of  competitive  sustainability 
on  22  March  2024.  On  21  November  2023,  on  the  basis  of  Regulation  (EU)  No 
1176/2011, the Commission also adopted the 2024 Alert Mechanism Report 2024. in 
which it did not identify Austria as one of the Member States that may be affected or 
may  be  at  risk  of  being  affected  by  imbalances,  and  for  which  an  in-depth  review 
would be needed. On the same date, the Commission also adopted an opinion on the 
2024  draft  budgetary  plan  of  Austria.  The  Commission  also  adopted  a 
recommendation  for  a  Council  recommendation  on  the  economic  policy  of  the  euro 
area, which the Council adopted on 12 April 2024, as well as the proposal for the 2024 
Joint  Employment  Report  analysing 
the  Employment 
the 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  the 
Council adopted on 11 March 2024.  

implementation  of 

On  30  April  2024,  the  EU’s  new  economic  governance  framework  came  into  force. 
The  framework  includes  the  new  Regulation  of  the  European  Parliament  and  of  the 
Council  (EU)  2024/1263  on  the  effective  coordination  of  economic  policies  and 
multilateral  budgetary  surveillance  and  repealing  Council  Regulation  (EC)  No 
1466/97.  It  also  includes  the  amended  Regulation  (EC)  No  1467/97  on  the 
implementation  of  the  excessive  deficit  procedure  and  the  amended  Directive 
2011/85/EU  on  the  budgetary  frameworks  of  Member  States7.  The  objectives  of  the 
new  framework  are  public  debt  sustainability  and  sustainable  and  inclusive  growth 
through gradual  fiscal consolidation  as  well as reforms  and investments.  It  promotes 
national  ownership  and  has  a  greater  medium-term  focus,  combined  with  more 
effective and coherent enforcement. Each Member State should submit to the Council 

COM(2023) 168 final. 
COM(2024) 77 final. 
COM(2023) 901 final. 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024,  ELI: http://data.europa.eu/eli/reg/2024/1264/oj)  and  Council  Directive  (EU)  2024/1265  of 
29  April  2024  amending  Directive  2011/85/EU  on  requirements  for  budgetary  frameworks  of  the 
Member States (OJ L, 2024/1265, 30.4.2024, ELI: http://data.europa.eu/eli/dir/2024/1265/oj). 

(3) 

(4) 

(5) 

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and  to  the  Commission  a  national  medium-term  fiscal-structural  plan.  National 
medium-term  fiscal-structural  plans  contain  the  fiscal,  reform  and  investment 
commitments  of  a  Member  State,  covering  a  planning  horizon  of  4  years  or  5  years 
depending on the regular length of the national legislature. The net expenditure path8  
in  the  national  medium-term  fiscal-structural  plans  should  comply  with  the 
requirements of Regulation (EU) No 2024/1263, including the requirements to put or 
keep  general  government  debt  on  a  plausibly  downward  path  by  the  end  of  the 
adjustment period at the latest, or for it to remain at prudent levels below 60% of GDP, 
and  to bring and/or maintain the government deficit below the 3% of GDP reference 
value  over  the  medium  term.  Where  a  Member  State  commits  to  a  relevant  set  of 
reforms and investments in accordance with the criteria set out in Regulation (EU) No 
2024/1263, the adjustment period may be extended by 3 years at most. For the purpose 
of supporting the preparation of those plans, on [21 June] 2024, the Commission is set 
to  provide  Member  States  with  guidance  on  the  content  of  the  plans  and  the 
subsequent  annual  progress  reports  that  they  will  need  to  submit  and,  in  accordance 
with  Article  5  of  Regulation  (EU)  No  2024/1263,  will  transmit  to  them  technical 
guidance  on  the  fiscal  adjustments  (reference  trajectories  and  technical  information, 
where  applicable).  Member  States  should  submit  their  medium-term  fiscal-structural 
plans by 20 September 2024, unless the Member State and the Commission agree to 
extend the deadline by a reasonable period of time. Member States should ensure the 
involvement  of  their  national  parliaments,  and  the  consultation  of  independent  fiscal 
institutions, of social partners and other national stakeholders, as appropriate. In 2024, 
the  European  Semester  for  economic  policy  coordination  continues  to  evolve  in  line 
with  the  implementation  of  the  Recovery  and  Resilience  Facility.  The  full 
implementation  of  the  recovery  and  resilience  plans  remains  essential  for  delivering 
the  policy  priorities  under  the  European  Semester,  as  the  plans  help  to  effectively 
address  all,  or  a  significant  subset  of  challenges  identified  in  the  relevant  country-
specific  recommendations  issued  in  recent  years.  The  2019,  2020,  2022  and  2023 
country-specific recommendations remain equally relevant also for revised, updated or 
amended  recovery and resilience plans in  accordance with  Articles 14, 18 and 21 of 
Regulation (EU) 2021/241.  

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 
recovery and resilience plan for Austria9, which was amended on 9 November 2023 in 
accordance  with  Article  21(1)  of  Regulation  (EU)  2021/241  on  the  grounds  that  the 
RRP is partially no longer achievable because of objective circumstances, as well as to 

(6) 

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Net expenditure as defined in Article 2 of Council Regulation (EU) 2024/1263 of 29 April 2024(OJ L 
2024/1263,  30.4.2024,  ELI:  http://data.europa.eu/eli/reg/2024/1263/oj).  Net  expenditure  means 
government  expenditure  net  of  (i)  interest  expenditure,  (ii)  discretionary  revenue  measures,  (iii) 
expenditure  on  programmes  of  the  Union  fully  matched  by  Union  funds  revenue,  (iv)  national 
expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of 
unemployment benefit expenditure, and (vi) one-offs and other temporary measures. 
Council Implementing Decision of 13 July 2021 on the approval of the assessment of the recovery and 
resilience plan for Austria (10159/2021). 

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in 

the 

relevant 

addressing 

include  the  REPowerEU  chapter10.  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. 
The Commission published the 2024 country report for Austria11 on 19 June 2024. It 
assessed  Austria’s  progress 
country-specific 
recommendations  adopted by the Council  between 2019  and  2023 and  took stock of 
Austria’s implementation of the recovery and resilience plan. Based on this analysis, 
the  country  report  identified  gaps  with  respect  to  those  challenges  that  are  not 
addressed  or  only  partially  addressed  by  the  recovery  and  resilience  plan,  as  well  as 
new and emerging challenges. 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.  
Based on data validated by Eurostat12, Austria’s general government deficit decreased 
from 3.3% of GDP in 2022 to 2.7% in 2023, while the general government debt fell 
from 78.4% of GDP at the end of 2022 to 77.8% at the end of 2023.  
On  12  July  2022,  the  Council  recommended13  that  Austria  take  action  to  ensure  in 
2023 that the growth of nationally financed primary current expenditure is in line with 
an  overall  neutral  policy  stance14,  taking  into  account  continued  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and to 
people  fleeing  Ukraine.  Austria  was  recommended  to  stand  ready  to  adjust  current 
spending  to  the  evolving  situation.  Austria  was  also  recommended  to  expand  public 
investment  for  the  green  and  digital  transitions,  and  for  energy  security  taking  into 
account  the  REPowerEU  initiative,  including  by  making  use  of  the  Recovery  and 
Resilience  Facility  and  other  Union  funds.  In  2023,  according  to  the  Commission 
estimates, the fiscal stance15 was contractionary, by 0.9% of GDP, in a context of high 
inflation.  The  growth  in  nationally  financed  primary  current  expenditure  (net  of 
discretionary revenue measures) in 2023 provided a contractionary contribution to the 
fiscal stance of 0.5% of GDP. This includes the increased targeted emergency support 
measures to  households  and firms  most vulnerable to  energy price hikes  by 0.2% of 
GDP.  The growth of nationally financed primary current expenditure in 2023 was in 

Council Implementing Decision of 7 November 2023 amending the Implementing Decision of 13 July 
2021 on the approval of the assessment of the recovery and resilience plan for Austria (14472/2023). 
SWD (2024) 620 final. 
Eurostat-Euro Indicators, 22.4.2024. 
Council  Recommendation  of  12  July  2022  on  the  National  Reform  Programme  of  Austria  and 
delivering a Council opinion on the 2022 Stability Programme of Austria OJ C 334, 1.9.2022, p. 162. 
Based on the Commission 2024 spring forecast, the medium-term potential output growth of Austria in 
2023 is estimated at 8.7% in nominal terms, based on the 10-year average real potential growth rate and 
the 2023 GDP deflator. 
The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of 
the  general  government.  It  aims  to  assess  the  economic  impulse  stemming  from  fiscal  policies,  both 
those  that  are  nationally  financed  and  those  that  are  financed  by  the  EU  budget.  The  fiscal  stance  is 
measured as the difference between (i) the medium-term potential growth and (ii) the change in primary 
expenditure  net  of  discretionary  revenue  measures  (and  excluding  temporary  emergency  measures 
related to the COVID-19 crisis) and including expenditure financed by non-repayable support (grants) 
from the Recovery and Resilience Facility and other Union funds. 

(7) 

(8) 

(9) 

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line  with  the  Council  recommendation.  Expenditure  financed  by  Recovery  and 
Resilience  Facility  grants  and  other  EU  funds  amounted  to  0.2%  of  GDP  in  2023. 
Nationally  financed  investment  amounted  to  3.5%  of  GDP  in  2023,  representing  a 
decrease  of  0.1  percentage  points  as  compared  to  2022.  Austria  financed  additional 
investment  through  the  Recovery  and  Resilience  Facility  and  other  EU  funds.  It 
financed  public  investment  for  the  green  and  digital  transitions,  and  for  energy 
security,  such  as  creating  better  broadband  access  in  rural  and  remote  areas  and 
supporting households to replace fossil-fuelled heating systems by renewable heating 
technology, which are partly funded by the Recovery and Resilience Facility and other 
EU funds. 

(10)  The  macroeconomic  scenario  underpinning  Austria’s  Economic  and  Budgetary 
Projections  foresees  real  GDP  to  grow  at  0.2%  in  2024  and  1.8%  in  2025,  while  it 
projects  CPI  inflation  at  3.8%  in  2024  and  2.7%  in  2025.  The  general  government 
deficit is expected to increase to 2.9% of GDP in 2024 and to stand at 2.8% of GDP in 
2025, while the general government debt-to-GDP ratio is set to decrease to 77.5% by 
the end of 2024 and 77.4% by the end of 2025.  After 2025, the general  government 
deficit is projected to decrease gradually to 2.8% of GDP in 2026, and 2.7% in 2027. 
Therefore, the general government balance is planned to remain below the 3% of GDP 
deficit  reference  value  over  the  programme  horizon.  In  turn,  after  2025,  the  general 
government  debt-to-GDP  ratio  is  projected  to  remain  stable  at  77.4%  in  2026,  and 
2027. The Commission  Spring 2024 Forecast  projects  real  GDP to  grow by 0.3% in 
2024  and  1.6%  in  2025,  and  HICP  inflation  to  stand  at  3.6%  in  2024  and  2.8%  in 
2025.  

(11)  The Commission Spring 2024 Forecast projects a government deficit of 3.1% of GDP 
in 2024, while the general government debt-to-GDP ratio is set to decrease to 77.7% 
by  the  end  of  2024.  The  increase  of  the  deficit  in  2024  mainly  reflects  the  delayed 
effects of inflation on the expenditure side (salaries, pensions, indexed social benefits), 
and additional spending under the national fiscal framework in the areas of childcare, 
housing  and  climate,  as  well  as  the  recently  adopted  housing  and  construction 
package. In addition to this, several energy-related emergency support measures, such 
as the electricity price brake, have been extended until the end of 2024. Based on the 
Commission’s estimates, the fiscal stance is projected to be expansionary by 0.4% of 
GDP in 2024.  

(12)  Expenditure amounting to 0.1% of GDP is expected to be financed by non-repayable 
support  (“grants”)  from  the  Recovery  and  Resilience  Facility  in  2024,  compared  to 
0.2%  of  GDP  in  2023,  according  to  the  Commission  Spring  2024  Forecast. 
Expenditure  financed  by  Recovery  and  Resilience  Facility  grants  will  enable  high-
quality investment and productivity-enhancing reforms without a direct impact on the 
general government balance and debt of Austria.  

(13)  On  14  July  2023,  the  Council  recommended16  that  Austria  ensure  a  prudent  fiscal 
policy,  in  particular  by  limiting  the  nominal  increase  in  net  nationally  financed 
primary  expenditure17  in  2024  to  not  more  than  4.6%.  When  executing  their  2023 
budgets  and  preparing  their  Draft  Budgetary  Plans  for  2024,  Member  States  were 

16 

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Council  Recommendation  of  14  July  2023  on  the  2023  National  Reform  Programme  of  Austria  and 
delivering a Council opinion on the 2023 Stability Programme of Austria, OJ C 312, 1.9.2023, p. 186. 
Net primary expenditure is defined as nationally financed  expenditure net of (i) discretionary revenue 
measures, (ii) interest expenditure, (iii) cyclical unemployment expenditure, and (iv) and one-offs and 
other temporary measures. 

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invited  to  take  into  account  that  the  Commission  would  propose  to  the  Council  the 
opening  of  deficit-based  excessive  deficit  procedures  based  on  the  outturn  data  for 
2023.  According  to  the  Commission  Spring  2024  Forecast,  Austria’s  net  nationally 
financed  primary  expenditure  is  projected  to  increase  by  5.9%  in  2024,  which  is 
above the  recommended  maximum  growth  rate.  This  excess  spending  over  the 
recommended  maximum  growth  rate  in  net  nationally  financed  primary  expenditure 
corresponds  to  0.6%  of  GDP  in  2024.  This  risks  being  not  in  line  with  what  was 
recommended by the Council.  

(14)  Moreover,  the  Council  recommended  that  Austria  take  action  to  wind  down  the 
emergency energy support measures in  force, using the related savings to  reduce the 
government  deficit,  as  soon  as  possible  in  2023  and  2024.  The  Council  further 
specified  that,  should  renewed  energy  price  increases  necessitate  new  or  continued 
support  measures,  Austria  should  ensure  that  these  were  targeted  at  protecting 
vulnerable  households  and  firms,  fiscally  affordable,  and  preserve  incentives  for 
energy savings. According to the Commission Spring 2024 Forecast, the net budgetary 
cost18 of emergency energy support measures is estimated at 1.4% of GDP in 2023 and 
projected at 0.4% in 2024, and 0.1% in 2025. In particular, the electricity price brake 
for households and the reduction of the energy levy are assumed to remain in force in 
2024,  albeit  with  a  minor  impact19.  If  the  related  savings  were  used  to  reduce  the 
government deficit, as recommended by the Council, these projections would imply a 
fiscal  adjustment  of  1.0%  of  GDP  in  2024,  whereas  net  nationally  financed  primary 
expenditure20  provides  an  expansionary  contribution  to  the  fiscal  stance  of  0.4%  of 
GDP  in  that  year.  The  emergency  energy  support  measures  are  not  projected  to  be 
wound down as soon as possible in 2023 and 2024. This risks being not in line with 
what  was  recommended  by  the  Council.  Moreover,  the  related  savings  are  not 
projected to be fully used to reduce the government deficit. This risks being not in line 
with  the  Council  recommendation.  The  budgetary  cost  of  emergency  energy  support 
measures  targeted  at  protecting  vulnerable  households  and  firms  is  estimated  at  less 
than 0.1% of GDP in 2024 (0.4% in 2023), of which less than 0.1% of GDP preserve 
the  price  signal  to  reduce  energy  demand  and  increase  energy  efficiency  (0.4%  in 
2023). 

(15) 

In  addition,  the  Council also  recommended  that  Austria  preserve  nationally  financed 
public  investment  and  ensure  the  effective  absorption  of  Recovery  and  Resilience 
Facility  grants  and  other  EU  funds,  in  particular  to  foster  the  green  and  digital 
transitions.  According  to  the  Commission  Spring  2024  Forecast,  nationally  financed 
public investment is projected to decrease to 3.3% of GDP in 2024 from 3.5% of GDP 
in  2023.  This  is  due  to  exceptionally  high  investment  in  2023,  partly  driven  by  the 
municipal  investment  law.  Taking  into  account  these  additional  factors,  public 
investment  in  2024  is  assessed  as  respecting  the  Council  recommendation.  In  turn, 

18 

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20 

The figure represents the level of the annual budgetary cost of those measures, including revenue and 
expenditure and, where applicable, net of the revenue from taxes on windfall profits of energy suppliers. 
Measures that, according to Austria, remain in place until the end of 2024 are, in principle, assumed in 
the Commission 2024 spring forecast as having a budgetary impact also in 2025.  
This contribution is measured as the change in general government primary expenditure, net of (i) the 
incremental  budgetary  impact  of  discretionary  revenue  measures,  (ii)  one-offs,  (iii)  cyclical 
unemployment  expenditure  and  (iv)  expenditure  financed by  non-repayable  support  (grants)  from  the 
Recovery  and  Resilience  Facility  and  other  EU  funds,  relative  to  the  medium-term  (10-year)  average 
potential nominal GDP growth rate, expressed as a ratio to nominal GDP. 

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public  expenditure  financed  from  revenues  from  EU  funds,  including  Recovery  and 
Resilience Facility grants, is expected to remain stable at 0.2% of GDP in 2024.  

(16)  Based on policy measures known at the cut-off date of the forecast and on a no-policy-
change  assumption,  the  Commission  Spring  2024  Forecast  projects  a  government 
deficit of 2.9% of GDP in 2025. The decrease of the deficit in 2025 mainly reflects a 
more  moderate  increase  in  salaries,  pensions  and  other  social  benefits  due  to 
decreasing  inflation  and  the  phase-out  of  measures  to  mitigate  the  impact  of  high 
energy prices. The general government debt-to-GDP ratio is set to increase to 77.8% 
by  the  end  of  2025.  The  increase  of  the  debt-to-GDP  ratio  in  2025  mainly  reflects 
higher interest rate expenditure in 2024 and lower nominal GDP growth rates.  

(17)  Austria’s fiscal framework relies on a complex system of intergovernmental transfers 
between  federal  and  regional  authorities,  providing  limited  incentives  for  efficient 
public  spending.  The  lack  of  tax  autonomy  makes  funding  of  expenditure  across 
federal levels highly dependent on this system. In 2023, only a small percentage of all 
public  revenues  were  own  source  revenues  of  the  federal  states.  At  the  same  time, 
financing  of  essential  services  such  as  healthcare,  childcare  and  public  transport 
depends partially on expenditure by the federal states and municipalities. Demographic 
change  and  the  green  transition  further  exacerbate  the  cost  pressure  on  the  federal 
states  and  municipalities,  while  own  source  revenues  are  not  linked  to  expenditure 
dynamics.  The  current  fiscal  framework  results  in  inefficiencies  and  a  lack  of 
transparency, as it blurs the link between the tax burden and public expenditure. Better 
aligning own source revenues with subcentral government spending and strengthening 
transparency  and  coordination  are  important  for  improving  the  overall  quality  of 
public  spending.  Reforming  the  property  tax  system  could  be  used  to  improve  fiscal 
federalism and the overall tax system.  

(18)  The  tax  mix  continues  to  rely  heavily  on  labour  income  (payroll  taxes  and  social 
security  contributions)  and  consumption.  In  2022,  Austria  had  the  third-highest  tax-
-to-GDP ratio in the EU and a very high tax wedge. Since 2023, personal income tax 
brackets have been indexed to inflation, preventing a further increase of the tax wedge 
through bracket  creep. At the same time, the eco-social tax reform of 2022 provided 
relief measures in the area of taxes and social security and introduced CO2 pricing in 
the  transport  and  heating  sectors,  improving  the  tax  mix.  However,  several  long-
standing structural challenges in the tax mix remain unaddressed. Making better use of 
more growth-friendly taxes could also help create the necessary budgetary space and 
improve the fairness of the tax system. 

(19)  Healthcare  spending  is  among  the  highest  in  the  EU,  with  many  healthcare  services 
still  provided  by  hospitals,  which  is  a  costly  and  less  efficient  way  to  provide  care. 
Public expenditure on healthcare is projected to increase from 7.8% of GDP in 2022 to 
8.8% GDP in 2050. In addition, a growing and ageing population is expected to lead to 
an  increase  in  the  utilisation  of  healthcare  services,  further  aggravating  fiscal 
sustainability  concerns.  The  healthcare  reform  of  2023 
included  significant 
investments in primary care, ambulatory care, digitalisation and prevention that could 
help  contain  costs  in  the  long  term,  if  accompanied  by  structural  reforms.  It  will  be 
crucial  to  ensure  that  patients  are  guided  through  the  health  system  in  a  consistent 
way,  including  by  making  sure  that  the  increased  availability  of  primary  healthcare 
services  will  translate  into  lower  utilisation  of  existing  hospital  or  ambulatory 
specialist  healthcare  services.  Austria’s  recovery  and  resilience  plan  will  help  to 
strengthen outpatient primary healthcare, in particular by supporting existing and new 
primary healthcare centres in local areas. However, the reform package of 2023 lacked 

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structural  reforms  that  would  realign  financing  and  spending  responsibilities  to 
increase efficiency.   

(20)  The  long-term  care  reform  of  2023  improved  the  adequacy  of  service  provision  in 
view  of  an  ageing  population.  At  the  same  time,  increasing  female  labour  market 
participation  and  changing  family  structures  call  for  strengthened  formal  care 
structures. While the long-term care reform helped improve the training opportunities, 
working conditions and pay of long-term care staff, further efforts are also needed to 
improve  the  situation  of  self-employed  live-in  carers.  Moreover,  the  reform  did  not 
address  structural  fiscal  sustainability.  Long-term  care  expenditure  is  projected  to 
almost double from 1.6% of GDP in 2022 to 3.1% in 2070. The long-term care system 
is characterised by split competencies for financing and service provision. It would be 
desirable to increase harmonisation of financing and services, coordinate between the 
different  sectors,  and  put  in  place  common  performance  standards  across  regions. 
Asset  testing  is  applied  for  home-  and  community-based  care  but  not  for  residential 
care,  leading  to  a  financial  incentive  to  use  the  relatively  more  expensive  residential 
care. 

(21) 

In accordance with Article 19(3), point (b), and Annex V, criterion 2.2 of Regulation 
(EU) 2021/241, the Austrian recovery and resilience plan includes an extensive set of 
mutually reinforcing reforms and investments to be implemented by 2026. These are 
expected to help effectively address all or a significant subset of challenges identified 
in  the  relevant  country-specific  recommendations.  Within  this  tight  timeframe, 
proceeding  swiftly  with  the  effective  implementation  of  the  plan,  including  the 
REPowerEU chapter, is essential to boost Austria’s long-term competitiveness through 
the  green  and  digital  transition,  while  ensuring  social  fairness.  To  deliver  on  the 
commitments  of  the  plan  by  August  2026,  it  is  essential  for  Austria  to  continue  the 
implementation  of  reforms  and  investments  by  addressing  emerging  delays.  In 
particular,  it  is  essential  to  proceed  with  the  preparation  of  the  second  and  third 
payment requests. The systematic involvement of local and regional authorities, social 
partners, civil society and other relevant stakeholders remains essential to ensure broad 
ownership for the successful implementation of the recovery and resilience plan. 

(22)  As  part  of  the  mid-term  review  of  the  cohesion  policy  funds,  in  accordance  with 
Article  18  of  Regulation  (EU)  2021/1060,  Austria  is  required  to  review  each 
programme  by  March  2025,  taking  into  account,  among  other  things,  the  challenges 
identified in the 2024 country-specific recommendations, as well as its national energy 
and climate plan. This  review  forms the basis for the definitive allocation of the EU 
funding  included  in  each  programme.  Austria  has  made  progress  in  implementing 
cohesion  policy  and  the  European  Pillar  of  Social  Rights,  but  challenges  remain. 
Regional disparities in Austria are among the smallest in the EU, but the existing ones 
risk  being  reinforced  in  the  future,  partially  because  of  demographic  challenges  and 
depopulation  in  certain  remote rural  territories.  It is  important  to  accelerate cohesion 
policy  implementation,  and  the  priorities  agreed  in  the  programmes  continue  to  be 
relevant.  It  is  particularly  important  to  improve  the  efficiency  of  the  research  and 
innovation  system,  in  line  with  the  national  and  regional  smart  specialisation 
strategies,  and  to  use  science-business  links.  It  is  also  necessary  to  continue  green 
investments, notably in promoting energy efficiency and reducing the carbon footprint, 
including  through  emerging  green  technologies.  Integrated  territorial  development 
approaches to support inclusive and sustainable local development are key. Fostering 
the quality and inclusiveness of education, training and lifelong learning, particularly 
for  disadvantaged  groups,  remains  pertinent,  and  investments  supporting  active 

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inclusion  and  employability  should  also  continue.  Austria  could  also  leverage  the 
Strategic  Technologies  for  Europe  Platform  initiative  to  support  the  development  or 
manufacturing  of  critical 
including  clean  and  resource-efficient 
technologies. 

technologies, 

(23)  Beyond the economic and social challenges  addressed by the recovery and resilience 
plan  and  other  EU  funds,  Austria  faces  several  additional  challenges  related  to  the 
labour  market,  business  dynamism  and  access  to  risk  capital  as  well  as  persistent 
dependence on gas imports from Russia and relatively high emissions in the transport 
sector.  

(24)  The  employment  rate  of  women  in  full-time  equivalents  is  below  the  EU  average, 
although an upward trend can be observed. Austria ranks second highest in the EU in 
terms of part-time employment of women. The insufficient provision of quality early 
childhood education and care facilities, together with strong regional differences, plays 
a key role in the high share of women in part-time employment. In 2023, only 24.1% 
of  under-3-year-olds  participated  in  formal  childcare,  thus  the  participation  rate  in 
early childhood education and care  remains overall below the EU average  of 34.9%. 
The  double  burden  of  paid-work  and  care  obligations  affects  women  significantly 
more than men. While steps are being taken to increase the availability and quality of 
early  childhood  education  and  care,  the  opening  hours  of  childcare  facilities  do  not 
significantly increase the possibility for parents with caring responsibilities, essentially 
women, to work longer hours. Furthermore, introducing compulsory quality standards 
in early childhood education and care could better ensure the provision of quality care 
across the country. 

(25)  Austria experiences a decline in its business dynamism, with enterprise birth and death 
rates  among  the  lowest  in  the  EU.  The  share  of  start-ups  and  young  enterprises  is 
declining, having a negative impact on productivity (while in 2013 the share of young 
enterprises  was  5.4%,  in  2020  this  percentage  fell  to  3.8%,  below  the  EU  average). 
The  share  of  high-growth  enterprises  is  also  significantly  below  the  EU  average  (in 
2021, 8.21% in number of enterprises and 7.29% in number of employees, compared 
to  9.18%  and  12.40%,  respectively,  in  the  EU).  Equity  financing  is  low  by 
international  standards.  The  limited  supply  of  private  risk  capital  is  a  constraint  for 
innovative companies and technology diffusion. Supply and demand of risk capital are 
not particularly high in Austria, which could hamper the creation and growth of new 
technology-intensive  or  innovative  enterprises.  Limitations  on  access  to  venture 
capital  finance  are  especially  affecting  innovative  SMEs  and  start-ups.  Risk  capital 
financing  is  underdeveloped,  with  private  equity  at  only  0.14%  of  GDP  in  2022, 
significantly below the EU average of 0.64%, and venture capital at 0.041% of GDP 
(EU average: 0.09%). 

(26)  Skills shortages and mismatches are among Austria’s most pressing challenges and the 
demographic  ageing  is  set  to  further  exacerbate  the  situation.  Austria’s  job  vacancy 
rate remains one of the highest in the EU and has remained over 4% since the end of 
2021. Although the employment rate of older workers has increased continuously over 
the last decade and reached 57.7% in 2023, it remains well below the EU average of 
63.8%.  With  more  limited  digital  skills  and  often  facing  discriminatory  practices 
because  of  their  age,  older  workers  have  difficulties  in  reintegrating  into  the  labour 
market. Low-qualified people with only the compulsory level of school education are 
particularly vulnerable and represent the highest share of the unemployed in Austria. 
Similarly,  people  with  a  migrant  background  and  people  with  a  disadvantaged 
socio-economic background  have lower labour  market  attainment  and face particular 

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regarding 

to  challenges 

labour  market  barriers  also  due 
school-to-work 
transition.   According  to  the  2022  Programme  for  International  Student  Assessment 
(PISA) survey,  around  one  in  four  15-year-old  Austrian  pupils  lacked  a  minimum 
level of proficiency in mathematics, reading and science; and the share for those with a 
disadvantaged or migrant background increased to 45% in mathematics.  Furthermore, 
young  people  born  outside  the  EU  are  nearly  two  times  more  likely  to  leave  school 
early, negatively impacting their labour market integration. The measures in Austria’s 
recovery  and  resilience  plan  to  improve  skills  supply  as  well  as  the  educational 
outcomes of disadvantaged pupils are being implemented, but additional measures are 
needed to reduce existing labour and skills shortages. These could include promoting 
labour  market  access  for  older,  low-skilled  workers  and  people  with  a  migrant 
background, preventing young people with a migrant background from leaving school 
early, as well as improving the basic skills of disadvantaged pupils and pupils with a 
migrant background.  

(27)  Despite  some  diversification  efforts,  Austria  continues  to  be  heavily  dependent  on 
Russian  gas.  Although  gas  supplies  from  Norway,  and  to  a  lesser  extent  from  North 
Africa  and  Central  Asia,  increased  in  2023,  imports  from  Russia  dominated  the  gas 
supply,  in  particular  during  winter  (98%  of  total  imports  in  December  2023).  To 
expand  transport  capacity  from  neighbouring  countries  such  as  Germany  and  Italy, 
Austria  supported  targeted  investments  to  upgrade  its  gas  pipeline  infrastructure.  At 
the  same  time,  measures  under  Austria’s  recovery  and  resilience  plan,  such  as  the 
investment  in  energy efficiency and in  the replacement of fossil fuel  heaters, help  to 
reduce  gas  demand  and  speed  up  the  green  transition.  The  government  announced  a 
new  plan  to  terminate  the  long-term  supply  contract  with  the  Russian  company 
Gazprom and to introduce an obligation for domestic gas suppliers to diversify away 
from Russia, however without a clear timeline for implementation. The lack of a clear 
strategy to decouple from Russian gas leaves Austria’s energy supply vulnerable. 

(28)  Austria’s  installed  renewable  energy  capacity  grew  by  6%  in  2022.  While  solar 
energy, in particular photovoltaics, continued to expand strongly, wind energy did not 
match  the  expansion  speed  of  solar  energy.  Upgrading  and  expanding  electricity 
storage as well as the transmission and distribution grids, especially between the east 
and  west  of  Austria,  has  become  a  matter  of  urgency  in  view  of  Austria’s  target  of 
using  100%  renewable  electricity  by  2030.  This  requires  both  more  investments  and 
speed in integrating additional renewable power generation into the system as set out 
in  the  first  integrated  net  infrastructure  plan  published  in  April  2024.  Austria  has 
presented  further  measures  to  accelerate  the  energy  transition,  but  the  revised 
electricity  market  act  and  the  renewable  gases  act  are  still  awaiting  adoption  by 
Parliament.  

(29)  Austria’s  measures  to  reduce  greenhouse  gas  emissions  over  the  last  few  years  are 
starting to show results.  Greenhouse gas emissions not covered by the EU emissions 
trading system declined by 5% in 2022. Nevertheless, current policies leave a gap of 
21  pps  to  Austria’s  agreed  effort  sharing  target  of  48%  under  the  Effort  Sharing 
Regulation  by  2030  compared  to  2005  levels.  Austria  still  needs  to  submit  to  the 
Commission a draft update of its national energy and climate plan, which was due in 
June 2023, setting out how it aims to close this gap. Austria introduced a CO2 price for 
non-ETS  sectors,  which  is  a  step  in  the  right  direction,  but  transport  emissions  per 
capita remain above the EU average, inter alia due to relatively low tax rate for diesel, 
causing  the  so-called  ‘fuel  tank  tourism’.  The  Austrian  recovery  and  resilience  plan 
contains a number of sustainable transport reforms and investments, but there is scope 

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for  further  emission  reduction  measures,  including  strengthening  public  transport  in 
rural areas. 

(30) 

In view of the close interlinkages between the economies of euro area Member States 
and of their collective contribution to the functioning of the Economic and Monetary 
Union,  in  2024  the  Council  recommended  that  the  euro  area  Member  States  take 
action,  including  through  their  recovery  and  resilience  plans,  to  implement  the 
recommendation  on 
the  euro  area.  For  Austria, 
recommendations  (1),  (2),  (3)  and  (4)  help  implement  the  first,  second,  third  and 
fourth euro area recommendations. 

the  economic  policy  of 

HEREBY RECOMMENDS that Austria take action in 2024 and 2025 to:  

1. 

2. 

3. 

4. 

Submit  the  medium-term  fiscal-structural  plan  in  a  timely  manner.  In  line  with  the 
requirements  of  the  reformed  Stability  and  Growth  Pact,  limit  the  growth  in  net 
expenditure21 in 2025 to a rate consistent with putting the general government debt 
on a plausibly downward trajectory over the medium term and respecting the 3% of 
GDP  deficit  Treaty  reference  value.  Improve  the  fiscal  sustainability  of  the 
healthcare  system  and  the  long-term  care  system.  Simplify  and  rationalise  fiscal 
relationships  and  responsibilities  across  layers  of  government  and  align  financing 
and spending  responsibilities. Further improve the tax mix to reduce the tax wedge 
and support inclusive and sustainable growth. 

Address emerging delays to allow for continued, swift and effective implementation 
of  the  recovery  and  resilience  plan,  including  the  REPowerEU  chapter,  ensuring 
the 
completion  of  reforms  and 
implementation  of  cohesion  policy  programmes.  In  the  context  of  their  mid-term 
review,  continue  focusing  on 
the 
opportunities  provided by the Strategic Technologies for Europe Platform initiative 
to improve competitiveness. 

investments  by  August  2026.  Accelerate 

the  agreed  priorities,  while  considering 

Boost  the  labour  market  participation  of  women,  including  by  improving  quality 
childcare  services,  and  of  older  workers.  Improve  labour  market  outcomes  for 
disadvantaged  groups,  such  as  low-skilled  jobseekers  and  people  with  a  migrant 
background,  and  raise  the  levels  of  basic  skills,  starting  at  school  level.  Promote 
business  dynamism,  creation  and  growth  of  young  companies,  including  through 
better access to risk capital. 

Improve  energy  security  by  accelerating  the  diversification  of  gas  supply  towards 
non-Russian sources. Further reduce emissions, in particular in the transport sector.  

Done at Brussels, 

For the Council 
The President 

21 

According  to  Article  2(2)  of  Regulation  (EU)  2024/1263,  ‘net  expenditure’  means  government 
expenditure net of interest expenditure, discretionary revenue measures, expenditure on programmes of 
the  Union  fully  matched  by  revenue  from  Union  funds,  national  expenditure  on  co-financing  of 
programmes funded by the Union, cyclical elements of unemployment benefit expenditure, and one-offs 
and other temporary measures. 

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