Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Austria
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Austria, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, labour market, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 4.6.2025  COM(2025) 220 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Austria {SWD(2025) 220 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 
Article 121(2) and Article 148(4) thereof, 

Having regard to Regulation (EU) 2024/1263 of the European Parliament and of the Council 
of  29 April  2024  on  the  effective  coordination  of  economic  policies  and  on  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: 

General considerations 

(1) 

Regulation (EU) 2024/1263, which entered into force on 30 April 2024, specifies the 
objectives  of  the  economic  governance  framework,  which  aims  at  promoting  sound 
and  sustainable  public  finances  and  sustainable  and  inclusive  growth  and  resilience 
through reforms and investments, and preventing excessive government deficits. The 
Regulation  stipulates  that  the  Council  and  the  Commission  conduct  multilateral 
surveillance in the context of the European Semester in accordance with the objectives 
and requirements set out in the TFEU. The European Semester includes, in particular, 
the  formulation,  and  the  surveillance  of  the  implementation  of  country-specific 
recommendations.  The  Regulation  also  promotes  national  ownership  of  fiscal  policy 
and  emphasises  its  medium-term  focus,  combined  with  more  effective  and  coherent 
enforcement. Each Member State must submit to  the Council and the Commission  a 
national  medium-term  fiscal-structural  plan,  containing  its  fiscal,  reform  and 
investment  commitments,  over  4  or  5  years,  depending  on  the  length  of the  national 
legislative  term.  The  net  expenditure2  path  in  these  plans  has  to  comply  with  the 

1  OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj. 
2  Net expenditure as defined in Article 2, point (2), of Regulation (EU) 2024/1263: ‘net expenditure’ means 
government expenditure net of (i) interest expenditure; (ii) discretionary revenue measures; (iii) expenditure 
on programmes of the Union fully matched by revenue from Union funds; (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. 

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Regulation’s  requirements,  including  the  requirements  to  put  or  keep  general 
government debt on a plausibly downward path by the end of the adjustment period, or 
for it to remain at prudent levels below 60% of gross domestic product (GDP), and to 
bring  and/or  maintain  the  general  government  deficit  below  the  3%-of-GDP  Treaty 
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  the 
Regulation, the adjustment period may be extended by up to three years. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility  (the  ‘RRF’),  entered  into  force  on 
19 February 2021.  The  RRF  provides  financial  support  to  Member  States  for 
implementing  reforms  and  investments,  delivering  a  fiscal  impulse  financed  by  the 
Union.  In  line  with  the  priorities  of  the  European  Semester  for  economic  policy 
coordination, the RRF fosters economic and social recovery while driving sustainable 
reforms and investments, in particular promoting the green and digital transitions and 
making  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 Union and support the continued implementation of the 
European Pillar of Social Rights. 
Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council4  (the 
‘REPowerEU  Regulation’),  which  was  adopted  on  27 February 2023,  aims  to  phase 
out the Union’s dependence on Russian fossil-fuel imports. This helps achieve energy 
security  and  diversify  the  Union’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  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 that Regulation, the Commission assessed the relevance, effectiveness, 
efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in  accordance  with  the 
assessment guidelines set  out  in  Annex V.  On 13 July  2021, the Council adopted its 
Implementing Decision approving the assessment of the recovery and resilience plan 
for  Austria5,  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  include  the 
REPowerEU  chapter6.  The  release  of  instalments  is  conditional  on the  adoption  of  a 
decision by the Commission, in accordance with Article 24(5), stating that Austria has 
satisfactorily  achieved  the  relevant  milestones  and  targets  set  out  in  the  Council 
Implementing  Decision.  Satisfactory  achievement  requires  that  the  achievement  of 

L 

and 

(OJ 

Facility 

Recovery 

Resilience 

Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing 
the 
ELI: 
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). 
Council  Implementing  Decision  of  13 July  2021  on  the  approval  of  the  assessment  of  the  recovery  and 
resilience plan for Austria (10159/2021). 
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). 

18.2.2021, 

p. 17, 

57, 

(2) 

(3) 

(4) 

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(5) 

(6) 

(7) 

preceding  milestones  and  targets  for  the  same  reform  or  investment  has  not  been 
reversed. 

On  [Date],  the  Council,  upon  the  recommendation  of  the  Commission,  adopted  a 
recommendation  endorsing  the  national  medium-term  fiscal-structural  plan  of 
Austria7.  On  13  May  2025  Austria  submitted  its  medium  term  fiscal  structural  plan. 
The  plan  was  submitted  in  accordance  with  Articles  11  and  36(1),  point (a)  of 
Regulation (EU)  2024/1263,  covers  the  period  from  2025  until  2029  and  presents  a 
fiscal adjustment spread over seven years. 

On  26 November  2024,  on  the  basis  of  Regulation  (EU)  No 1176/2011,  the 
Commission  adopted  the  2025  Alert  Mechanism Report,  in  which  it  did  not  identify 
Austria as one of the Member States for which an in-depth review would be needed. 
The  Commission  also  adopted  a  recommendation  for  a  Council  recommendation  on 
the economic policy of the  euro  area and  a proposal  for the 2025 Joint  Employment 
Report,  which  analyses  the  implementation  of  the  Employment  Guidelines  and  the 
principles  of  the  European  Pillar  of  Social  Rights.  The  Council  adopted  the 
Recommendation on the economic policy of the euro area8 on 13 May 2025 and the 
Joint Employment Report on 10 March 2025. 

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic framework that aims to boost the EU’s global competitiveness over the next 
five  years.  It  identifies  the  three  transformative  imperatives  of  sustainable  economic 
growth: (i) innovation; (ii) decarbonisation and competitiveness; and (iii) security. To 
close  the  innovation  gap,  the  EU  aims  to  foster  industrial  innovation,  support  the 
growth of start-ups through initiatives like the EU Start-up and Scale-up Strategy, and 
promote the adoption of advanced technologies like artificial intelligence and quantum 
computing.  In  pursuit  of  a  greener  economy,  the  Commission  has  outlined  a 
comprehensive Affordable Energy Action Plan and a Clean Industrial Deal, ensuring 
that  the  shift  to  clean  energy  remains  cost-effective,  competitiveness-friendly, 
particularly  for  energy-intensive  sectors,  and  is  a  driver  for  growth.  To  reduce 
excessive dependencies and increase security, the Union is committed to strengthening 
global  trade  partnerships,  diversifying  supply  chains  and  securing  access  to  critical 
raw materials and clean energy sources. These priorities are underpinned by horizontal 
enablers, namely regulatory simplification, deepening of the single market, financing 
competitiveness and a Savings and Investments Union, promotion of skills and quality 
jobs, and better coordination of EU policies. The Competitiveness Compass is aligned 
with  the  European  Semester,  ensuring  that  Member  States’  economic  policies  are 
consistent with the Commission’s strategic objectives, creating a unified approach to 
economic governance that fosters sustainable growth, innovation and resilience across 
the Union. 

(8) 

In  2025,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  implementation  of  the  RRF.  The  full  implementation  of  the 
recovery and resilience plans remains essential for delivering on the policy priorities 
under the European Semester, as the plans help effectively address all or a significant 
subset  of  challenges  identified  in  the  relevant  country-specific  recommendations 
issued  in  recent  years.  These  country-specific  recommendations  remain  equally 

7 
8 

Council Recommendation of [xxx] endorsing the medium-term fiscal-structural plan of Austria, OJ… 
Council Recommendation of 13 May 2025 on the  economic policy of the euro area (OJ C, C/2025/2782, 
22.5.2025, ELI: http:// data.europa.eu/eli/C/2025/2782/oj).) 

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relevant  for  the  assessment  of  amended  recovery  and  resilience  plans  in  accordance 
with Article 21 of Regulation (EU) 2021/241. 

(9) 

The  2025  country-specific  recommendations  cover 
the  key  economic  policy 
challenges that are not sufficiently addressed by measures included in the recovery and 
resilience  plans,  taking  into  account  the  relevant  challenges  identified  in  the  2019-
2024 country-specific recommendations. 

in 

(10)  On  4  June  2025,  the  Commission  published  the  2025  country  report  for  Austria.  It 
country-specific 
assessed  Austria’s  progress 
recommendations  and  took  stock  of  Austria’s  implementation  of  the  recovery  and 
resilience plan. Based on this analysis, the country report identified the most pressing 
challenges  Austria  is  facing.  It  also  assessed  Austria’s  progress  in  implementing  the 
European  Pillar  of  Social  Rights  and  in  achieving  the  Union  headline  targets  on 
employment, skills and poverty reduction, as well as progress in achieving the United 
Nations Sustainable Development Goals. 

addressing 

relevant 

the 

Assessment of the Annual Progress Report 

(11)  On 13 May 2025, Austria submitted a medium-term plan committing to the following 
maximum growth rates of net expenditure: 2.6% in 2025, 2.2% in 2026, 2.2% in 2027, 
2.0%  in  2028  and  2.3%  in  2029,  which  correspond  to  the  maximum  cumulative 
growth rates calculated by reference to 2024 of 2.6% in 2025, 4.8% in 2026, 7.2% in 
2027,  9.4%  in  2028  and  11.9%  in  2029.  On  13  May  2025,  Austria  submitted  its 
Annual  Progress  Report9  on  relevant  fiscal  outturn  data  and  projections  and  the 
implementation  of  reforms  and  investments  responding  to  the  main  challenges 
identified  in  the  European  Semester  country-specific  recommendations.  The  Annual 
Progress  Report  also  reflects  Austria’s  biannual  reporting  on  the  progress  made  in 
achieving its recovery and resilience plan in accordance with Article 27 of Regulation 
(EU) 2021/241. 

(12)  Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  recommended  to 
activate the national  escape clause of the Stability and Growth Pact  in  a coordinated 
manner to support the EU efforts to achieve a rapid and significant increase in defence 
spending and this proposal was welcomed by the European Council of 6 March 2025.  
(13)  Based on data validated by Eurostat10, Austria’s general government deficit increased 
from 2.6% of GDP in 2023 to 4.7% in 2024, while the general government debt rose 
from 78.5% of GDP at the end of 2023 to 81.8% at the end of 2024. According to the 
Commission’s  calculations,  these  developments  correspond  to  a  net  expenditure 
growth rate of 8.7% in 2024. Based on the Commission’s estimates, the fiscal stance11, 
which  includes  both  nationally  and  EU  financed  expenditure,  was  expansionary,  by 
2.3%  of  GDP,  in  2024.  On  4  June  2025,  the  Commission  adopted  a  report  under 

9 

The  2025  Annual  Progress  Reports  are  available  on:  https://economy-finance.ec.europa.eu/economic-and-
fiscal-governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en 

10  Eurostat-Euro Indicators, 22.4.2025. 
11  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 including expenditure financed by non-repayable support (grants) from 
the Recovery and Resilience Facility and other Union funds. 

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Article 126(3) of the TFEU12. That report assessed the budgetary situation of Austria, 
as its general government deficit in 2024 exceeded the reference value of 3% of GDP. 
The  report  concluded  that  in  the  light  of  this  assessment,  and  after  considering  the 
opinion of the Economic and Financial Committee as established under article 126(4) 
TFEU, the Commission will consider proposing to open an excessive deficit procedure 
for  Austria  by  proposing  to  the  Council  to  adopt  a  Decision  under  Article  126(6) 
establishing the existence of an excessive deficit. 

(14)  According to the Annual Progress Report, the macroeconomic scenario underpinning 
the budgetary projections by Austria expects real GDP growth at -0.3% in 2025, while 
HICP  inflation  is  projected  at  2.8%  in  2025.  The  Commission  Spring  2025  Forecast 
projects real GDP to decline by 0.3% in 2025 and to grow by 1.0% in 2026, and HICP 
inflation to stand at 2.9% in 2025 and 2.1% in 2026. 

(15) 

In the Annual Progress Report, the general government deficit is expected to decrease 
to  4.5%  of  GDP  in  2025,  while  the  general  government  debt-to-GDP  ratio  is  set  to 
increase  to  84.7%  by  the  end  of  2025.  These  developments  correspond  to  net 
expenditure growth of 1.6% in 2025. The Commission Spring 2025 Forecast projects a 
general  government  deficit  of  4.4%  of  GDP  in  2025.  The  decrease  of  the  deficit  in 
2025 mainly reflects the implementation of a consolidation package, while at the same 
time  increased  spending  on  public  salaries,  pensions  and  social  expenditure  due  to 
inflation indexation and other ageing-related costs continue to weigh significantly on 
public  finances.  According  to  the  Commission’s  calculations,  these  developments 
correspond  to  net  expenditure  growth  of  2.0%  in  2025.  Based  on  the  Commission’s 
estimates,  the  fiscal  stance,  which  includes  both  nationally  and  EU  financed 
expenditure, is projected to be contractionary, by 1.3% of GDP, in 2025. The general 
government debt-to-GDP ratio is set to increase to 84.0% by the end of 2025. 

(16)  General  government  expenditure  amounting  to  0.1%  of  GDP  is  expected  to  be 
financed  by  non-repayable  support  (“grants”)  from  the  Recovery  and  Resilience 
Facility  in  2025,  compared  to  0.1%  of  GDP  in  2024,  according  to  the  Commission 
Spring 2025 Forecast. Expenditure financed by Recovery and Resilience Facility non-
repayable support enables high-quality investment and productivity-enhancing reforms 
without a direct impact on the general government balance and debt of Austria.  

(17)  General government defence expenditure in Austria remained stable at 0.6% of GDP 
between  2021  and  202313.  According  to  the  Commission  Spring  2025  Forecast, 
expenditure on defence is projected to amount to 0.7% of GDP in 2024 and 0.8% of 
GDP  in  2025.  This  corresponds  to  an  increase  of  0.2  percentage  points  of  GDP 
compared to 2021. 

(18)  According  to  the  Commission  Spring  2025  Forecast,  net  expenditure  in  Austria  is 
projected to grow by 2.0% in 2025. Based on the Commission Spring 2025 Forecast, 
the net expenditure growth of Austria in 2025 is projected to be below the maximum 
growth rate committed to by Austria in its plan.  

(19)  The  Annual  Progress  Report  does  not  include  budgetary  projections  beyond  2025. 
Based on policy measures known at the cut-off date of the forecast, the Commission 
Spring 2025 Forecast projects a general government deficit of 4.2% of GDP in 2026. 

12  Report from the Commission, prepared in accordance with Article 126(3) of the Treaty on the Functioning 

of the European Union, 04.06.2025, COM(2025) COM(2025)615 final. 

13  Eurostat, government expenditure by classification of functions of government (COFOG).  

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These developments correspond to net expenditure growth of 2.3% in 2026. Based on 
the Commission’s estimates, the fiscal stance, which includes both nationally and EU 
financed expenditure, is projected to be contractionary, by 0.3% of GDP, in 2026. The 
general government debt-to-GDP ratio is projected by the Commission to increase to 
85.8% by the end of 2026.  

(20)  The  medium-term  plan  of  Austria  specifies  the  set  of  reforms  and  investments 
underpinning  the  extension  of  the  adjustment  period.  They  include  existing  and 
stepped-up measures from the recovery and resilience plan, such as improved access to 
education  (“Chancenbonus”)  as  well  as  additional  reforms  and  investments  such  as 
increasing the effective retirement age, reforming the upskilling leave and increasing 
the health care contribution for pensioners.  

Key policy challenges 

(21)  Austria faces rising ageing-related fiscal pressures from its healthcare, long-term care 
and  pension  systems.  The  country’s  relatively  low  statutory  and  effective  retirement 
ages  lead  to  high  pension  costs,  projected  to  peak  at  15%  of  GDP  by  2030  before 
decreasing  slightly.  Despite  past  reforms,  Austria’s  effective  retirement  age  remains 
below  the  EU  average.  Recently  implemented  pension  measures  have  been  modest, 
especially  compared  to  gains  in  life  expectancy,  and  new  plans  to  limit  early 
retirement  may  help  only  to  a  limited  extent  raise  the  effective  retirement  age. 
Demographic ageing also puts a strain on healthcare and long-term care finances. By 
2070,  healthcare  spending  is  expected  to  rise  from  7.8%  in  2024to  8.9%  of  GDP, 
double the EU average increase, while long-term care costs might grow from 1.6% to 
3.1%  of  GDP  over  the  same  period.  The  2023  healthcare  reform  aimed  to  boost 
primary care and reduce hospital reliance, but  primary care remains underdeveloped, 
there  continue  to  be  overlapping  services,  and  spending  targets  are  not  adhered  to. 
spending 
Effective 
responsibilities  are  lacking,  contributing  to  a  situation  where  regions  and  the  social 
insurance  frequently  exceed  the  agreed  annual  spending  ceilings.  In  long-term  care, 
recent reforms improved working conditions and support for family carers, but did not 
address  fiscal  sustainability.  Institutional  care  dominates  public  spending,  though 
home  care  is  more  cost-effective  in  many  cases.  The  recovery  and  resilience  plan 
includes  measures  to  promote  primary  healthcare  and  implement  target-based 
governance in long-term care. 

regulatory  measures  and  alignment  of 

financing  and 

(22)  Austria’s  fiscal  framework  is  marked  by  a  complex  system  of  intergovernmental 
transfers  between  federal  and  regional  authorities,  which  constrain  the  efficiency  of 
public  spending.  With  a  low  level  of  tax  autonomy,  federal  states  rely  heavily  on 
shared  revenues  rather  than  their  own  sources  –  only  a  small  share  of  total  public 
revenue  in  2024  came  from  subnational  sources.  At  the  same  time,  the  financing  of 
essential services such as healthcare, childcare and public transport depends partially 
on expenditure provided 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. 

(23)  The  tax  mix  continues  to  rely  heavily  on  labour  income  and  consumption.  In  2023, 
Austria had the  fourth-highest  tax-to-GDP ratio in the EU  with a significant  average 
tax wedge on labour (fifth highest in the EU in 2024)14. Since 2023, personal income 
tax  brackets  have  been  indexed  to  inflation,  preventing  a  further  increase  of  the  tax 

14  OECD (2025), Taxing Wages 2025. 

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wedge through bracket creep. However, several long-standing structural challenges in 
the tax mix remain unaddressed. Making better use of more growth- and employment-
friendly taxes could help create the necessary budgetary space and improve the overall 
tax structure. 

(24)  The implementation  of  cohesion  policy  programmes, which encompass support from 
the  European  Regional  Development  Fund  (ERDF),  the  Just  Transition  Fund  (JTF) 
and the European Social Fund Plus (ESF+), has accelerated in Austria. It is important 
to  continue  efforts  to  ensure  the  swift  implementation  of  these  programmes,  while 
maximising  their  impact  on  the  ground.  Austria  is  already  taking  action  under  its 
cohesion  policyprogrammes  to  boost  competitiveness  and  growth.  At  the  same  time, 
Austria  continues  to  face  challenges,  including  those  relating  to  competitiveness, 
affordable  housing,  skills  and  active  inclusion.  In  accordance  with  Article  18  of 
Regulation (EU) 2021/1060, Austria is required – as part of the mid-term review of the 
cohesion policy funds – to review each programme taking into account, among other 
things,  the  challenges  identified  in  the  2024  country-specific  recommendations.  The 
Commission  proposals  adopted on 1 April 202515 extend the deadline for submitting 
an assessment – for each programme– of the outcome of the mid-term review beyond 
31  March  2025.  It  also  provides  flexibilities  to  help  speed  up  programme 
implementation  and  incentives  for  Member  States  to  allocate  cohesion  policy 
resources  to  five  strategic  priority  areas  of  the  Union,  namely  competitiveness  in 
strategic technologies, defence, housing, water resilience and energy transition. 

(25)  The  Strategic  Technologies  for  Europe  Platform  (STEP)  provides  the  opportunity  to 
invest in a key EU strategic priority by strengthening the EU’s competitiveness. STEP 
is channelled through 11 existing EU funds. Member States can also contribute to the 
InvestEU programme supporting investments in priority areas. Austria could use these 
initiatives  to  support  the  development  or  manufacturing  of  critical  technologies, 
including clean and resource-efficient technologies. 

(26)  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 
sustainability  of  its  public  finances,  the  labour  market,  business  dynamism  and 
competitiveness, its persistent reliance on fossil fuels and high energy prices. 

(27)  While a variety  of funding instruments  are available, risk financing  for start-ups and 
scale-ups remains a constraining factor. The local venture and growth capital market is 
showing a positive trend, with venture capital rising to 0.08% of GDP over 2021-2023 
but is not yet sufficiently developed. Limited venture capital financing is partly driven 
by the low level of participation of institutional investors, including pension funds. At 
only 1% of private equity and venture capital funds raised annually over 2007-2023, 
this is substantially below leading Member States. 

(28)  Austria’s comparatively high R&D expenditure (at 3.26% of GDP in 2023) and strong 
science-business collaboration are not sufficiently translated into marketable solutions 
and  business  dynamism.  The  percentage  of  people  working  in  knowledge-intensive 
services  stood  at  39.8%,  slightly  lower  than  the  EU  average  of  40.8%  in  2022.  The 
country  also  lags  behind  the  EU’s  most  innovative  Member  States  in  generating 
domestic value added from exports of high-tech goods and services. Public support for 

15  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending 
Regulations  (EU)  2021/1058  and  (EU)  2021/1056  as  regards  specific  measures  to  address  strategic 
challenges in the context of the mid-term review - COM(2025) 123 final. 

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innovation,  mainly  through  R&D  tax  incentives,  tends  to  focus  on  incremental 
innovation in established sectors. Weakening patenting activity over the past decade, 
with  persisting  large  disparities  in  R&D  spending  between  the  federal  states,  limit 
Austria’s ability to fully capitalise on its potential to derive higher economic benefits 
from innovation. A more systematic review of existing support schemes could increase 
the efficacy of the innovation system. 

(29)  Promoting  the  integration  of  digital  technologies  into  business  would  further 
strengthen  competitiveness.  Despite  advancements  in  cloud  adoption,  with  35.6%  of 
businesses  using  cloud  technologies,  Austria  lags  behind  the  EU  average  of  38.9%, 
indicating room for growth in this area. The adoption of data analytics also remains a 
challenge, as only 23.9% of Austrian businesses have implemented such technologies, 
significantly below the EU average of 33.2%. Targeted measures – including financial 
incentives, support for cloud and data infrastructure, and investment in digital skills –
could  significantly  accelerate  the  adoption  of  advanced  technologies,  particularly 
among small to medium-sized enterprises (SMEs). 

(30)  Austrian consumers are negatively affected by a lack of competition in certain sectors, 
which  contributes  to  higher  prices.  Barriers  to  market  entry  for  new  competitors, 
territorial  supply  constraints  and  excessive  regulatory  restrictiveness  for  certain 
professions and service providers limit competition and drive up prices for consumers.  

(31)  As  set  in  the  Competitiveness  Compass,  all  the  EU,  national,  and  local  institutions 
must  make  a  major  effort  to  produce  simpler  rules  and  to  accelerate  the  speed  of 
administrative  procedures.  The  Commission  has  set  ambitious  goals  for  reducing 
administrative burden: by at least 25% and by at least 35% for SMEs; and has created 
new  tools  to  achieve  these  goals,  including  systematic  stress  test  of  the  stock  of  EU 
legislation and enhanced stakeholders’ dialogue. To match this ambition, Austria also 
needs  to  take  action.  51%  of  businesses  consider  the  complexity  of  administrative 
procedures  to  be  a  problem  for  their  company  when  doing  business  in  Austria16. 
Accelerating  permitting  procedures  and  reducing  administrative  complexity  – 
especially  for  SMEs  –  is  another  lever  to  increase  competitiveness.  Permitting 
procedures  often  unduly  delay  industrial  projects,  usually  extending  over  22-23 
months from the date of application. A major contributing factor is the limited use of 
digital  tools,  with  communication  still  relying  heavily  on  physical  document 
submissions.  Accelerating  permitting  could  be  achieved  by  introducing  options  such 
as early commencement of preparatory construction works, simplified procedures for 
public objections, and the deferral of non-essential documentation to later stages of the 
procedure.  Overall,  Austria  has  a  high  administrative  and  regulatory  burden  with 
business regulation often seen as a greater obstacle to investment than the EU average. 

(32)  Austria  has  made  significant  progress  in  its  clean  energy  transition  pathway  and 
strengthened its energy security by completely phasing out Russian gas imports by the 
beginning  of  2025.  However,  for  65%  of  its  energy  needs,  Austria  still  relies  on 
imports,  particularly  oil  and  gas.  Energy  prices  have  risen  significantly,  with  the 
electricity price for large consumers being the seventh highest in the EU in 2023. This 
affects  price  competitiveness,  particularly  for  energy-intensive  industries.  The  major 
expansion in renewables over the last few years and ambitious renewables targets until 
2030 require the grid to be urgently expanded and upgraded as well as a flexibilisation 
of  the  energy  system.  This  requires  both  more  investments  and  speed  so  additional 

16 

‘Businesses' attitudes towards corruption in the EU’ Flash Report, Eurobarometer Report (April 2024)      

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renewable  power  generation  can  be  integrated  into  the  system.  The  cost  of  network 
expansion is borne by network users. Network charges rose by an average of 19% in 
January 2025 to finance ongoing investments, among other things. Work on the new 
Electricity  Market  Act  (ELWG)  to  enable  a  reform  of  network  tariffs,  the  energy 
system  to  become  more  flexible,  or  incentives  to  use  power  purchase  agreements 
(PPAs)  have  not  progressed.  Currently,  renewable  PPAs  are  limited  in  Austria,  with 
only 0.1 GW contracted. 

(33)  Representing 40.8% of  Austria’s total  energy consumption, renewable  energy makes 
up a large and increasing share. However, progress on further accelerating the roll-out 
of  renewable  energy  and  the  infrastructure  it  requires  has  stalled.  The  expansion  of 
Austria’s net-zero technology  in  particular is  still  held  back by complex  and lengthy 
administrative procedures. 

(34)  Austria is projected to be on track to reach its emission reduction target, but the pace 
of decarbonisation in 2024 slowed down compared to the previous year. Emissions are 
expected  to  have  declined  by  only  3.7%  compared  to  6.5%  in  2023.  The  Austrian 
industrial  sector  is  characterised  by  high  energy  intensity  and  has  been  slow  to 
decarbonise.  Given  that  many  companies  have  been  struggling  to  absorb  significant 
energy  price  hikes,  improving  energy  efficiency  is  important  both  for  reducing 
emissions and for boosting competitiveness. While most sectors have made progress in 
this regard, the decarbonisation of transport continues to lag behind. In 2023, the final 
energy consumption of the transport sector actually increased by 1% compared to the 
previous year. To address this, the 2024 national energy and climate plan puts forward 
additional measures that will allow Austria to reach its effort-sharing targets, but their 
success will depend on these measures being decisively and full implemented. 

(35)  Labour taxation and social contributions in Austria are among the highest in the EU, 
hindering job creation and participation in the labour market. Over the last decade, the 
number  of  average  actual  weekly  hours  worked  per  person  fell  from  35.8  to  33.6 
hours. Against the trend in  other Member States, the  already high  share  of part-time 
work increased by 2 percentage points since 2019. At 30.6% in 2024, part-time work 
remains  almost  twice  as  high  as  the  EU  average  (17.1%).  The  high  tax  wedge  on 
labour discourages longer working hours, contributing to labour shortages and limiting 
economic potential. 

(36)  The  share  of  women  working  part-time  is  among  the  highest  in  the  EU.  This  also 
reflects  their  high  level  of  participation  in  unpaid  care  work  and  the  insufficient 
availability  of,  and  access  to,  affordable  and  high-quality  early  childhood  education 
and  care.  Despite  efforts  to  expand  the  availability  of  early  childhood  education  and 
care,  the  percentage  of  children  under  3  years  of  age  participating  in  formal  early 
childhood  education  and  care  remains  well  below  the  EU  average.  This  is  coupled 
with regional disparities in the availability of places for early childhood education and 
care, as well as with staff shortages. 

(37)  Although  the  employment  rate  of  older  workers  (55  to  64  years)  has  increased 
continuously over the last decade  to reach 58.8% in  2024, it remains well below the 
EU  average  of  65.2%.  Older  workers  have  difficulties  reintegrating  into  the  labour 
market,  ranging  from  limited  digital  skills  to  preconceptions  towards  older  workers. 
People  with  a  low  level  of  qualification,  who  only  attained  the  compulsory  level  of 
school  education  are  particularly  vulnerable  and  represent  the  highest  share  of 
unemployed  people  in  Austria.  Similarly,  people  with  a  migrant  background  and 
people  with  a  disadvantaged  socio-economic  background  have  lower  levels  of 

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attainment  in  the  labour  market  and  face  particular  barriers  to  entering  the  labour 
market.  This  is  compounded  by  challenges  regarding  inadequate  language  skills  and 
limited recognition of qualifications. 

(38)  According  to  the  2022  OECD  Programme  for  International  Student  Assessment 
(PISA),  the  underperformance  of  pupils  in  acquiring  basic  skills  has  increased, 
especially for those with a migrant and/or disadvantaged socio-economic background 
or  those  born  abroad.  The  increasing  share  of  pupils  with  a  migrant  and/or 
disadvantaged  socio-economic  background  entering  education  without  sufficient 
language  skills  poses  challenges  for  teachers.  Furthermore,  shortages  of  teachers 
present  an  additional  obstacle  to  improving  educational  outcomes.  Moreover, 
worsening  basic  skills  among  school  pupils  are  carried  into  adulthood,  particularly 
among those with a migrant and/or disadvantaged socio-economic background. While 
Austria continues to implement a wide range of reforms to improve the performance of 
its education system, strengthening the development of basic and STEM skills at every 
stage from children’s education to adult learning is key to addressing skills shortages. 

(39)  Shortages of skilled workers remain a bottleneck for Austria’s growth potential. 72% 
of companies identify this as a major obstacle to investment17. In particular, the lack of 
green skills  hampers both the competitiveness  of sectors  key  for the green transition 
and risks delaying Austria in reaching its climate targets. In addition, there is currently 
no explicit strategy to address job losses anticipated in carbon-intensive industries as 
Austria moves toward a net-zero economy.  Boosting  existing  upskilling programmes 
could unlock untapped labour supply and boost Austria’s net-zero industry. Providing 
targeted support to individuals in occupations and regions at risk of being  negatively 
affected  by  large-scale  decarbonisation  efforts  is  particularly  crucial  for  ensuring 
broad public support for the green transition. 

(40) 

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,  in  2025,  the  Council  recommended  that  the  euro-area  Member  States  take 
action,  including  through  their  recovery  and  resilience  plans,  to  implement  the  2025 
the  euro  area.  For  Austria, 
Recommendation  on 
recommendations (2), (3) and (5) help implement the first euro-area recommendation 
on  competitiveness,  while  recommendations  (1),  (4)  and  (5)  help  implement  the 
second  euro-area  recommendation  on  resilience,  and  recommendation  (1)  helps 
implement  the  third  euro-area  recommendation  on  macroeconomic  and  financial 
stability set out in the 2025 Recommendation. 

the  economic  policy  of 

HEREBY RECOMMENDS that Austria take action in 2025 and 2026 to: 

1. 

Reinforce overall defence spending and readiness in line with the European Council 
conclusions  of  6  March  2025.  Adhere  to  the  maximum  growth  rates  of  net 
expenditure  recommended  by  the  Council  on  [date].  Implement  the  set  of  reforms 
and  investments  underpinning  the  extended  adjustment  period  as  recommended  by 
the Council on [date]. Take decisive action to safeguard the sustainability of public 
finances, including by improving the fiscal sustainability of the healthcare, long-term 
care  and  pension  systems,  by,  among  other  things,  streamlining  underused  hospital 
infrastructure,  improving  the  cost-effectiveness  of  healthcare  and  long-term  care, 
strengthening  expenditure  control  and  significantly 
the  effective 
retirement  age.  Simplify  and  rationalise  fiscal  relationships  and  responsibilities 

increasing 

17  EIB Investment Survey 2024 Country Overview: Austria p. 17. 

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2. 

3. 

4. 

5. 

across  layers  of  government  and  ensure  financing  and  spending  responsibilities  are 
clearly  aligned.  Improve  the  tax  mix  to  reduce  the  high  tax  wedge  on  labour  and 
support inclusive and sustainable growth in a challenging fiscal environment. 

In  view  of  the  applicable  deadlines  for  the  timely  completion  of  reforms  and 
investments under Regulation (EU) 2021/241, ensure the effective implementation of 
the recovery and resilience plan, including the REPowerEU chapter.  Accelerate the 
implementation of cohesion policy programmes (ERDF, JTF, ESF+), building, where 
appropriate, on the opportunities offered by the mid-term review. Make optimal use 
of  EU  instruments,  including  the  opportunities  provided  by  the  InvestEU  and  the 
Strategic Technologies for Europe Platform, to improve competitiveness. 

Promote  business  dynamism,  and  the  creation  and  growth  of  young  companies, 
including  by  providing  better  access  to  venture  and  growth  capital  and  removing 
barriers  hindering  investment  from  institutional  investors  in  equity  instruments. 
Improve  the  translation  of  the  high  levels  of  R&D  investment  into  marketable 
solutions  and step  up  the  use  of  (advanced)  digital  technologies  by  companies. 
Simplify regulation, reduce administrative burden, particularly for SMEs, accelerate 
permitting procedures and strengthen competition to lower prices. 

Tackle  high  energy  costs  including  through  a  reform  of  the  Electricity  Act,  by 
improving  the  flexibility  of  the  energy  system  and  incentivising  power  purchase 
agreements.  Reduce  overall  reliance  on  fossil  fuels  and  accelerate  the  roll-out  of 
renewable  energy  and  the  required  infrastructure,  particularly  by  simplifying 
permitting  procedures  and  putting  in  place  dedicated  acceleration  areas.  Further 
reduce  emissions,  particularly  in  the  transport  sector  and  by  advancing  industrial 
decarbonisation. Improve energy efficiency. 

Create  incentives  to  boost  the  numbers  of  hours  worked  overall  and  the  full-time 
labour  market  participation  of  women,  including  by  improving  quality  and 
availability of childcare services. Improve labour market outcomes for older workers 
and  for  disadvantaged  groups,  such  as  low-skilled  job  seekers  and  people  with  a 
migrant  background, and raise the levels  of basic skills,  starting from  an early  age, 
notably at school level. Step up policy efforts aimed at the provision and acquisition 
of skills and competences needed for the green transition. 

Done at Brussels, 

For the Council 
The President 

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