Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Austria
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: Austria, budget policy, economic policy, economic recovery, economic reform, employment policy, investment, macroeconomics, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 3.6.2026  COM(2026) 220 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Austria {SWD(2026) 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  1466/97  (1),  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) 

Regulation  (EU)  2024/1263  specifies  the  objectives  of  the  economic  governance 
framework,  which  aims  at  promoting  sound  and  sustainable  public  finances, 
sustainable  and  inclusive  growth  and  resilience  through  reforms  and  investments,  as 
well  as  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 
Treaty  on  the  Functioning  of  the  European  Union  (TFEU).  The  European  Semester 
includes, in  particular, the formulation and the surveillance of  the implementation  of 
country-specific recommendations. 

(2) 

On  16 July 2025,  the  Commission  adopted  its  proposal  for  a  regulation  establishing 
the European Fund for economic, social and territorial cohesion, agriculture and rural, 
fisheries and maritime, prosperity and security for the period 2028-2034 and amending 
Regulation (EU) 2023/955 and Regulation (EU, Euratom) 2024/2509 (2). The proposal 

1 

2 

EN 

Regulation 

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 
ELI: 
http://data.europa.eu/eli/reg/2024/1263/oj). 
Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  establishing  the  European 
Fund  for  economic,  social  and  territorial  cohesion,  agriculture  and  rural,  fisheries  and  maritime, 
prosperity  and  security  for  the  period  2028-2034  and  amending  Regulation  (EU)  2023/955  and 

(EC)  No 

2024/1263, 

30.4.2024, 

1466/97 

(OJ 

L, 

1 

  EN 

 
 
(3) 

(4) 

(5) 

(6) 

aims to increase the effectiveness of Union funding by reducing the fragmentation of 
the  financial  architecture  and  to  support  Member  States  in  the  coordination  of  their 
economic policy in line with Article 175 TFEU. 

On  25 November 2025,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  adopted  the  2026  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,  a  recommendation  for  a  Council 
recommendation on human capital in the European Union, and a proposal for the 2026 
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  area  (3)  on 
21 April 2026, and the Joint Employment Report, and the Recommendation on human 
capital on 9 March 2026.  

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic  framework  that  aims  to  boost  the  Union’s  global  competitiveness  over  the 
next  five  years.  It  identifies  the  three  transformational  imperatives  of  innovation, 
decarbonisation  and  competitiveness,  and  security  as  critical  pillars  for  sustainable 
economic  growth.  The  European  Semester  is  aligned  with  the  Competitiveness 
Compass, ensuring that EU 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. 

In  2026,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  final  stage  of  Recovery  and  Resilience  Facility  (RRF) 
implementation (4). Recovery and resilience plans (RRPs), along with cohesion policy 
funding, have been essential for delivering on the policy priorities under the European 
Semester, as the plans were required to effectively address all or a significant subset of 
challenges identified in the relevant country-specific recommendations issued in recent 
cycles, and programmes funded by the European cohesion policy were required to take 
country-specific recommendations into account. As the RRF approaches the end of its 
lifetime,  it  remains  essential  to  sustain  the  reforms  and  investments  supported  and 
implemented  under  the  RRF,  in  particular  those  that  contribute  to  addressing 
challenges identified in the country-specific recommendations. 

in 

addressing 

On  3 June 2026,  the  Commission  published  the  2026  country  report  for  Austria.  It 
assessed  Austria’s  progress 
country-specific 
recommendations  and  took  stock  of  Austria’s  implementation  of  the  RRP.  On  the 
basis  of  that  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.  

relevant 

the 

3 
4 

Regulation (EU, Euratom) 2024/2509 - COM(2025) 565 final. The proposed Regulation is currently the 
subject of negotiations with the co-legislators. 
OJ C, C/2026/2434, 28.4.2026, ELI: http://data.europa.eu/eli/C/2026/2434/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). 

the  Recovery  and  Resilience  Facility 

EN 

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(7) 

(8) 

(9) 

5 

6 

7 

8 

9 

10 

On  8 July 2025,  the  Council,  upon  the  assessment  and  recommendation  of  the 
Commission, adopted a Recommendation endorsing the national medium-term fiscal-
structural  plan  of  Austria  (5).  The  plan  covers  the  period  from  2025  until  2029  and 
presents  a  fiscal  adjustment  spread  over  seven  years.  The  Council  recommended  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 the base year of 2024  of 2.6% in 
2025,  4.8%  in  2026,  7.2%  in  2027,  9.4%  in  2028  and  11.9%  in  2029.  For  the  years 
2025-2028,  these  maximum  growth  rates  of  net  expenditure  coincide  with  the 
corrective  path,  as  recommended  by  the  Council  under  Article  126(7)  TFEU  on 
8 July 2025, with a view to bringing an end to the situation of an excessive deficit (6). 
Based  on  the  Commission’s  assessment  on  effective  action  of  3 June 2026  (7),  the 
excessive deficit procedure for Austria is held in abeyance.  

Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  has  invited  Member 
States  to  request  the  activation  of  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  (8)  and  this  proposal  was  welcomed  by  the 
European  Council  of  6 March 2025.  Following 
the  request  of  Austria,  on 
17 February 2026 the Council, upon a recommendation from the Commission, adopted 
a  Recommendation  allowing  Austria  to  deviate  from  the  recommended  maximum 
growth  rates  of  net  expenditure  (9).  The  period  when  the  national  escape  clause  is 
activated  (2025-2028)  allows  Austria  to  reprioritise  government  expenditure  or 
increase  government  revenue  so  that  lastingly  higher  defence  expenditure  would  not 
endanger fiscal sustainability in the medium term.  
On  29 April 2026,  Austria  submitted  its  2026  Annual  Progress  Report  (10)  on 
adherence  to  the  recommended  maximum  growth  rates  of  net  expenditure,  the 
implementation  of  the  set  of  reforms  and  investments  underpinning  the  extension  of 
the adjustment period 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  implementing  its  recovery  and  resilience  plan  in 

Council Recommendation of  8 July 2025  endorsing the national medium-term fiscal-structural plan of 
Austria (OJ C, C/2025/ 3958, 20.08.2025, ELI: http://data.europa.eu/eli/C/2025/3958/oj). 
Council  Recommendation  with  a  view  to  bringing  an  end  to  the  situation  of  an  excessive  deficit  in 
Austria adopted on 8 July 2025. All documents related to the excessive deficit procedure of Austria can 
be 
found  at:  https://economy-finance.ec.europa.eu/economic-governance-framework/stability-and-
growth-pact/corrective-arm-excessive-deficit-procedure/excessive-deficit-procedures-
overview/Austria_en. 
Communication from the Commission to the European Parliament,  the Council, the European Central 
Bank,  the  European  Economic  and  Social  Committee,  the  Committee  of  Regions  and  the  European 
Investment Bank, 2026 European Semester – Spring Package, COM(2026)200 final. 
Communication  from  the  Commission,  'Accommodating  increased  defence  expenditure  within  the 
Stability and Growth Pact’, Brussels, 19.03.2025, C(2025)2000 final. 
Council Recommendation of 17 February 2026 allowing Austria to deviate from the maximum growth 
rates  of  net  expenditure  as  set  by  the  Council  under  Regulation  (EU)  2024/1263  (Activation  of  the 
national 
ELI: 
http://data.europa.eu/eli/C/2026/1158/oj). 
The  2026  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. 

C/2026/1158, 

04.03.2026, 

clause), 

escape 

(OJ 

C, 

EN 

3 

  EN 

 
accordance with Article 27 of Regulation (EU) 2021/241. The report on action taken 
under the excessive deficit procedure is integrated in the Annual Progress Report. 

(10)  Real  GDP  growth  in  2025  was  0.6%  and  HICP  inflation  stood  at  3.6%.  The 
Commission  Spring  2026  Forecast  projects  real  GDP  to  grow  by  0.6%  in  2026  and 
0.9% in 2027, and HICP inflation to stand at 3.0% in 2026 and 2.5% in 2027. 
(11)  Based  on  data  provided  by  Eurostat  (11),  Austria’s  general  government  deficit 
decreased from  4.6% of  GDP in  2024 to 4.2% of GDP in  2025. The decrease in  the 
deficit in 2025 mainly reflects the implementation of a consolidation package. Based 
on policy measures known by the cut-off date of the forecast, the Commission Spring 
2026 Forecast projects a deficit of 4.1% of GDP in 2026 and 2027. 

(12)  Based  on  the  Commission’s  estimates,  the  fiscal  stance  (12),  which  includes  both 
nationally  and  EU  financed  expenditure,  was  contractionary,  by  1.1%  of  GDP,  in 
2025. It is projected to be contractionary in both 2026 and 2027, by 0.4% of GDP in 
each year. 

(13)  Based on data provided by Eurostat (13), Austria’s general government debt increased 
from  80.0%  of  GDP  at  the  end  of  2024  to  81.5%  of  GDP  at  the  end  of  2025.  The 
increase in the debt ratio in 2025 mainly reflects the fiscal deficit, modest GDP growth 
and credit financed investments in infrastructure projects by some extrabudgetary units 
in the central government sector. Based on policy measures known at the cut-off date 
of the forecast, the Commission Spring 2026 Forecast projects the debt-to-GDP ratio 
to increase to 83.4% by the end of 2026 and to further increase to 84.9% by the end of 
2027. 

(14)  Based on Eurostat data (14), total general government defence expenditure in Austria 
amounted  to  0.7%  of  GDP  in  2025,  corresponding  to  an  increase  of  0.1  percentage 
points  compared  to  the  reference  year  2021.  According  to  the  Commission  Spring 
2026 Forecast, it is projected at 0.9% of GDP in 2026, corresponding to an increase of 
0.3 percentage points of GDP compared to 2021. 

(15)  The  Union  continues  to  face  risks  of  energy  supply  disruptions  and  elevated  price 
volatility,  exacerbated  by  geopolitical  tensions  which  affect  global  oil  and  gas 
markets.  Experience  from  the  2022–2023  energy  crisis  has  shown  that  broad  and 
untargeted  measures  entail  large  fiscal  costs  and  are  socially  and  economically 
inefficient. Since the outbreak of the war in the Middle East in February 2026, Austria 
adopted  a  fiscal  policy  measure  to  mitigate  the  impact  of  high  energy  prices  on 
households and firms (15), namely, an untargeted reduction in excise duties on petrol 
and  diesel  in  April  and  May  2026.  According  to  the  Commission  Spring  2026 
Forecast,  the  fiscal  cost  of  this  measure  is  projected  to  amount  to  less  than  0.1%  of 
GDP in 2026, also if it were to be extended until the end of the year.  

11 
12 

13 
14 
15 

Eurostat-Euro Indicators, 22 April 2026. 
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. 
Eurostat-Euro Indicators, 22 May 2026. 
Eurostat, government expenditure by classification of functions of government (COFOG). 
This reflects the situation at the cut-off date of the Commission’s Spring 2026 Forecast (4 May 2026). 

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(16)  Based on the Commission’s calculations, net expenditure in Austria grew by 2.0% in 
2025.  The  net  expenditure  growth  in  2025  is  below  the  recommended  maximum 
growth rate. 

(17)  Based  on  the  Commission’s  calculations,  net  expenditure  in  Austria  is  projected  to 
grow by 2.1% in 2026, and 4.1% cumulatively over 2025 and 2026. The projected net 
expenditure growth in 2026 is below the recommended maximum growth rate. When 
considering  2025  and  2026  together,  the  projected  cumulative  growth  rate  of  net 
expenditure is also below the recommended maximum growth rate.  

(18)  The recommendation endorsing the medium-term  plan of Austria specifies the set  of 
reforms and investments underpinning the extension of the adjustment period, together 
with a timeline for their implementation. Taking into account the information provided 
by  Austria  in  its  Annual  Progress  Report,  the  Commission  finds  that  the 
implementation  of  the  key  steps  of  these  reforms  and  investments  that  were  due  by 
30 April 2026 seems to be broadly on track. The Commission considers that, overall, 
Austria has complied with its commitments in a satisfactory manner (16). 

(19)  Demographic  ageing  poses  a  significant  challenge  for  the  fiscal  sustainability  of  the 
pension  system.  Public  pension  expenditure  is  among  the  highest  in  the  Union,  at 
14.5% of GDP in 2025, reflecting also low effective retirement age. Despite recent and 
past  measures,  including  stricter  eligibility  rules  for  early  retirement  schemes  as  of 
2026, and the convergence in male and female retirement age until 2033, effective and 
statutory  retirement  ages  are  projected  to  remain  low  compared  to  other  Member 
States. Federal transfers to the pension system are projected to  remain significant. In 
contrast, supplementary pension schemes remain underdeveloped, with low coverage 
and limited financial depth. 

(20)  Besides  demographic  ageing,  fragmentation  and  cost-inefficiencies  contribute  to 
elevated  levels  of  healthcare  and  long-term  care  expenditure,  thereby  weighing  on 
public finances. Spending remains skewed towards in-patient hospital care and weak 
adherence to expenditure targets continues to undermine budgetary control. Reforms, 
including  the  establishment  of  a  healthcare  reform  fund  in  2026,  aim  to  strengthen 
primary  care  and  digitalisation,  but  their  impact  is  constrained  by  insufficient 
regulatory  support  and  weak  coordination  of  patient  pathways.  The  digitalisation  of 
the healthcare system remains incomplete, limiting efficiency gains. Despite relatively 
high  spending  on  disease  prevention,  there  is  scope  to  increase  efforts  in  the 
management  of  behavioural  risk  factors  and  prevention  of  non-communicable 
diseases.  In long-term care, governance weaknesses  persist, including  the absence of 
binding  expenditure  targets  and  limited  integration  with  healthcare  services.  The 
relatively high share of residential care and regional disparities in provision, point to 
scope for improving cost-effectiveness and ensuring more uniform quality of care. 

(21)  Austria's  fiscal  framework  is  marked  by  a  complex  system  of  intergovernmental 
transfers  between  federal  and  regional  authorities,  which  constrains  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  2025  came  from  subnational  sources.  At  the  same  time,  the  financing  of 
essential services such as healthcare, childcare and public transport depends partially 

16 

Communication from the Commission to the European Parliament,  the Council, the European Central 
Bank,  the  European  Economic  and  Social  Committee,  the  Committee  of  Regions  and  the  European 
Investment Bank, 2026 European Semester – Spring Package, COM(2026) 200 final. 

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on  expenditure  provided  by  the  federal  states  and  municipalities.  Austria  revised  the 
Austrian Stability Pact (2026-2031) in November 2025 to set debt and deficit targets 
for  federal,  regional  and  local  governments  and  to  introduce  monthly  reporting 
requirements  at  the  regional  level,  but  concrete  changes  to  expenditure  assignments 
and  accountability  mechanisms  were  modest.  The  pact  largely  builds  on  existing 
the  complex  distribution  of 
arrangements  and  does  not  fundamentally  alter 
competencies  across  levels  of  government.  Moreover,  current  inter-municipal 
cooperation  is  uneven.  Linking  municipal  data  into  an  interoperable  data  exchange 
platform  and  promoting  multi-purpose  service  partnerships  (Mehrzweckverbände)  at 
the functional level could boost efficiency, service quality, and cost savings.  

(22)  The  tax  mix  continues  to  rely  heavily  on  labour  income  and  consumption.  In  2025, 
Austria had the fifth-highest tax-to-GDP ratio in the EU with a significant average tax 
wedge on labour (17). Since 2023, personal income tax brackets have been indexed to 
inflation,  preventing  a  further  increase  of  the  tax  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. 

(23)  The systematic, meaningful and timely involvement of local and regional authorities, 
social partners, civil society and other relevant stakeholders remains essential in order 
to  ensure broad ownership  for the successful  implementation  of the Union’s funding 
instruments, as well as in the context of the European Semester. 

(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+) in Austria, is above the average pace at EU 
level, both in terms of project selection and payments. It is important to keep current 
momentum,  while  maximising  the  impact  of  investments  on  the  ground.  Austria  is 
already taking action under its cohesion policy programmes to boost competitiveness 
and  growth.  Nevertheless,  some  areas  may  require  further  strengthening 
in 
implementation, including those relating to energy efficiency and integrated territorial 
and urban development. It is essential to ensure that the new investments identified by 
Austria in its mid-term review of the cohesion policy funds, notably those linked to the 
five priorities identified in the Mid-Term Review Regulation (18), are deployed rapidly 
and effectively. 

(25)  Austria faces several challenges related to the sustainability of its public finances, the 
labour  market  and  skills  development,  business  dynamism  and  competitiveness,  its 
persistent reliance on fossil fuels and high energy prices.  

(26)  Despite  steps  to  simplify  business  creation  and  to  expand  the  range  of  funding 
instruments,  a  lack  of  risk  financing  continues  hampering  the  scaling  of  innovative 
firms. Local venture and growth capital markets remain underdeveloped compared to 
leading  EU  peers,  whereas  start-up  funding  dropped  by  56%  in  2025  to  the  lowest 
level since 2019. Gaps in venture capital financing – currently exacerbated by barriers 
hindering  institutional  investors  to  invest in  long-term  equity  instruments  –  could  be 
narrowed  by  planned  reforms  to  the  laws  governing  pension  funds  and  insurers. 

17 
18 

OECD (2026), Taxing Wages 2026. 
Regulation  (EU)  2025/1914  of  the  European  Parliament  and  of  the  Council  of  18 September 2025 
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. 

EN 

6 

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Strengthening  the  supplementary  pension  pillar  could  also  contribute  to  deepening 
Austria's equity market and mobilising additional capital for innovative companies. 

(27)  Despite the high level of R&D investment (among the top three EU Member States), 
the  translation  into  marketable  products  and  disruptive  innovation  remains  limited. 
The European Innovation Scoreboard 2025 shows Austria’s relative underperformance 
in SMEs introducing product innovations. To address this, the government announced 
measures to improve R&D capabilities in its Industrial Strategy 2035 and adopted the 
third Research, Technology and Innovation Pact for 2027 to 2029, with a total funding 
envelope  of  around  EUR  5.5  billion.  Thorough  implementation  of  these  measures, 
including through a robust coordination of competencies across ministries and impact-
oriented  monitoring  is  needed  to  ensure  that  Austria’s  high  R&D  spending  achieves 
marketable innovation outcomes comparable to leading member states. 

(28)  Lagging  adoption  of  advanced  digital  technologies  by  companies  remains  a  further 
challenge  for  growth  and  productivity.  Progress  in  digitalising  Austria’s  economy 
remains uneven. SMEs demonstrate a slightly above-EU-average level of basic digital 
intensity,  and  AI  adoption  among  companies  has  a  strong  momentum.  Nevertheless, 
companies’  uptake  of  other  advanced  digital  technologies,  notably  cloud  computing 
and data analytics, continues to be below the EU average. Targeted measures are still 
needed  to  address  this  gap,  including  financial  incentives,  stronger  support  for 
business uptake of cloud and data solutions, and investment in digital skills. 

(29)  Administrative and regulatory burden weighs on the business environment in Austria, 
slowing  down  permitting  procedures  and  requiring  firms  to  commit  significant 
resources  to  administrative  tasks.  Progress  was  made  by  enabling  a  fully  digital 
business  registration  process,  but  significant  further  action  is  needed.  The  proposed 
reform  of  the  Trade  Code  has  the  potential  to  accelerate  business  permitting  and 
reduce  administrative  burden,  but  full  implementation  requires  effective  cooperation 
across local, provincial and federal levels. 

(30)  Austrian consumers are negatively affected by a lack of competition in certain sectors, 
which contributes to higher prices. Territorial supply constraints and barriers to market 
entry  are  important  drivers.  Regulatory  restrictiveness  for  certain  professions  and 
service  providers,  such  as  within  civil  engineering,  further  limits  competition  and 
creates obstacles including for the cross-border provision of services. 

(31)  Housing affordability challenges emerged due to rising construction costs and waning 
supply  of  new  housing,  putting  new  entrants  into  the  housing  market  at  a 
disadvantage.  A  review  of  complex  technical  standards  known  as  “established 
commercial  practice”  with  a  view  to  reducing  requirements  that  are  not  strictly 
necessary for safety or energy efficiency could pave the way for smart simplification 
that lowers costs. 

(32)  Austria  took  several  measures  in  2025  to  tackle  high  energy  prices.  In  addition  to 
short-term measures aimed at lowering energy prices for energy-intensive industry and 
lowering the electricity levy for the year 2026, the Electricity Market Act was adopted. 
This new Act represents an important shift in the regulatory framework of the Austrian 
electricity  market  and  will  help  increase  the  flexibility  of  the  energy  and  enables 
power  purchase  agreements.  However,  full  and  timely  implementation  of  the 
Electricity Market Act is essential to achieve sustainably and structurally lower prices. 
Moreover,  the  country’s  reliance  on  natural  gas  for  electricity  generation  in 
combination with limited non-fossil flexibility and interconnection capacity continues 
to drive up energy prices, which stand significantly above the EU-average. While this 

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reliance on natural gas persists, Austria has taken actions to improve energy security 
by diversifying the sources of its gas supply. 

(33)  Austria  continues  to  progress  in  its  clean  energy  transition  pathway,  but  fossil  fuels 
still accounted for more than half of its energy mix in 2024. To meet its 2030 targets, 
Austria  will  have  to  accelerate  the  pace  of  renewables  capacity  and  infrastructure 
expansion,  in  particular  for  wind  energy,  where  only  0.2  GW  of  new  capacity  was 
added  in  2025.  Renewable  energy  accounted  for  83.9%  of  electricity  generation  in 
2025, with a high share of hydro power. Given the seasonal variability of hydropower 
and  photovoltaics,  wind  energy,  which  represented  11.8  %  of  the  renewables’ 
generation  in  2024,  is  a  cost-efficient  complement  to  reduce  the  need  for  electricity 
imports,  especially  in  winter.  Shortening  permitting  times  and  designating  sufficient 
acceleration areas, in particular for wind energy will be essential to match the targets 
set  out  in  the Renewables Expansion  Act  and the  National  Energy  and  Climate Plan 
(NECP).  Accelerating  the  upgrade  and  extension  of  the  electricity  grid,  including 
cross-border,  and  increasing  storage  remain  key  to  drive  the  clean  energy  transition. 
This  requires  both  more  investments  and  speed,  including  in  permitting,  so  that 
additional renewable energy generation can be integrated into the system. 

and 

energy- 

(34)  The current pace of decarbonisation remains insufficient for  Austria to meet its 2030 
climate  targets  and  2040  climate  neutrality  goal.  In  2024,  greenhouse  gas  emissions 
fell by 3%, significantly slower than in 2023, with preliminary estimates indicating an 
emission  increase  in  2025.  Industrial  emissions  declined  recently,  yet  the  sector 
remains 
industry 
decarbonisation  and  the  development  of  clean  industrial  infrastructure,  including  its 
physical  expansion  and  regulatory  frameworks,  should  be  further  developed,  with  a 
focus  on  regions  with  high  emission  intensity.  Transport  emissions  fell  in  2024, 
primarily due to lower freight traffic, but policy progress remains limited. Phasing out 
fossil-fuel  subsidies  and  accelerating  transport  electrification,  including  road  freight 
transport, will be important. Further reducing emissions will also depend on improving 
energy  efficiency  in  industry,  transport  and  buildings,  including  through  regulatory 
reforms of rental and property regulations to facilitate building renovation. 

emission-intensive.  Measures 

supporting 

(35)  The  labour  market  faces  challenges  to  meet  labour  demand  against  a  background  of 
demographic ageing and relatively high labour taxation and social contributions which 
are among the highest in the EU. Employment continued to expand gradually, driven 
mainly by the increase in the statutory retirement age for women. The average number 
of  usual  weekly  hours  worked  remained  low  at  35.8  hours  (vs.  37.3  at  EU  level). 
Women’s  activity  and  employment  rates  in  2025  stood  at  75.1%  and  74.2% 
respectively  (vs.82.7% and 81% for men). The related gender gaps were  high, at 7.6 
and 6.9 pps. Austria also has one of the widest gender gaps in part-time employment 
in the EU, at 37.1 pps. in 2025, with almost half of all women (49.6%) working part-
time.  The  high  tax  wedge  on  labour  discourages  moving  from  part-time  to  full-time 
work,  contributing  to  labour  shortages  and  limiting  economic  potential.  Despite 
improvements in expanding early childhood education and care, access, coverage and 
access remain uneven across the federal states. The main drivers are the fragmentation 
of  the  governance  system,  financing  and  staff  shortages.  A  compulsory  quality 
framework with clear quality standards could help address uneven quality at the local 
level. 

(36) 

In light of the crucial role of human capital in enhancing the Union’s competitiveness 
and  strategic  autonomy,  in  2026  the  Council  recommended  that  Member  States  take 
action  to  urgently  address  human  capital  related  structural  challenges  in  the  areas  of 

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skills  and  education,  which  hamper  competitiveness.  The  2026  country-specific 
recommendations  addressed  to  Austria  can  contribute  to  the  implementation  of  the 
Council Recommendation on human capital in the Union. 

(37)  Labour shortages started to decline, yet they still remain at a comparatively high level. 
Skills shortages and regional mismatches continue to hamper the recruitment of skilled 
tradespeople,  for  jobs  requiring  medium-level  qualifications.  High  vacancy  rates  in 
some  regions  contrast  with  relatively  high  unemployment  in  others.  Barriers  to 
regional labour mobility include differences in rental prices, social housing availability 
and  disparities  in  the  availability  of  early  childhood  education  and  care  for  children 
under  the  age  of  three.  The  vocational  education  and  training  system,  despite  being 
well  developed,  faces  growing  challenges.  Around  24 500  aspiring  apprentices  were 
unable to find placements in 2025, with small- and medium-sized enterprises (SMEs) 
facing  greater  challenges.  Training  quality  is  also  a  concern,  including  the  use  of 
digital tools. 

(38)  Employment  outcomes  remain  weak  compared  to  the  EU  average  for  older  people, 
low-qualified  workers,  and  people  with  a  migrant  background.  Recent  reforms  to 
increase  employment  include  support  for  the  re-employment  of  older  long-term 
unemployed,  tighter  access  to  early  retirement,  the  introduction  of  a  partial  pension 
and  the  announcement  of  tax  incentives  for  work  after  the  statutory  retirement  age. 
However, labour market integration policies for people with a migrant background and 
low-qualified  jobseekers  remain  insufficient.  Strengthened  upskilling  and  reskilling 
efforts, together with a strengthened coordination of the future ‘lifelong learning 2040 
strategy’ between the federal states and the federal level, could further improve basic 
skills and increase the labour market integration of both groups.  

(39)  Austria’s social situation worsened in 2025, with a rise in the share of people at risk of 
poverty or social exclusion. Low incomes grew at a slower pace than average incomes 
and the impact of social transfers in reducing poverty became less effective. Children 
were  disproportionately  affected,  with  more  than  one  in  four  at  risk  of  poverty  or 
social  exclusion  an  increase  by  4.4  pps  from  2024  and  surpassing  the  EU  average. 
AROPE levels also increased among those with low qualifications, and among people 
born  outside  the  EU.  Despite  recent  reforms,  there  remains  a  need  to  improve  the 
accessibility and adequacy of training courses  for people with  a migrant  background 
and  low-qualified  people.  In  particular,  sufficient  German  language  courses  would 
improve  employability.  In  addition,  many  non-EU  workers  are  overqualified  (41.2% 
in  2024) compared to  Austrians (24.3%)  and other EU nationals  (34.6%), as Austria 
currently  does  not  have  a  standardised  national  system  for  recognising  foreign 
qualifications.  Faster  and  more  uniform  recognition  of  qualifications  could  mobilise 
underused  potential  in  the  labour  market,  further  the  integration  of  migrants,  and 
contribute to reducing their poverty risks.  

(40)  Austria continues to face challenges to increase the level of basic skills. About 1 in 4 
students  lack  basic  skills  and  this  share  is  significantly  higher  among  students  from 
disadvantaged  and  migrant  backgrounds.  Austria  is  off-track  to  reach  the  European 
Education  Area  target  of  less  than  15%  underachievement  by  2030,  with  wide 
increasing, 
socio-economic  and  regional  disparities.  Early  school 
particularly  among  native  born  disadvantaged  learners,  and  those  with  a  migrant 
background.  OECD  Talis  2024  data  show  a  very  low  rate  of  inclusion  in  schools 
(8.1%, EU average: 50.2). Educational outcomes remain uneven across federal states 
and  persistent  teacher  and  staff  shortages  constrain  the  capacity  to  improve  learning 
outcomes.  Keeping  young  people  in  general  education  with  systematic  follow  up 

leaving 

is 

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(41) 

systems,  targeted  support  combining  basic  skills,  language  learning,  addressing 
teacher  and  staff  shortages  and  promoting  inclusive  teacher  training  and  flexible 
second-chance  pathways  could 
integration,  employability  and  social 
cohesion. 

improve 

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  2026,  the  Council  recommended  that  the  euro-area  Member  States  take 
action, including through their RRPs, to implement the 2026 Recommendation on the 
economic  policy  of  the  euro  area.  For  Austria,  the  recommendation  (1)  helps 
implement  the  first,  second,  third  and  fifth  recommendations  on  the  euro  area, 
recommendation  (2)  helps  implement  the  fourth  recommendation  on  the  euro  area, 
eleventh 
recommendation 
recommendations on the euro area, recommendation (4) helps implement the seventh 
recommendation  on  the  euro  area  and  the  recommendation  (5)  helps  implement  the 
fifth recommendation on the euro area. 

seventh,  ninth 

(3)  helps 

implement 

and 

the 

HEREBY RECOMMENDS that Austria take action in 2026 and 2027 to:  

1. 

2. 

3. 

Continue adhering to the maximum growth rates of net expenditure recommended by 
the  Council  on  8 July 2025,  with  a  view  to  bringing  an  end  to  the  situation  of  an 
excessive deficit, while making use of the flexibility under the national escape clause 
for  higher  defence  expenditure.  Reinforce  defence  spending  and  readiness  while 
ensuring  spending  efficiency  and  gradually  adapting  the  budget  to  sustain 
structurally higher defence spending. Ensure that any measures taken to mitigate the 
impact of the hike in energy prices are temporary, targeted at protecting vulnerable 
households or at addressing the needs of energy-intensive firms, preserve incentives 
for  energy  savings  while  ensuring  that  their  fiscal  cost  is  compatible  with  the 
commitments  under  the  EU  fiscal  framework.  Implement  the  set  of  reforms  and 
investments  underpinning  the  extended  adjustment  period  as  recommended  by  the 
Council on 8 July 2025. Take decisive action to safeguard the sustainability of public 
finances, including by improving the fiscal sustainability of the healthcare, long-term 
things,  streamlining  hospital 
care  and  pension  systems,  by,  among  other 
infrastructure,  improving  the  cost-effectiveness  of  healthcare  and  long-term  care, 
strengthening digitalisation and disease prevention to foster expenditure control, and 
significantly  increasing  the  effective  retirement  age.  Simplify  and  rationalise  fiscal 
relationships  and  responsibilities  across  layers  of  government  and  ensure  financing 
and  spending  responsibilities  are  clearly  aligned.  Improve  the  tax  mix  in  a  fiscally 
neutral manner to reduce the high tax wedge on labour. 

Ensure continuity of reforms and investments implemented under the Recovery and 
Resilience  Facility.  Sustain  implementation  momentum  under  cohesion  policy 
programmes  building,  where  appropriate,  on  the  reallocation  to  strategic  priorities 
and flexibilities in the mid-term review of the cohesion policy framework. 

Promote  business  dynamism,  and  the  creation  and  growth  of  young  companies, 
including by providing better access to venture and growth capital and by facilitating 
equity investment by institutional investors and strengthening supplementary pension 
schemes.  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  and  reduce  administrative  burden,  particularly  for 
SMEs, including by accelerating permitting procedures. Address regulatory barriers 

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4. 

5. 

in  the  services  sector  and  strengthen  competition  to  lower  prices.  Address  high 
construction costs. 

Implement  the  Electricity  Act,  improve  the  flexibility  of  the  energy  system  and 
incentivise  power  purchase  agreements.  Improve  energy  efficiency,  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,  especially  in  regions 
with high emission intensity.  

Create  incentives  to  boost  the  number  of  hours  worked  overall  and  the  full-time 
labour  market  participation  of  women,  including  by  improving  quality  and 
availability of childcare services. Tackle the shortage of skilled workers and address 
regional  mismatches  including  by  improving  labour  market  outcomes  for  older 
workers and for people with  a migrant  background through the recognition  of their 
qualifications. Raise the levels of basic skills from an early age.  

Done at Brussels, 

For the Council 
The President 

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