CELEX: 52011SC0801
Language: en
Date: 2011-06-07 00:00:00
Title: Recommendation for a COUNCIL RECOMMENDATION on the National Reform Programme 2011 of Austriaand delivering a Council opinionon the updated Stability Programme of Austria 2011-2014

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		52011SC0801
		
			Recommendation for a COUNCIL RECOMMENDATION on the National Reform Programme 2011 of Austriaand delivering a Council opinionon the updated Stability Programme of Austria 2011-2014 /* SEC/2011/0801 final  */
			
				
		
		
			
			   	Recommendation for a
COUNCIL RECOMMENDATION
on the National Reform Programme 2011 of
Austria
and delivering a Council opinion
on the updated Stability Programme of Austria 2011-2014
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 148(4)
thereof,
Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1],
and in particular Article 5(3) thereof,
Having regard to the recommendation of the
European Commission[2],
Having regard to the conclusions of the
European Council,
Having regard to the opinion of the
Employment Committee,
After consulting the Economic and Financial
Committee,
Whereas:
(1)                   
On 26 March 2010, the European Council agreed to
the European Commission's proposal to launch a new strategy for jobs and
growth, Europe 2020, based on enhanced coordination of economic policies, which
will focus on the key areas where action is needed to boost Europe’s potential
for sustainable growth and competitiveness.
(2)                   
On 13 July 2010, the Council adopted a
recommendation on the broad guidelines for the economic policies of the Member
States and the Union (2010 to 2014) and on 21 October 2010, adopted a decision
on guidelines for the employment policies of the Member States[3],
which together form the “integrated guidelines”. Member States were invited to
take the integrated guidelines into account in their national economic and
employment policies.
(3)                   
On 12 January 2011, the Commission adopted the
first Annual Growth Survey, marking the start of a new cycle of economic
governance in the EU and the first European semester of ex-ante and integrated
policy coordination, which is anchored in the Europe 2020 strategy. 
(4)                   
On 25 March 2011, the European Council endorsed
the priorities for fiscal consolidation and structural reform (in line with the
Council’s conclusions of 15 February and 7 March 2011 and further to the
Commission’s Annual Growth Survey). It underscored the need to give priority to
restoring sound budgets and fiscal sustainability, reducing unemployment
through labour market reforms and making new efforts to enhance growth. It
requested Member States to translate these priorities into concrete measures to
be included in their Stability or Convergence Programmes and National Reform
Programmes.
(5)                   
On 25 March 2011, the European Council also
invited the Member States participating in the Euro Plus Pact to present their
commitments on time for their inclusion in their Stability or Convergence
Programmes and their National Reform Programmes.
(6)                   
On 27 April 2011, Austria submitted its updated
Stability Programme covering the period 2011-2014 and on 2 May 2011 its 2011
National Reform Programme. In order to take account of the interlinkages, the
two programmes have been assessed at the same time.
(7)                   
The Austrian economy entered the crisis on sound
fundamentals, without having suffered from any major imbalances or distortions
in the period preceding it. In spite of that, the financial and economic crisis has pushed the
economy into the deepest recession for decades. Overall, real GDP contracted by
almost 4% in 2009. As a result of the crisis,
employment fell by about 1% in 2009, lifting unemployment to 4.8% (from 3.8% a
year earlier).The crisis halted the previous continuous growth of current
account surplus. The economic
and financial crisis took its toll on public finances. As a result of the
adoption of the stimulus packages and automatic stabilisers operating fully,
the general government deficit reached 4.1% and 4.6% of GDP in 2009 and 2010
respectively. Public debt went up to 69.6% and 72.3% of GDP in the same years.
Since most of the stimulus measures were of permanent nature, there was a need
for fiscal consolidation as soon as economic conditions had improved. A
consolidation package, amounting to close to 1% of GDP, has been adopted in the
budget law for 2011. Since the third quarter of 2009, the economy has been
steadily recovering from the crisis on the back of improved foreign demand and
in particular of stronger economic activity in Germany. Overall, real GDP
growth reached 2% in 2010. 
(8)                   
Based on the assessment of the updated Stability
Programme pursuant to Article 5(1) of Council Regulation (EC) No 1466/97, the
Council is of the opinion that the macroeconomic scenario underpinning the
budgetary projections is plausible, and too favourable towards the end of the
programme period. The main goal of the medium-term
budgetary strategy, presented in the latest update of the Stability Programme,
is to gradually reduce the general government deficit from 4.6% of GDP in 2010
to 2.4% of GDP in 2014, chiefly by expenditure restraint. There are mainly
downside risks to these targets due to the fact that the measures to underpin
the consolidation path at the sub-national level are unspecified and the fact
that savings from some of the measures adopted at the
federal level will not materialise, e.g. gains from the anti-tax-fraud campaign
the predicted impact of which seems to be highly speculative. On the other
hand, a positive risk factor is the multi-annual expenditure framework
introduced for the federal government in 2009, which seems to have contributed
to enhancing predictability of the budgetary process in the medium term, albeit
only at the federal level. The programme stipulates
that the debt-to-GDP ratio will grow from 72.3% in 2010 to 75.5% in 2013 before
declining to 75.1% in 2014. However, there are some
risks attached to this projection, which relate to the growing debt of
state-owned companies classified outside the government sector and potential
further burden stemming from support measures to the banking sector. At the
same time, however, the debt ratio might turn out lower as it is probable that
the banks which received the public support during the crisis will pay it back
ahead of the schedule that is assumed in the programme.
(9)                   
According to the Programme, the general
government deficit is expected to fall below the 3% reference value in 2013,
which is in line with the deadline set by the Council. However, the annual
average fiscal effort of 0.35% of GDP envisaged by the programme in the period
2011-2013 is well below the 0.75% of GDP effort that the Council invited
Austria to provide.
(10)               
While Austria has a developed National Stability
Pact in place, further reforming the fiscal relations between various layers of
government would bring in substantial savings, support fiscal consolidation and
free up resources for growth-enhancing investment in areas such as R&D and
education. It is widely acknowledged that current relations are complex: not
only are revenues from most individual taxes shared among the different
territorial levels in fixed proportions, but also decision-making in many areas
is divided among various levels of authority. For a number of activities,
revenue-raising and spending responsibilities do not reside within the same
level of government. Notable examples of inefficiencies stemming from the
current form of these fiscal relations are found in the health care and
education sectors.
(11)               
The average tax wedge in Austria is among the
highest in the EU. Compared with other EU countries, the social security
contributions of employees are very high. The reduction of unemployment
insurance contributions of low-wage earners in 2008 and the income tax reform
of 2009 helped reduce the labour tax burden, but could not prevent the tax
wedge from increasing slightly for both low and average income earners as
compared with the start of the last decade. This wedge has a negative impact on
employment, in particular of low-paid and low-skilled workers. 
(12)               
The employment rate of older workers in Austria
is still well below the EU average in spite of a sharp rise in the last decade.
Early retirement schemes and disability pensions are still widely used.
Altogether 72% of all new pensions in 2010 were granted before the statutory
retirement age was reached. Another factor contributing to the low employment
rate of older workers is the still relatively low statutory retirement age for
women (60). Given the demographic developments in Austria, raising the
effective retirement age and improving the framework enabling older workers to
stay longer in the labour market are important in the context both of ensuring
sustainability of public finances and of boosting the labour supply, which is
forecast to start shrinking from 2020 onwards. 
(13)               
The female employment rate in Austria is
relatively high, associated with one of the highest rates of part-time work.
Women's jobs are highly concentrated in low-wage employment. These patterns
result in a gender pay gap of 25.4% which is the second highest in the EU and
one of the factors leading to a relatively high poverty risk for women. A
reason for female part-time work is the uneven distribution between women and
men of care obligations for children and the elderly and the lack of child care
and long-term care services. 
(14)               
The education system is characterised by
"early tracking", whereby pupils have to decide at the age of 10
about their future education path with limited permeability between paths, and
widespread half-day schooling. This can result in suboptimal educational
outcomes for vulnerable youth, in particular those with a migrant background. Early
choices predetermine to a large extent future education paths, making it more
difficult to reach higher education levels at a later stage. A common school
for all 10-14 year-olds would help increase equality of opportunities in the
education system and help tackle school drop-out rates.
(15)               
Competition in the services sector, in
particular network services such as telecommunications, transport, utilities,
as well as retail trade and professional services, is not sufficiently
developed. Productivity growth has been sluggish and the market structure has
not fostered purchasing power and consumer demand. Promoting competition
through facilitating market entry, reducing the statutory regulation of trades
and professions and ensuring competitive pricing would expand consumer choice
and affordability. Austria has accumulated lengthy delays in implementing the
Services Directive; addressing these could contribute to unlocking growth. In
particular the "horizontal law", a federal law implementing the main
principles of the Directive, is still pending. 
(16)                
Austria has made a number of commitments under
the Euro Plus Pact[4]. The commitments refer to
the three of the four areas of the Pact. On the fiscal side, the measures
address the need to raise the effective retirement age as well as control
public expenditure more effectively at the various levels of government. For
employment, the focus is on combating youth unemployment, and for
competitiveness, on investing further in research and technical education, as
well as on developing models for all-day schools. The initiatives presented
under the Pact are in line with the National Reform Programme and are in
compliance with the Federal Budgetary Framework Law and the Stability
Programme. However, while the measures address some of the main socio-economic
issues facing the country, there are outstanding challenges that could usefully
have been covered in the commitments, including in the areas of fiscal policy,
education, competition and innovation. The Euro Plus Pact commitments have been
assessed and taken into account in the recommendations. 
(17)               
The Commission has assessed the Stability
Programme and National Reform Programme, and the Euro Plus Pact commitments for
Austria[5]. It has taken into
account not only their relevance for sustainable fiscal and socio-economic
policy in Austria but also their observance of EU rules and guidance, given the
need to reinforce the overall economic governance of the European Union by
providing EU-level input into future national decisions. It considers that,
given the favourable economic conditions, the fiscal consolidation effort
should be stepped up, in particular in 2012, and that the fiscal relations
between the various layers of government should be reformed further. Reducing
the tax wedge, improving educational outcomes, and combating gender
segmentation would be beneficial to the dynamism of the labour market, while
enhancing competition and fostering innovation would increase competitiveness. 
(18)               
In light of this assessment, also taking into
account the Council Recommendation under Article 126(7) of the Treaty on the
Functioning of the European Union of 2 December 2009, the Council has examined
the 2011 update of the Stability Programme of Austria and its opinion[6]
is reflected in particular in its recommendation under (1) and (2) below,
HEREBY RECOMMENDS that Austria
should take action within the period 2011-2012 to:
(1)                   
Take advantage of the
ongoing economic recovery to accelerate the correction
of the excessive deficit. To this end, adopt and implement the necessary
measures, including at the sub-national level, in order to ensure an average
annual fiscal effort of at least 0.75% of GDP in 2012 and 2013. 
(2)                   
Take steps to further strengthen the national
budgetary framework by aligning legislative, administrative, revenue-raising
and spending responsibilities across the different levels of government, in
particular in the area of health care. 
(3)                   
In consultation with the social partners and
according to national practices, take measures to phase out the current early
retirement scheme for people with long insurance periods and bring forward the
increase in women's statutory retirement age to ensure the sustainability and
adequacy of the pension system. Apply strictly the conditions for access to the
invalidity pension scheme.
(4)                   
Take measures to enhance participation in the
labour market, including the following: reduce, in a budgetary neutral way, the
tax and social security burden on labour, especially for low and medium-income
earners; implement the National Action Plan on the
equal treatment of women and men on the labour market, including improvements
in the availability of care services and of all-day
school places to increase the options for women to work
full-time and in the high gender pay gap; take steps to
improve educational outcomes and prevent school
drop-out.
(5)                   
Take further steps to foster competition, in
particular in the services sectors, by relaxing barriers to entry, removing
unjustified restrictions on trades and professions, as well as enhancing the
powers of the competition authorities. Accelerate the adoption of the outstanding "horizontal law"
implementing the Services Directive.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 2.8.1997, p. 1.
[2]               OJ C , , p. .
[3]               Maintained for 2011 by Council Decision 2011/308/EU
of 19 May 2011.
[4]               More details on the commitments made under the Euro
Plus Pact can be found in SEC(2011) 728.
[5]               SEC(2011) 728.
[6]               Foreseen in Article 5(3) of Council Regulation (EC)
No 1466/97.