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Austria The Economy
Austria - Unavailable
Coat of arms of the province of Carinthia
THE AUSTRIAN ECONOMY MIGHT best be characterized by the old
German phrase klein aber fein, or--in the loose English
equivalent--"small but beautiful." Austria is a small European
country in terms of gross domestic product, area, and population.
Yet, since the end of World War II, it has achieved a remarkable
record of growth, even when international conditions have not
been at their most favorable. Austria has done this by
concentrating on manufacturing the products of the second
industrial revolution--such as high-quality machine tools,
chemicals, and other producer goods--and exporting them largely
to the countries of Western Europe, especially Germany.
Austria has achieved considerable autonomy in many important
economic areas. It is almost self-sufficient in food production,
largely through careful development and husbanding of resources
and through an extensive program of subsidies. Judiciously
planned exploitation of the hydroelectric power-generating
capacity of the Alps has lessened the country's dependence on
imported fossile fuels. Austria has also been able to train an
efficient and dedicated work force, although it has come to rely
on foreign workers for some essential tasks.
Austria nonetheless remains fully engaged in the European and
global economic environment. It must import fuels--especially
oil, coal, and gas--and certain industrial raw materials and as a
result has a consistent trade deficit. But, because the country
is one of the most attractive states in Europe to foreign
tourists, Austria is generally able to keep its current account
in balance.
The Austrian government has long recognized that the country
and the economy cannot function without trade and without access
to other markets and sources. Therefore, Austria has always
wanted to join customs unions and free-trade areas. It was a
founding member of the European Free Trade Association (EFTA).
Because it could not join the European Community (EC) owing to
its pledge of political neutrality, it helped form the European
Economic Area, out of the EC and the EFTA, in late 1992. In 1989
it had applied to join the EC and is regarded as a prime
candidate for admission into the organization, known since late
1993 as the European Union (EU), in 1995.
Austria saw many opportunities opening to the East as the
Iron Curtain fell and as the former communist economies turned to
the West for trade and guidance. As a result, Austria ranks among
the top Western nations in opening joint ventures with East
European states and has made a variety of trade agreements with
those states as well as with the states that had declared their
independence from what was Yugoslavia. Some of the links that
Austria established and reestablished antedated World War I and
thus offer a potential for the re-creation of historical
financial and commercial links.
Since the end of World War II, the Austrian economy has
functioned in a comfortable niche among the smaller West European
states. It has been sheltered from intense international
competition because it is only a small market, although the of
many Austrian goods is higher than international prices. The
Austrian system of economic and social consensus, characterized
by the term social partnership, has functioned effectively
to permit a high standard of living for its citizens and
especially for its labor force. The chambers of commerce, and
agriculture, and labor, together with the trade unions, have
joined and supported a considerable framework of institutions and
regulations that make Austria a model for relations between
public and private institutions.
Despite its carefully designed and effectively functioning
system, the economy has not been immune to external realities. It
was severely buffeted by the "oil shocks" of the 1970s and by the
sharp global recession at the beginning of the 1980s. The
accumulation of public-sector deficits imposed a heavy burden of
debt service on the economy. Austria's recovery from that
recession did not fully begin until the mid-1980s, although the
recovery advanced smoothly after that and accelerated during the
late 1980s before the economy suffered another recession
beginning in 1990.
With the end of the Cold War and the consolidation of Europe,
the economy faces the problems of greater exposure to outside
influences and potential outside competition. As this opening
occurs, the Austrian economy also must cope with the potential
buffeting arising from the EU adoption of the Maastricht Treaty
as well as with other pressures resulting from developments since
the ending of the division of Europe. The Maastricht Treaty's
provision for a common European currency could compel West
European countries and central banks to pursue more cautions
fiscal policies and more restrictive monetary policies than in
the past. Although the Austrian government and the central bank
have long pursued such restrictive policies in order to keep the
country's currency, the schilling, on a par with the German
deutsche mark, the pressures on other currencies could intensify
while the deutsche mark establishes itself as the dominant
currency of Europe. This could jeopardize Austrian markets in the
EU.
Austria's membership in the EU could also open Austrian
markets more directly to the competition of large West European
companies that not only enjoy economies of scale but also are
more able than Austrian companies to withstand the rigors of
long-term competition. And, the fall of the Iron Curtain has
opened Austria to greater competition from Central and Eastern
European states having lower production costs. Conversely,
Austrian exporters also have a wider playing field on which to
show their wares. Thus, Austrian planners have both many
opportunities and many problems to contemplate as they try to
maintain and extend the prosperity and economic success that
their country has enjoyed in the postwar period.
Data as of December 1993
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