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Austria Developments During the 1970s and 1980s
After a relatively smooth course throughout the 1960s,
Austria was deeply affected by several international developments
during the early 1970s. Like the Federal Republic of Germany
(West Germany), it revalued its currency upward by 5 percent, but
this proved insufficient in light of the weakness of the United
States dollar.
In August 1971, when the
Bretton Woods system (see Glossary)
collapsed and the price of gold was no longer maintained at US$35
per troy ounce, the Austrian government reaffirmed its decision
to maintain the stability of the schilling even if it meant a
potentially deteriorating competitive position with the dollar.
Thus, the schilling remained closely linked to the deutsche mark
through the interest rate policies of the Nationalbank (the
Austrian central bank).
The Austrian economy could not help being affected, however,
by the subsequent turmoil in international trade and finance, the
"oil shocks," inflation, and the downturn at the end of the
1970s. By 1975 growth had slowed and inflation had risen because
of higher fuel prices. Unemployment had begun to increase and
would have risen faster if government-owned industries had not
made an effort to maintain employment. The current account, which
had remained in balance for most of the postwar period,
deteriorated significantly. In addition, the budget deficit rose.
In 1979 and 1980, the Austrian economy began to improve
somewhat. Growth resumed and unemployment fell. But exports did
not rise as hoped, the budget deficit remained high, and the boom
was short-lived. Another downturn appeared, to be overcome only
at the expense of considerable fiscal stimulus in 1983 and 1984
when the government budget deficit rose from 4 to 5.5 percent of
GDP. After several years of high deficits, the cost of servicing
the national debt began to serve as a brake on further
expansionary fiscal policies. Although unemployment remained low
by the standards of other industrialized states and although the
Austrian economy came through the various crises better than most
economies, these developments provided little consolation for
most Austrians. The only good news was that exports were rising,
although the current account remained negative as the strength of
the dollar drove energy import costs sharply upward.
It was only in 1985, well after global interest rates had
declined from their post-1980 highs, that the economy began
moving forward again at an acceptable pace. Even then, growth
came more slowly and unevenly than in the 1950s and 1960s, in
part because the expense of servicing the accumulated public
deficit (which by then had risen to almost one-half of GDP)
remained a brake on the economy as a whole. When rapid growth
resumed in 1988, it took many observers by surprise. At that
point, the rising trend of unemployment experienced since 1981
began to decline, and the volume of investment and exports grew
sharply.
Data as of December 1993
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