Austria The Subsidy Policy
The Liebherr plant at Bischofshofen in the province of
Salzburg produces high-quality industrial equipment.
The General Motors plant outside Vienna
Courtesy Luftreportagen Hausmann, Vienna and ICD Austria,
New York
Austrian federal subsidies, both direct and indirect,
stabilized as a share of GDP during the late 1980s. Direct
subsidies were estimated to average about 0.4 percent of GDP, and
indirect subsidies were estimated at about 1.3 percent of GDP.
The subsidies began changing during the late 1980s from generally
defensive subsidies intended to preserve traditional industries
to more specifically targeted programs such as special subsidies
for research and development, innovation, and environmental
protection. The Innovation and Technology Fund was established,
and in 1989 the government conducted a special review to reduce
subsidies to certain traditional industries and to tourism.
Agricultural subsidies were well below the EC average during
the late 1970s, but they rose during most of the 1980s. By the
end of the decade, they had reached a level slightly above the EC
average. In addition, the government subsidized investment and
debt service for nationalized industries and covered occasional
losses for those industries.
To reduce the burden of the nationalized companies on the
state budget, the government began a systematic effort to
privatize its share in those companies in the late 1980s. Some of
the privatization efforts included the sale of the mint to the
partially privately owned Nationalbank. The government's share in
Austrian Airlines was reduced to a small majority ownership, and
49 percent of the state electricity company was sold. The federal
government's share in the Creditanstalt-Bankverein and the
Österreichische Länderbank was reduced to 51 percent. In other
instances, however, privatization took place through the sale of
state assets to other government-owned or government-directed
organizations, rather than to the private sector. For this
reason, the program did not generate as much income as originally
anticipated.
The level of regulation and subsidization, combined with the
significant national ownership of major industries, makes
production and consumption costs high. On average, consumer
prices in Austria are between 10 and 20 percent higher than in EU
member states. They are even higher than in Germany, which is
also noted for its high prices. Direct comparisons indicate that
productivity in Austria is lower than in Germany but that markups for consumer retail sales and profit margins in the
distribution system are higher.
These figures raise a number of important questions for
Austrian economic planners as they prepare for the economic
unification of Europe after the collapse of the Soviet Union's
satellite system. The competitive pressures against Austrian
producers and workers will likely increase in a widened EU,
especially if states having low costs, such as those of Eastern
Europe, are admitted.
Data as of December 1993
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