kom (2017) 0090 - Ingen titel

Europaudvalget 2017
KOM (2017) 0090
Offentligt

EUROPEAN

COMMISSION

Brussels, 22.2.2017

SWD(2017) 85 final

COMMISSION STAFF WORKING DOCUMENT

Country Report Austria 2017

Accompanying the document

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN

PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE

EUROGROUP

2017 European Semester: Assessment of progress on structural reforms, prevention and

correction of macroeconomic imbalances, and results of in-depth reviews

under Regulation (EU) No 1176/2011

{COM(2017) 90 final}

{SWD(2017) 67 final to SWD(2017) 93 final}

kom (2017) 0090 - Ingen titel

CONTENTS

Executive summary

Economic situation and outlook

Progress with country-specific recommendations

Reform priorities

3.1.

3.2.

3.3.

3.4.

3.5.

Public finances and taxation

Financial sector

Labour market, education and social policies

Investment

Sectoral policies

Overview table

MIP Scoreboard

Standard tables

References

LIST OF TABLES

1.1.

2.1.

B.1.

C.1.

C.2.

C.3.

C.4.

C.5.

Key economic, financial and social indicators – Austria

Summary table on 2016 CSR assessment

The MIP Scoreboard for Austria

Financial market indicators

Labour market and social indicators

Labour market and social indictors (continued)

Product market performance and policy indicators

Green growth

LIST OF GRAPHS

1.1.

1.2.

1.3.

1.4.

1.5.

Real GDP growth and contributions, output gap

Corporate financing positions

Headline and core HICP (harmonised index of consumer prices)

Labour force and unemployment rate (15-64 years)

Labour productivity

kom (2017) 0090 - Ingen titel

1.6.

1.7.

1.8.

1.9.

1.10.

1.11.

3.1.1.

3.1.2.

3.1.3.

3.1.4.

3.2.1.

3.2.2.

3.3.1.

3.3.2.

3.3.3.

3.3.4.

3.3.5.

3.3.6.

3.4.1.

3.4.2.

3.4.3.

3.5.1.

3.5.2.

Trade balance and export market share

House prices and rental costs

House price to income and rent ratio

General government debt and deficit

Tax wedge (% of labour costs, 2015)

Hospital discharges and hospital beds 2014

The effect of the fiscal drag in Austria

Revenues from recurrent property taxes (2014)

Share of homeowners by deciles of equivalised disposable income

Public expenditure for healthcare (2014)

Intra-group liquidity to CESEE subsidiaries

Net profits of Austrian subsidiaries in CESEE

Labour market — key indicators

Unemployment rate by country of birth

Unemployment rate by educational attainment

Regional dispersion of unemployment

Employment rate by qualifications and country of birth (2015)

PISA performance 2012 -2015 in science - share of top and low performers

Regulatory restrictiveness indicator 2016 Austria and the EU

High-growth enterprises as % of all active enterprises with at least 10 employees

Venture capital as % of GDP

Evolution of business and public R&D intensity

Europe 2020 emission reduction targets

LIST OF BOXES

2.1.

3.3.1.

3.4.1.

3.5.1.

Contribution of the EU budget to structural change in Austria

Integration of refugees

Investment challenges and reforms in Austria

Selected highlights

kom (2017) 0090 - Ingen titel

EXECUTIVE SUMMARY

This report assesses Austria’s economy in the light

of the European Commission’s Annual Growth

Survey published on 16 November 2016. In the

survey the Commission calls on EU Member

States to redouble their efforts on the three

elements of the virtuous triangle of economic

policy — boosting investment, pursuing structural

reforms and ensuring responsible fiscal policies. In

so doing, Member States should focus on

enhancing social fairness in order to deliver more

inclusive growth.

Economic growth in Austria is gaining

momentum with the support of stronger private

consumption and investment.

In 2016 growth

accelerated to 1.5 % after 4 years of rather modest

expansion, and is expected at 1.6 % in 2017 and

2018. The 2016 tax reform stimulated private

consumption as households used their higher

disposable incomes to spend more. Improved

domestic demand conditions have also spurred

higher investment by corporations, particularly in

machinery and equipment, and non-residential

construction. The need for replacements after years

of subdued investment, together with favourable

financing conditions, has further contributed to the

upturn in 2016. Following this more dynamic

phase, investment dynamics are expected to slow

over the coming 2 years.

Austriaʼs unemployment rate has increased but

remains low compared with the rest of the EU.

Austria remains an attractive destination for

foreign workers and is seeing a continuous inflow

from EU and non-EU countries alike. This,

together with the longer working lives of elder

workers (due to restrictions on early retirement)

and increasing female labour market participation,

is helping to increase the labour supply and

potential growth. Employment has also been

increasing, but somewhat more slowly than the

labour supply. This has led to an increase in the

unemployment rate, which reached 6.1 % in the

second and third quarter of 2016, slightly above its

previous peak in 2004. The increase in

employment since the crisis has mainly been

driven by part-time jobs rather than full-time work.

Work is thus distributed among more employees.

This is limiting unemployment to some extent but

also resulting in stagnating labour productivity per

employee (while productivity per hour worked has

been increasing).

Inflation above the euro area average is pushing

wages

and

undermining

price

competitiveness.

Since the crisis, inflation in

Austria has been driven by robust demand for

tourism and business services. At the same time,

however, rising wages in combination with slower

productivity growth are reducing the price

competitiveness of Austrian exporters.

Public finances are expected to recover as bank

support measures fade out.

Following the

financial crisis Austria's government debt

increased significantly, peaking at 85.5 % of GDP

in 2015, due to the impact of support measures for

the banking sector. Following the agreement

reached in the HETA case (the ‘bad bank’ of the

former Hypo Alpe Adria bank), the restructuring

of the banking sector is expected to proceed

smoothly and without significant risks.

Government debt is projected to gradually decline

to below 80 % of GDP by 2018.

Overall, Austria has made some progress in

addressing

the

2016

country-specific

recommendations.

In view of ensuring fiscal

sustainability, some progress was made with

respect to the healthcare system and limited

progress with respect to the pension system.

However, no progress was made in linking the

statutory retirement age to life expectancy. Some

progress was made towards reforming the fiscal

relations between the various layers of

government. On balance, in these fields Austria

made some progress.

Austria made some progress in improving the

labour market participation of women as well as

the educational achievements of disadvantaged

young people. On balance, Austria achieved in

these areas some progress.

There has been some progress on improving the

sustainability of the healthcare and pension

systems and streamlining fiscal relations across the

various levels of government. Austria has also

made some progress in improving the labour

market participation of women — as childcare

infrastructure and services have expanded — and

in taking some measures aimed at improving the

educational achievements of disadvantaged young

people. On reducing investment barriers in the

services sector it has made only limited progress:

only a narrow draft revision of the trade licence act

kom (2017) 0090 - Ingen titel

Executive summary

(Gewerbeordnung) was put forward, and some

measures of administrative simplification.

Regarding progress in reaching the national targets

under the Europe 2020 strategy, Austria has

already reached its targets on tertiary education

attainment and limiting early school leaving. It is

on track to meet the renewable energy and the

energy efficiency targets. However, more effort is

needed to raise the employment rate, increase

research and development expenditure, cut

greenhouse gas emissions and reduce poverty and

social exclusion.

The main findings of the analysis in this report,

and the related policy challenges, are as follows:



The new financial agreement between the

different levels of government is a step

forward, but the fiscal framework remains

complex with weak incentives for cost

efficiency.

The 2017 financial equalisation law

slightly simplifies the system of transfers

between the various layers of government. It

also creates the legal basis for benchmarks and

spending reviews and ratifies the commitment

to reform the responsibilities of the

sub-national governments. Their spending

responsibilities are nevertheless still far greater

than their revenue-raising powers, while the

overall organisational set-up remains overly

fragmented (see also Section 3.1).



Despite the 2016 tax reform, the tax wedge –

i.e. the burden on labour in form of taxes

and social security contributions – is

relatively high, while more growth-friendly

sources of revenue are underutilised.

Like in

the past the recent tax reform has mainly

countered the effect of inflation, while the tax

wedge on labour has remained significantly

above the EU average. By contrast, revenues

from recurrent property taxes are remarkably

low, mainly because the tax base is outdated.



Pension and healthcare spending poses a

medium risk to fiscal sustainability in the

medium and long term, due to a rapidly

ageing population.

This is the case for

pensions partly because the effective retirement

age remains relatively low despite the recent

pension reforms. Furthermore, the statutory

retirement age for women is particularly low

and will not be aligned with that of men before

2024. This raises concerns about the

sustainability and adequacy of pensions.

Linking the statutory retirement age to life

expectancy would help curb public spending on

pensions. For healthcare, the more stringent

caps on expenditure growth set by the 2017

financial equalisation law are expected to help,

but they are not sufficient to ensure

sustainability (see also Section 3.1).



The efficiency of the healthcare sector is

suboptimal, with a very large hospital sector

and underutilised outpatient care.

The

fragmented organisational and financial

structure of the healthcare sector does not

encourage cost efficiency. It is characterised by

a disproportionately large hospital sector with

unexploited savings potential, for instance

through better use of ambulatory care and

improved public procurement. The 2017

financial equalisation law includes measures to

strengthen outpatient care outside hospitals,

which could improve cost efficiency in the

medium term. Nevertheless, the success of this

initiative also depends on reforming the

financial arrangements between healthcare

providers and social security funds (see also

Section 3.1).



Banking sector developments point to a

steady but slow improvement, but continue

require

monitoring.

The

capitalisation of Austrian banks remains below

that of its EU peers’ and their ability to

generate profits in the domestic market has

been under pressure. In their Central Eastern

and South-Eastern European operations, asset

quality and profitability have improved further

in several markets but still face some risks. At

the same time, the increase in real estate prices

and housing loans underscore the importance

of macro-prudential measures (see also Section

3.2).



The labour market is performing better in

Austria than in most EU countries, but

challenges remain.

Despite the comparatively

high female labour market participation,

several indicators still point to unexploited

labour potential and significant gender

kom (2017) 0090 - Ingen titel

Executive summary

inequalities. These indicators include the rates

of part-time work and the gender gap in pay

and pensions. While the expanded and targeted

policies to get people into work are delivering

good results, finding employment remains a

challenge for older workers, low skilled and

people with a migrant background (especially

women born outside the EU). The recent

inflow of migrants into Austria and the

increasing number of recognised refugees

makes it all the more important to integrate

them into the labour market and in education

successfully (see also Section 3.3).



Education results in Austria are still in the

middle of the range compared to other

countries.

Basic skills in reading, writing and

mathematics continue to deteriorate, hampering

Austria’s overall skills base and its ambition to

become one of Europe’s innovation leaders.

Austria faces challenges in meeting the

increasing demand for computer specialists and

digitally

skilled

employees.

Parents’

socioeconomic status and their eventual

migrant background continue to have a major

influence on their children’s education results.

In 2015, first generation immigrant students are

3 times more likely than native born students to

be low achievers in science and 3 times more

likely to leave school early before completing

upper secondary education (see also Section

3.3).



Social welfare standards are still high

overall, but some groups are at greater risk

of poverty and inequality is on the rise.

The

proportion of the population at risk of poverty

or social exclusion is one of the lowest among

EU Member States. However, inequality on the

labour market — reflected in the large gender

gap in pay and pensions — means that women

aged 65 and over are at much higher risk of

poverty than men of the same age, adding to

overall income inequality. Furthermore, the ‘at

risk of poverty’ rate is higher for specific

groups, such as children of foreign-born

parents and the long-term unemployed (see

also Section 3.3).



Rigidities in service markets and regulated

professions are hampering competition and

discouraging investment.

High access barriers

and restrictive rules on the exercise of key

trades and professions — such as specific

shareholding requirements, extensive reserved

activities and interdisciplinary restrictions —

are limiting business dynamism and

investment.

The

restrictive

business

environment for services is not conducive to

investment and job creation in the sector. It

also affects other parts of the economy for

which services are an important input (see also

Section 3.4).



Regulatory and administrative barriers are

holding back company growth and the

creation of start-ups.

Low interest rates,

improved consumer demand and the need to

renew equipment have led to an increase in

investment. However, structural barriers are

still significant and are constraining investment

in creating and expanding businesses.

Insufficient investment in business creation and

expansion hampers job creation and adaptation

to new opportunities of digital technology.

Small and medium-sized enterprises and

start-ups in Austria lack diversified financing

options, notably as regards equity financing.

The current fiscal rules do not contribute

sufficiently to the investment climate (see also

Section 3.4).

kom (2017) 0090 - Ingen titel

ECONOMIC SITUATION AND OUTLOOK

favourable and demand is strong, housing

investment remains subdued, pushing up house

prices. Corporations have increased their net

lending position since the crisis and the bank loans

to corporations as a percentage of GDP

continuously declined (see Graph 1.2). However,

especially in recent years this happened through

passive deleveraging, i.e. the growth in loans to

corporations was outpaced by GDP growth and

inflation. Dividend payments, although they have

declined, remain high. It is thus not a lack of

financing resources that is hampering investment

activity but rather a lack of opportunities in an

environment of economic and political uncertainty

and subdued domestic demand dynamics (see also

Section 3.4).

Graph 1.2:

GDP growth

Austria’s economy is leaving behind the 4 years

of slow growth seen since 2012.

In the aftermath

of the financial crisis Austria entered a phase of

subdued growth, with GDP growth fluctuating

between 0 % and 1 % and only reaching the upper

limit in 2015. For 2016 and the coming years, the

Commission 2017 winter forecast expects growth

to stabilise at around 1.5 % (see Graph 1.1). The

main reasons for this pick-up can be found in

increased

private

consumption,

benefiting

noticeably from the income tax reform that took

effect at the start of 2016 and turning positive for

the first time since 2012. This has also stimulated

investment activity, which recovered since the last

quarter of 2015 and gained momentum throughout

2016.

Graph 1.1:

Real GDP growth and contributions, output

gap

% of pot.

GDP

Corporate financing positions

% of GDP

pps

-2

-4

Net lending / net borrowing corporations

NFC Distributed income (National accounts)

NFC Loans (national accounts) (rhs)

-1

-2

-3

-4

-5

Forecast

-1

-2

-3

-4

-5

-6

05 06 07 08 09 10 11 12 13 14 15 16 17 18

-6

Output gap

Public consumption

Private consumption

Investment

Inventories

Real GDP (% change)

Net exports

Source:

European Commission

Source:

European Commission

Inflation

Investment

Investment increased in 2016 after several years

of relative stagnation.

Overall investment in

Austria remained relatively stable during the crisis,

fluctuating around 22 % of GDP, which is only 1

percentage point (pp.) less than before the crisis.

After improving in 2015, investment is forecast to

continue growing, though at a declining rate (by

3.6 % in 2016, by 2.4 % in 2017 and 2.0 % in

2018) The recovery in investment activity is being

driven by greater spending on equipment and non-

residential construction, which is reducing the

backlog of replacement investment that had been

postponed. Although financing conditions are

Austria continues to experience higher inflation

than the other euro area countries, widening the

price gap.

Headline inflation has increased much

more rapidly than in the euro area since 2012,

while core inflation is growing faster since 2010

(see Graph 1.3). Due to Austria's important and

thriving tourism sector, prices in accommodation

and hospitality services continuously increase.

This helped to counterbalance the dampening

effect of low oil prices in recent years, keeping

inflation positive at all times. HICP inflation in

2015 reached a low at 0.8 % and is expected to

creep up to 1.0 % in 2016 before more than

doubling to 1.8 % in 2017 with rising oil prices.

kom (2017) 0090 - Ingen titel

1. Economic situation and outlook

Graph 1.3:

Headline and core HICP (harmonised index of

consumer prices)

Index,

2005=100

140

135

130

125

120

115

Forecast

Graph 1.4:

Labour force and unemployment rate (15-64

years)

% of active

pop.

130

125

120

115

110

105

100

Index,

2005=100

4500

4400

4300

4200

4100

4000

3900

3800

3700

3600

3500

1000

persons

110

105

100

16Q3

16Q1

15Q3

15Q1

14Q3

14Q1

13Q3

13Q1

12Q3

12Q1

11Q3

11Q1

10Q3

10Q1

09Q3

09Q1

08Q3

08Q1

05 06 07 08 09 10 11 12 13 14 15 16 17 18

HICP inflation, Austria

HICP inflation, euro area

Core inflation, Austria (rhs)

Core inflation, euro area (rhs)

Unemployment rate(rhs)

Employment

Labour supply

Source:

European Commission

Source:

European Commission

Labour market

Social developments

Although employment is continuously rising,

the unemployment rate is also increasing.

The

economy cannot fully absorb the growth in the

labour force (see Graph 1.4) also resulting from

the continued inflow of foreign workers. In

general, migration is expected to positively

contribute to the demographic trend and potential

growth. Other factors behind the increase in the

labour force include longer working lives (a

consequence of restricted access to early

retirement and invalidity pensions) and increasing

female labour market participation. While a large

proportion of the increasing labour supply can still

be absorbed by the continuous growth in

employment, unemployment has also increased,

especially for the low-skilled. The impact of

refugees and asylum seekers on the labour force is

expected to be limited in comparison (see also

Section 3.3).

Inequality of income is low, while inequality of

wealth is high.

For 2015 data, disposable income

inequality in Austria with a Gini coefficient at 0.27

was among the lowest in the EU (

). The income of

the richest 20 % of households was 4.0 times

greater than that of the poorest 20 % of households

(S80 / S20), well below the EU average of 5.2 (

By contrast, Austria is among the countries with

highest net wealth (

) inequality in the EU (ECB

2016). Wealth inequality is thus much more

pronounced and decisive than income inequality as

the tax and social benefit systems are effective in

reducing market income inequality. In Austria,

market income inequality before taxes and social

transfers (0.50) is only marginally reduced by the

tax system (0.48) and relies largely on social

redistribution (0.27). These different Gini

coefficients were rather stable in the period 2010

to 2015. Comparing layers of society, over 2007 to

2015 real median income increased in total by

9.6 % despite the financial and economic crisis.

However, the lowest 10 % of income earners saw

their real incomes hardly grow, by just 0.5 %. In

general, over this period households’ real income

(

) The Gini coefficient takes values between 0 and 1 and is a

measure of equal or unequal distribution, with higher

values indicating a higher degree of inequality.

(

) The income quintile share ratio (S80 /S20 ) is the ratio of

total income received by the 20 % of the population with

the highest income to that received by the 20 % with the

lowest.

(

) Difference between total assets and total liabilities.

kom (2017) 0090 - Ingen titel

1. Economic situation and outlook

per capita fell while real GDP growth per capita

stagnated.(

) In addition, the creation of

predominantly low-paid and part-time jobs over

recent years has aggravated the segmentation of

the labour market and income inequalities.

The social situation remains good overall,

although some groups are at higher poverty

risk.

The proportion of the population at risk of

poverty or social exclusion, at 18.3 %, is one of the

lowest in the EU and below the EU average of

23.7 %. However, 15.1 % of women aged 65 and

over are at risk of poverty, much higher than the

10.7 % rate for men of the same age. This is

because of the large gender gap in pay and

pensions and a pension system which reflects the

inequality in the labour market. Possible further

reforms may also consider the situation of specific

groups, in particular the children of foreign-born

parents, who face at-risk-of-poverty rates of

34.6 %, above the EU average of 33.2 % (see also

Section 3.3).

Productivity

growth in total factor productivity is also visible in

Austria’s weak GDP growth since 2011.

Graph 1.5:

140

135

Labour productivity

Index,

2000=100

130

125

120

115

110

105

100

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Nominal compensation per employee

Total factor productivity - AT

Total factor productivity - EA

Real labour productivity per person

Real labour productivity per hour worked

Source:

European Commission

External position

Productivity in Austria remains high but is

shared among a rising number of employees.

Productivity per employee grew until 2007 (see

Graph 1.5) but dropped sharply during the crisis. It

has remained flat at a lower level since then while

the EU average has risen continuously. However,

Austria’s productivity per hour worked has grown

constantly since 2000 and, unlike the EU average,

did not drop even during the crisis years. The

explanation is that the increase in employment

since the crisis has created more part-time jobs and

fewer full-time ones. Overall, Austria’s

productivity is doing well and growing above the

EU average. However, as wage growth is

increasing faster than productivity per hour worked

since 2008, Austria is losing slightly in price

competitiveness and rebalancing within the euro

area. Total factor productivity incorporating

technological progress and innovative capacity has

been on a constant decline in Austria since 2011,

staying below pre-crisis levels, while the euro area

average has been rising again since 2013. Weak

(

) While real GDP per capita grew annually by 0.28 %

between 2007 and 2012 and shrank by -0.18 % between

2012 and 2015, real income of households per capita

shrank annually by -0.28 % between 2007 and 2012 and

by -0.52 % between 2012 and 2015.

Austria’s current account and net international

investment position remain in the black.

Austria

has had current account surpluses for many years,

thanks to its important tourism industry and the

continuously growing export of business services.

Despite the important role of the export industry in

the Austrian economy, the trade balance in goods

contributes only marginally to the current account

surplus and recovered only recently from its

negative contribution in the aftermath of the

financial crisis. Austria has seen its export market

share constantly decline since 2007, both overall as

well as relative to other advanced economies (see

Graph 1.6), although the decline was more limited

in volume terms. Austria’s non-EU trade however

continues to rely heavily on markets in Central,

Eastern and South-Eastern Europe, including

Russia. More recently it has also come to rely on

the US market, but is less present in fast-growing

markets in Asia and South America. On the level

of sectors, households and non-financial

corporations have a positive net lending position

which more than compensates for the negative net

lending position of financial corporations and the

government. Overall, the net international

investment position, which turned positive in 2013,

continues to improve (see Graph 1.6).

kom (2017) 0090 - Ingen titel

1. Economic situation and outlook

Graph 1.6:

Trade balance and export market share

% of GDP

Graph 1.7:

170

House prices and rental costs

Index,

Jan08=100

170

160

150

140

130

120

110

100

2.0

1.8

1.6

1.4

160

150

140

130

120

110

100

Index,

2008Q1

=100

-5

-10

-15

-20

-25

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Trade balance goods (rhs)

Trade balance services (rhs)

Export market share AT, values

Export performance AT vs. advanced economies, values

Net international investment position (rhs)

1.2

1.0

0.8

0.6

0.4

0.2

0.0

Source:

European Commission

Source:

ECB, Statistics Austria, OeNB

Housing market

The strong growth in house prices over recent

years has accelerated since mid-2015.

Austria is

one of the European countries where house prices

have been constantly rising since the financial

crisis unlike in many other European countries (see

Graph 1.7). The quarterly house price index shows

accelerated growth since Q3-2015, when the year-

on-year increase was 9.3 % before reaching 13.4 %

in Q1-2016, 8.9% in Q2-2016 and 5.2% in

Q3-2016. Unlike in 2012, when the rise in house

prices could be attributed largely to Vienna, the

capital, the bigger cities throughout the country are

now also contributing to the acceleration in prices.

Since 2011 house prices are growing faster than

rental costs and income, leading to increasingly

high price-to-rent and price-to-income ratios which

point to considerable overvaluation. The increase

in Austria’s price-to-income ratio since the crisis

has been among the strongest in the EU, with the

majority of Member States seeing their ratio drop

(see Graph 1.8). As this trend accelerated in the

first months of 2016, Austria was flagged in

December by the European Systemic Risk Board

(see also Section 3.2).

In Austria, both rental costs and house prices are

rising much more steeply than overall inflation.

This could pose a risk for private consumption if

the increasing living costs were to limit spending

on consumption goods. Growth in housing

mortgages is also accelerating, but the overall

mortgage-to-GDP ratio is still relatively low.

Graph 1.8:

08Q1

% change

08Q3

09Q1

09Q3

House price to income and rent ratio

% of GDP

110

100

-10

-20

-30

-40

-50

-60

-70

-80

-90

-100

-110

10Q1

10Q3

House price index

Housing mortgages

Gross disposable income (4qma)

Rent inflation (rhs)

HICP (rhs)

11Q1

11Q3

12Q1

12Q3

13Q1

13Q3

14Q1

14Q3

15Q1

15Q3

16Q1

16Q3

-10

-20

-30

-40

-50

-60

Source:

European Commission, ECB

The concentration of homeowners in the higher

income deciles helps to mitigate risks (Graph

3.1.3) as higher-income households have the

financial resources to react to changing market

conditions. The development of building supply

and construction investment appears moderate

compared to changes in house prices. In order to

EA19

Price to income change (2010-2015)

Price to rent change (2010-2015)

Lending for house purchase (2015) (rhs)

kom (2017) 0090 - Ingen titel

1. Economic situation and outlook

increase housing supply the government plans

several measures, such as easing investment and

land provision for social housing.

Public finances

Public finances are expected to improve in the

coming years as the impact of bank support

measures fades out.

Government debt strongly

increased in 2009 due to the nationalisation of the

Austrian bank Kommunalkredit and was further

swollen in 2014 and 2015 by the creation of the

defeasance vehicle HETA for the former bank

Hypo Alpe Adria (see Graph 1.9). In 2016, an

agreement was reached with HETA’s creditors on

the guarantee provided by Carinthia, significantly

reducing the risk of additional costs for bank

support measures. Government debt peaked at

85.5 % in 2015 but is expected to decline markedly

in the coming years if, as planned, the assets of

nationalised banks included in government

accounts are gradually sold off. Even without

considering these assets government debt would

have stood at around 75 % of GDP in 2016, i.e.

significantly above the 60 % threshold.

Exceptional spending for refugee-related costs in

2015 and 2016 added to the government deficit but

is modest compared with the bank support

measures.

Graph 1.9:

% of GDP

Austria had one of the highest tax wedges (

) in the

EU at 49.5 % (for a single earner at 100 % of

average wage without children). With the reform,

this has fallen to 46.7 % and Austria improved

some places in EU comparison (see Graph 1.10).

The government announced in January 2017 the

introduction of an automatic indexation of tax

brackets according to inflation for countering the

effect of the fiscal drag. Together with measures to

reduce non-wage labour costs for employers

annually by around EUR 1 billion this will support

efforts for further lowering the tax wedge on

labour. The analysis in Section 3.1 shows that, in

the past, tax reforms have been implemented every

couple of years to counter the effect of a rising tax

wedge due to fiscal drag.

Graph 1.10:

Tax wedge (% of labour costs, 2015)

General government debt and deficit

% of GDP

100

-5

Source:

OECD

-25

Impact of bank support measures on debt

Bank support measures

Expenditure for refugees

Government deficit

Government debt (rhs)

Government debt w/o liabilities from nationalised banks

Healthcare

-15

Source:

European Commission

Austria’s healthcare system is characterised by

a large and costly hospital sector which,

together with projected ageing of the

population,

threatens

its

long-term

sustainability.

In general the accessibility and

quality of healthcare provided are good but

compared to other European countries Austria

spends a relatively high percentage of GDP on

healthcare. Equally, the proportion of hospital

expenditure in overall healthcare costs is one of the

(

) The tax wedge on labour represents the difference between

the total labour cost of employing a worker and the

worker’s net earnings. It is defined as personal income tax

and employer and employee social security contributions.

Despite the income tax reform in 2016 the tax

burden on labour remains high compared to

other European countries.

Before the tax reform

AT 15

AT 16

OECD

Income tax

Employee social security contributions

Employer social security contributions

Forecast

kom (2017) 0090 - Ingen titel

1. Economic situation and outlook

highest in the EU. The number of hospital

discharges and the number of hospital beds per

capita is significantly higher than in other

European countries with the exception of Germany

(see Graph 1.11). As an ageing society, Austria

faces considerable financial challenges as

healthcare, long-term care and pension costs are

expected to increase markedly in future (see also

Section 3.1).

Graph 1.11:

Hospital discharges and hospital beds 2014

per 100 000

population

1400

1200

1000

800

600

strategy for the digital future till 2025. Also in the

government programme 2017-18 digitalisation is

addressed as one of the key priorities. Austrian

businesses are doing well on many digitalisation

aspects and public authorities are offering a wide

range of e-government solutions. Austria,

however, ranks below or merely in line with the

EU average on aspects such as investment in

digital skills, e-commerce, e-procurement and the

deployment of high-speed broadband in rural areas

(see also Sections 3.4 and 3.5).

per 100

population

400

200

Source:

OECD

Education

Austria reaches its national EU 2020 targets on

tertiary education and early school leaving,

which is markedly better than the EU average,

however national and international tests show

deficiencies in basic skills.

Weaknesses in some

basic skills (reading and science) were confirmed

by their deterioration in the last 2015 OECD

Programme for International Student Assessment

(PISA) test. For instance, the proportion of low

achievers in science amounts to 20.8 % in 2015,

while the proportion of high achievers ranks only

in the mid-field. These results do not help Austria

realise its ambition of becoming an innovation

leader (see also Section 3.3).

Digitalisation

Austria aspires to become one of the innovation

leaders in Europe but remains around the EU

average in key aspects of the digitalisation of its

economy and society. In January 2017, Austria has

adopted the Digital Roadmap Austria, its national

Inpatient care discharges

Total hospital beds (rhs)

kom (2017) 0090 - Ingen titel

1. Economic situation and outlook

Table 1.1:

Key economic, financial and social indicators – Austria

2004-2008 2009

2.7

-3.8

2.2

0.6

2.4

2.5

1.7

-7.3

6.5

-15.0

5.2

-12.0

0.7

-2.5

2.0

0.7

1.8

0.2

0.8

0.2

0.7

1.1

3.2

4.0

-0.8

-0.1

-12.3

-15.1

173.0

13.0

-0.9

2.2

11.1

5.8

124.5

51.4

73.1

-0.2

26.8

5.3

0.4

4.2

2.1

2.2

2.7

1.2

1.5

-0.6

0.2

-0.2

33.3

21.6*

11.6

5.1

1.3

9.8

72.1

18.1

7.6

-2.6

42.3

66.7

-0.9

-0.8

-2.1

-0.3

0.5

0.6

2.6

3.6

2.2

0.0

-5.1

-10.8

184.7

1.9

-1.7

0.3

11.3

1.3

132.8

53.9

78.9

2.0

24.7

5.2

3.5

4.4

1.9

0.4

1.6

-3.4

5.2

3.2

2.1

1.1

32.6

21.0

-0.4

9.6

1.2

2.7

5.3

1.2

10.7

74.3

19.1

7.1

-5.4

42.1

79.7

2010

1.9

1.0

0.1

-2.1

13.8

12.0

-1.5

0.9

0.1

0.5

1.2

0.0

0.4

0.5

2.9

3.0

-1.8

0.1

-5.2

-18.0

185.3

-5.5

-10.4

2.0

9.3

0.3

132.8

54.8

78.0

3.8

24.9

3.9

4.4

1.0

1.7

1.1

1.2

-0.1

-1.1

-2.2

-3.4

32.7

21.2

0.8

10.0

6.6

3.9

4.8

1.2

9.5

74.4

18.9

7.8

-4.5

42.0

-3.3

82.4

2011

2.8

1.3

0.0

6.7

6.0

6.2

0.3

0.9

2.2

0.6

0.1

0.0

0.5

0.4

1.6

2.3

-1.7

-0.1

-1.9

-20.8

186.2

-4.5

-2.4

3.6

7.9

3.0

130.1

53.5

76.6

2.0

25.1

2.4

3.0

4.4

1.9

3.6

2.0

1.2

0.8

-1.1

-0.1

0.5

33.4

20.9

1.5

10.3

1.2

4.0

4.6

1.2

8.9

74.6

19.2

8.6

-2.6

42.1

-2.6

82.2

2012

0.7

0.5

0.2

1.4

1.7

1.1

0.1

0.9

0.6

-0.4

0.3

0.1

0.5

0.3

1.5

2.4

-0.4

-0.1

-3.2

-23.7

183.7

-12.3

-6.0

3.2

8.7

1.3

129.2

52.4

76.8

0.7

24.2

3.0

4.8

4.3

2.0

2.6

2.7

-0.3

3.0

1.0

-0.6

-1.8

33.9

21.7

2.0

11.3

4.5

4.3

4.9

1.2

9.4

75.1

18.5

7.7

-2.2

42.7

-1.9

82.0

2013

0.1

-0.1

0.7

2.2

0.5

0.7

-0.7

0.9

0.6

-0.5

0.0

0.1

0.5

0.3

2.0

2.9

0.1

-0.2

1.3

-20.1

172.7

-10.6

1.7

2.4

7.0

0.6

128.0

51.6

76.4

0.8

23.6

2.0

2.9

4.4

1.6

2.1

-0.2

2.3

0.8

3.2

2.1

34.4

23.1

-1.5

11.9

1.0

4.2

5.4

1.3

9.7

75.5

18.8

7.8

-1.4

43.5

-1.2

81.3

2014

0.6

-0.3

0.8

-0.9

2.3

1.3

-0.9

0.9

-0.2

0.3

0.5

0.0

0.5

0.4

2.4

3.2

0.5

-0.1

2.2

-21.1

171.1

-10.0

0.2

-0.6

7.0

0.9

126.2

51.6

74.6

2.5

23.5

2.6

1.4

4.3

1.8

1.5

1.9

-0.3

2.1

0.4

1.7

34.7

22.8

1.1

12.3

-1.9

6.2

5.6

1.5

10.3

75.4

19.2

9.1

-2.7

43.7

-0.7

84.4

2015

1.0

0.0

2.1

0.7

3.6

3.4

-0.9

1.0

0.6

0.0

0.2

0.1

0.5

0.4

1.8

3.4

1.3

-0.5

2.9

-21.8

161.6

-7.69

-3.3

1.9

7.3

2.1

126.4

52.3

74.1

0.6

23.4

2.5

3.5

4.3

1.9

0.8

1.9

0.3

1.5

-0.3

-1.7

-1.9

34.9

23.1

0.9

13.2

6.3

5.5

5.7

1.7

10.6

75.5

18.3

8.2

-1.0

44.3

0.0

85.5

2016

1.5

1.3

1.8

3.6

2.7

3.7

-0.7

1.3

1.9

0.0

-0.4

0.3

0.5

1.1

0.9

23.8

3.3

1.7

1.0

1.4

0.8

-0.9

0.1

1.6

6.0

11.3

-1.4

43.2

-0.9

83.5

forecast

2017

1.6

1.2

1.0

2.4

2.9

2.8

-0.4

1.3

1.4

0.0

0.2

0.5

0.6

-0.6

1.3

24.3

2.7

1.4

1.9

1.6

0.8

-0.5

-0.4

-1.0

6.1

-1.2

43.1

-0.8

81.3

2018

1.6

1.1

0.8

2.0

3.1

2.5

-0.2

1.4

1.2

0.0

0.4

0.3

0.5

0.6

-0.1

1.8

24.8

2.2

1.6

1.7

0.8

-0.8

-1.0

6.2

-0.9

43.1

-0.7

79.3

Real GDP (y-o-y)

Private consumption (y-o-y)

Public consumption (y-o-y)

Gross fixed capital formation (y-o-y)

Exports of goods and services (y-o-y)

Imports of goods and services (y-o-y)

Output gap

Potential growth (y-o-y)

Contribution to GDP growth:

Domestic demand (y-o-y)

Inventories (y-o-y)

Net exports (y-o-y)

Contribution to potential GDP growth:

Total Labour (hours) (y-o-y)

Capital accumulation (y-o-y)

Total factor productivity (y-o-y)

Current account balance (% of GDP), balance of payments

Trade balance (% of GDP), balance of payments

Terms of trade of goods and services (y-o-y)

Capital account balance (% of GDP)

Net international investment position (% of GDP)

Net marketable external debt (% of GDP) (1)

Gross marketable external debt (% of GDP) (1)

Export performance vs. advanced countries (% change over 5 years)

Export market share, goods and services (y-o-y)

Net FDI flows (% of GDP)

Savings rate of households (net saving as percentage of net disposable income)

Private credit flow, consolidated (% of GDP)

Private sector debt, consolidated (% of GDP)

of which household debt, consolidated (% of GDP)

of which non-financial corporate debt, consolidated (% of GDP)

Corporations, net lending (+) or net borrowing (-) (% of GDP)

Corporations, gross operating surplus (% of GDP)

Households, net lending (+) or net borrowing (-) (% of GDP)

Deflated house price index (y-o-y)

Residential investment (% of GDP)

GDP deflator (y-o-y)

Harmonised index of consumer prices (HICP, y-o-y)

Nominal compensation per employee (y-o-y)

Labour productivity (real, person employed, y-o-y)

Unit labour costs (ULC, whole economy, y-o-y)

Real unit labour costs (y-o-y)

Real effective exchange rate (ULC, y-o-y)

Real effective exchange rate (HICP, y-o-y)

Tax rate for a single person earning the average wage (%)

Tax rate for a single person earning 50% of the average wage (%)

Total Financial sector liabilities, non-consolidated (y-o-y)

Tier 1 ratio (%) (2)

Return on equity (%) (3)

Gross non-performing debt (% of total debt instruments and total loans and

advances) (4)

Unemployment rate

Long-term unemployment rate (% of active population)

Youth unemployment rate (% of active population in the same age group)

Activity rate (15-64 year-olds)

People at risk of poverty or social exclusion (% total population)

Persons living in households with very low work intensity (% of total

population aged below 60)

General government balance (% of GDP)

Tax-to-GDP ratio (%)

Structural budget balance (% of GDP)

General government gross debt (% of GDP)

(1) Sum of portfolio debt instruments, other investment and reserve assets.

(2,3) Domestic banking groups and stand-alone banks.

(4) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU

foreign-controlled branches.

(*) Indicates BPM 5 and/or ESA 95

Source:

European Commission, ECB

kom (2017) 0090 - Ingen titel

PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS

Nevertheless, the organisational and financing

structure of the healthcare sector remains overly

complex and ensuring its sustainability in the

medium and long term remains a challenge.

The labour market participation of women has

increased

in recent years but this is mainly due to

part-time employment. Women would gain more

from the labour market if the gender gap in pay

and pensions were narrowed and childcare and

long-term care facilities expanded.

Measures have been taken to improve the

educational achievements of disadvantaged

young people

— including those from a migrant

background — but education outcomes have so far

not improved, rather deteriorated.

Austria has made some efforts to improve

competition and investment in the services

sector

by reducing regulatory and administrative

barriers. These efforts have focused notably on

administrative simplification (such as the

introduction of an electronic trade register). This

reduces compliance costs and mitigates some of

the negative effects of regulation without,

however, resolving the underlying issue of

restrictiveness. Austria also removed some

regulatory obstacles in reaction to national court

rulings or EU infringement procedures. It has

recently tabled a proposal for a limited revision of

the trade licence act (Gewerbeordnung). Austria

participated actively in the mutual evaluation of

professional regulation at EU level which took

place between 2014 and 2016. The action plan it

presented as part of this exercise was however

unambitious and has not yet resulted in a

systematic attempt to remove administrative and

regulatory obstacles across professions and trades.

Overall, Austria has made some(

) progress in

addressing

the

2016

country-specific

recommendations (CSRs).

Some progress was

made on CSR1 in addressing the sustainability of

the pension and healthcare system together with

streamlining the fiscal framework. Some progress

was made on CSR2 in improving the labour

(

) Information on the level of progress and actions taken to

address the policy advice in each respective subpart of a

CSR is presented in the Overview Table in the Annex. This

overall assessment does not include an assessment of

compliance with the Stability and Growth Pact.

Progress with the implementation of the

recommendations addressed to Austria in

2016(

) has to be seen in a longer term

perspective since the introduction of the

European Semester in 2011.

Austria has

undertaken several reforms since then.

By increasing financial surveillance and

implementing targeted measures,

Austria

managed to restructure most of its nationalised and

partly nationalised banks by 2016 so that

remaining risks are contained and relate to legacy

issues. By activating several macro-prudential

measures, it also reduced risks related to the

quality of foreign assets.

The 2017 financial equalisation law helped

simplify the financial relations between the

different layers of government.

The agreement

also introduced several new elements which have

the potential to increase the efficiency and

adaptability of Austria's fiscal framework.

Nevertheless, the framework remains overly

complex and still suffers from a misalignment

between limited revenue-raising powers and

broader spending responsibilities.

Several measures were taken to reduce taxation

on labour,

such as the 2016 income tax reform

and the reduction of non-wage labour costs for

employers. Austria nonetheless still has one of the

highest tax wedges in Europe.

Austria has managed to increase the effective

retirement age

by limiting access to early

retirement and invalidity pension schemes as from

2014. Earlier harmonisation of the pension age of

men and women as well as a linking of the

statutory pension age to life expectancy have been

recommended several times but have not been

implemented.

The 2013 healthcare reform comprised several

measures to improve the efficiency of the

healthcare sector,

including a cost-containment

path up to 2016. The 2017 financial equalisation

law established more stringent expenditure ceilings

up to 2021 and also took some steps to strengthen

the provision of outpatient care outside hospitals.

(

) For the assessment of other reforms implemented in the

past, see in particular Section 3.

kom (2017) 0090 - Ingen titel

2. Progress with country-specific recommendations

market participation of women and the educational

achievements of disadvantaged young people.

Limited progress was made on CSR3 on reducing

barriers to investment in the services sector.

Table 2.1:

Summary table on 2016 CSR assessment

Austria

CSR 1:

Ensure that the deviation from the medium-term

budgetary objective in 2016 and in 2017 is limited to the

allowance linked to the budgetary impact of the

exceptional inflow of refugees in 2015, and to that effect

achieve an annual fiscal adjustment of 0,3 % of GDP in

2017 unless the medium-term budgetary objective is

respected with a lower effort. Ensure the sustainability

of the healthcare system, and of the pension system by

linking the statutory pension age to life expectancy.

Simplify, rationalise and streamline fiscal relations and

responsibilities across the various layers of government.

Overall assessment of progress with 2016 CSRs:

Some progress



Some progress in ensuring the financial sustainability

of the healthcare system



Limited progress in ensuring

sustainability of the pension system

the

financial

No progress in linking the statutory retirement age to

life expectancy

Some progress in reforming fiscal relations between

the various layers of government

CSR 2:

Improve the labour market participation of

Some progress

women. Take steps to improve the educational



Some progress in improving the labour market

participation of women

achievements of disadvantaged young people, in

particular those from a migrant background.



Some progress in improving the educational

achievements of disadvantaged young people

CSR 3:

Reduce, in the area of services, administrative

Limited progress

and regulatory barriers for investments, such as



Limited progress in reducing administrative and

regulatory barriers to investment in services

restrictive authorisation requirements and restrictions

on legal form and shareholding, and impediments to



No progress in reducing impediments to setting up

setting up interdisciplinary companies.

interdisciplinary services companies

* This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact.

Source:

European Commission

kom (2017) 0090 - Ingen titel

2. Progress with country-specific recommendations

Box 2.1:

Contribution of the EU budget to structural change in Austria

Austria receives up to EUR 4.9 billion from the European Structural and Investment Funds (ESIF) for the

period 2014-2020. This is equivalent to around 0.2 % of GDP annually (over 2014-2017) and 5 % of

national public investment (

). By 31 December 2016, an estimated EUR 1.4 billion, which represents about

28 % of the total allocation for ESI Funds, have already been allocated to concrete projects.

Financing under the European Fund for Strategic Investments, Horizon 2020, the Connecting Europe

Facility and other directly managed EU funds is additional to the ESI Funds. By end 2016, Austria has

signed agreements for EUR 738 million for projects under the Connecting Europe Facility. The EIB Group

approved financing under EFSI amounts to EUR 188 million, which is expected to trigger nearly EUR 492

million in total investments (as of end 2016).

All necessary reforms and strategies as required by the ex-ante conditionalities (

) have been met,

thus

ensuring a timely and efficient up-take of the funds.

All relevant CSRs were taken into account when designing the 2014-2020 programmes.

The European

Regional Development Fund (ERDF) will contribute to stimulating private investments in research and

development and to improve the cooperation between public and private investments actors. Furthermore,

Austria already improved with the help of the ERDF the coordination between the regional and Federal

levels through the national Smart Specialisation Strategy.

A considerable part of the ESI Funds (EAFRD EUR 3.9 billion) addresses rural development, with the aim

of improving competitiveness in the agricultural sector, preserving eco-systems with a view to ensuring

biodiversity and supporting the socio-economic regeneration of rural areas. The ESI Funds also support

various labour market policies, particularly skills upgrading and contribute to increasing the employability

of the labour force. Austria also uses ESI Funds assistance for different social policies supporting social

inclusion measures, especially for minorities and migrants. Specifically, the ESF supports the

implementation of country specific recommendations, by assisting measures to improve the employability of

women, older workers and workers with migrant background in particular.

https://cohesiondata.ec.europa.eu/countries/AT

(

) National public investment is defined as gross capital formation + investment grants + national expenditure on

agriculture and fisheries.

( ) At the adoption of programmes, Member States are required to comply with a number of ex-ante conditionalities,

which aim at improving framework and investment conditions for the majority of areas of public investments. For

Members States that do not fulfil all the ex-ante conditionalities by the end 2016, the Commission has the possibility

to propose the temporary suspension of all or part of interim payments.

kom (2017) 0090 - Ingen titel

REFORM PRIORITIES

3.1. PUBLIC FINANCES AND TAXATION

3.1.1. FISCAL FRAMEWORK

The 2017 financial equalisation law takes some

steps to reduce the complexity of the fiscal

framework.

In 2016, representatives of the central

government, the federal states and the

municipalities agreed on a new financial

equalisation law, which will govern financial

relations between the different layers of

government from January 2017 for 5 years.

Several inter-sector transfers have been abolished

and integrated into the general revenue-sharing

system. A first step has also been taken to make

the revenue-sharing system itself more task-

oriented: starting in 2018 the funds for childcare

will be allocated to municipalities based on the

services provided rather than the number of

inhabitants. From 2019, the same system will also

apply to compulsory schooling. The law also

introduced a uniform formula for calculating the

maximum amount of liabilities and guarantees for

each sub-sectoral government, at the same time

implementing a general ban on financial

speculation. Nevertheless, the responsibilities of

each government subsector towards other sectors’

liabilities remain unclear.

The new agreement also introduces several

elements to improve the efficiency and

flexibility of the fiscal framework.

The legal

basis has been created for regular reviews of tasks

and expenditure in individual areas in order to

consider progress, results and the potential for

savings or redistribution of tasks. By the end of

2018, a system of benchmarks will also be

developed to compare federal states’ performance

in several areas in order to encourage efficiency

and improve monitoring. These include

administration, hospitals, long-term care and

compulsory schools. The three government

subsectors (central government, federal states and

municipalities) also committed to reform the

distribution of their respective competencies, for

which an agreement will have to be reached by the

end of 2018. The reform will aim at unbundling

competencies both in the legislative and executive

field, and will include subsequent changes in the

financial arrangements. The legal basis for

spending reviews and benchmarks improves the

adaptability of the fiscal framework, while the

reform of competencies could make it possible to

tackle the complexity of the system at its roots.

However, the effectiveness of these measures will

depend on their thorough implementation.

The 2017 financial equalisation law does little to

correct the misalignment of revenue-raising

powers and spending responsibilities across the

different layers of government.

The new

agreement slightly increases tax autonomy at the

sub-national level, leaving the federal states free to

set the tariff for the housing subsidy contribution

from 2018. While this measure has the potential to

increase federal states’ revenues from autonomous

taxes from EUR 500 million to around EUR 1.5

billion, this would be still low compared to their

overall budget of around EUR 30 billion in 2015.

At the same time, the law increases yearly

transfers to federal states and municipalities by

EUR 300 million, which will raise their spending

capacity, thus widening the misalignment with

their revenue-raising powers.

Regarding the implementation of the national

fiscal rules, the complexity of the 2012 Austrian

Stability Pact makes an effective monitoring at

the sub-national level difficult.

The 2012

Austrian Stability Pact introduced several

numerical rules for the budgets of each

government subsector. As part of these rules,

federal states and municipalities were required not

to exceed a specific share of the general

government structural budget deficit. For this

purpose they should keep a structural balance

control account from 2017 onwards where

deviations from targets would be recorded.

Similarly, increases in expenditure at the sub-

national level have been made subject to the same

rules as set at EU level (Council Regulation (EC)

No 1175/2011). Both the structural budget control

account and the implementation of the expenditure

rule are very difficult and resource-consuming at

the

sub-national

level,

especially

for

municipalities. This is particularly relevant given

the current heterogeneity of the accounting

standards and practices across sub-national

governments (accounting standards will be fully

kom (2017) 0090 - Ingen titel

3.1. Public finances and taxation

harmonised only from 2020 onwards) as well as

the complexity of intergovernmental transfers and

subsidies. Similar conclusions are shared by the

Fiscal Advisory Council (Fiskalrat, 2016), which

since 2013 has the mandate to analyse the

sustainability and the quality of budgetary policies.

earners remains significantly above the EU

average of 33.5 %.

In the absence of an indexation of tax brackets,

the tax burden on personal income tends to

increase over time as an effect of the fiscal drag.

The Austrian tax system currently does not

envisage any mechanism to automatically adjust

tax brackets to inflation. Consequently, as wages

grow to adjust for inflation, taxpayers

progressively move to higher tax brackets with a

corresponding increase in their tax liability. To

some extent, the income tax reforms implemented

in recent years countered the effect of the fiscal

drag and did not reduce the tax wedge on labour in

a structural way. For this reason, since the early

2000s the tax wedge on labour in Austria has

fluctuated between 47 % and 49 %, always

remaining far above the EU average (Graph 3.1.1).

In January 2017, the government agreed to

automatically index the two lowest income tax

brackets when the cumulative inflation reaches

5%. If adopted, this measure would provide for a

more stable reduction of the tax burden on labour

from 2019 onwards.

Graph 3.1.2:

Revenues from recurrent property taxes (2014)

3.1.2. TAXATION

Despite the 2016 tax reform, the tax wedge on

labour in Austria remains comparatively high.

The tax reform implemented from January 2016

has reduced the tax wedge on labour. Tax brackets

for personal income tax have been adjusted, with a

substantial reduction of the entry rate. The tax

wedge for a single person with average income has

decreased by 2.8 percentage points, from 49.5 % to

46.7 %. The reform also provided work incentives,

with a significant reduction of the low-wage trap

for second earners (from 43.9 % to 37.7 %)(

Graph 3.1.1:

The effect of the fiscal drag in Austria

bn euro

2001

tax

reform

2005 tax

reform

2009 tax

reform

% of earning

2016 tax

reform

3.5

% of GDP

% of

population

100

3.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Taxes on production and imports, receivable

Current taxes on income, wealth, etc., receivable

AT - Tax wedge, single person, average income (rhs)

EU average, GDP weighted - Tax wedge, single person, average income (rhs)

2.5

2.0

1.5

1.0

0.5

(1) The dashed values are Commission forecast

Source:

OECD, European Commission

0.0

Recurrent property tax revenue

Average recurrent property tax revenue

Share of houseowners (% of population)

Average share of houseowners

Nevertheless, even after the reform the tax wedge

on labour in Austria is among the highest in the

EU, and far above the EU average of 40.6 %.

Similarly, at 37.7 % the low-wage trap for second

(

) The low-wage trap shows the share of a family’s additional

earnings arising from an increase in work productivity

which are wiped out by increasing taxes and benefit

withdrawal. The family considered here has two-earners

with two children, where the principal earner earns the

average wage and the second earner increases its gross

wage from 33 % of the average wage to 67 %.

Source:

OECD

Austria has potential scope to shift the tax

burden from labour to recurrent property

taxes.

Revenues from recurrent property taxes are

significantly lower in Austria than the rest of the

EU: in 2014 they amounted to 0.2 % of GDP

versus an EU average of 1.6 % of GDP (Graph

3.1.2). Empirical research shows that recurrent

kom (2017) 0090 - Ingen titel

3.1. Public finances and taxation

Graph 3.1.3:

Share of homeowners by deciles of

equivalised disposable income

Income deciles

Mean annual equivalised disposable income of homeowners (rhs)

Share of homeowners per decile

Distribution of homeowners across deciles

1000 Euro

(1) Homeowners are defined as outright owners and owners

paying a mortgage.

(2) EUROMOD simulates benefit entitlements and tax

liabilities (including social security contributions) of individual

and households. The simulations are based on

representative survey data from the European Statistics on

Income and Living Conditions (EU-SILC).

Source:

European Commission, Joint Research Centre

based on the EUROMOD model

Commission, 2014)(

). However, the tax base is

extremely low, as the last assessment of property

values for tax purposes occurred in 1973 and the

assessed values bear little correlation with today's

market values. This misalignment affects revenues,

limits the stabilising role that property taxation can

play in the housing market, and may produce a

regressive distributional effect as the market values

of properties have evolved very differently across

the country. The 2016 tax reform introduced

several measures to update the assessed values of

immovable properties for tax purposes, in order to

better reflect their market values. Nevertheless, the

new tax base applies only to taxes on gratuitous

transfers, not to recurrent taxes.

3.1.3. AGE RELATED SPENDING

taxes on immovable property are the least

distortive to growth (Arnold

et al.,

2011), and

other studies indicate that shifting the tax burden

from labour to consumption or property would

have positive effects on GDP and employment

(European Commission, 2013). While the design

of such a shift would need to avoid potential

negative distributional impacts, in the case of

Austria these would be limited by the

comparatively low share of house-owners in the

overall population (Graph 3.1.2) and their

concentration in the higher income deciles (Graph

3.1.3). As recurrent property taxes are one of the

few sub-national own taxes in Austria, increasing

the corresponding revenues would also reduce the

transfer dependency of sub-national governments.

For this reason, the 2017 financial equalisation law

established a working group with the specific

mandate to propose a reform of the property tax by

mid-2017. Austria is also one of the few Member

States without an inheritance tax, which was

suspended in 2008.

The outdated tax base for recurrent taxes on

immovable property leads to low revenues and

distortive distributional effects.

In Austria the

rates of recurrent property taxes are relatively high,

ranging up to 1 % depending on the municipality

(EU average of 0.36 % in 2012) (European

Austria faces a medium risk to its fiscal

sustainability in the medium- and long-term,

mainly due to the effects of ageing.

Based on a

debt sustainability analysis by Commission staff

(European Commission 2017a) as updated

following the Commission 2017 winter forecast, in

a no-policy-change scenario Austria's public debt

is projected to decrease by about 18 pps of GDP

between 2016 and 2027, reaching 65.5 % of GDP.

A cumulative gradual improvement in the

structural primary balance of 0.5 % of GDP over 5

years (starting from the year after the forecasts,

currently 2019) would be required in order to reach

the 60 % debt-to-GDP ratio by 2031. This is

mainly due to the unfavourable current level of

debt and, to a lesser extent, to an age-related effect

over the medium term. In the long-term, the

projections point to a required fiscal adjustment of

2.2 % of GDP to ensure the sustainability of public

finances, qualifying Austria as facing medium

fiscal sustainability. This is mainly due to the

stronger projected impact of age-related spending

(2.5 % of GDP) over the longer term.

3.1.4. PENSIONS

Austria's public expenditure on pensions is

relatively high compared to the rest of Europe

and is expected to increase significantly due to a

rapidly ageing population.

According to the

(

) Data refer to 2012 and to tax rates on the possession of a

dwelling with a value of EUR 213 000.

kom (2017) 0090 - Ingen titel

3.1. Public finances and taxation

2015 Ageing Report (European Commission,

2015a), for the period 2013-2060, Austria is

expected to be among the EU Member States with

the largest predicted increase in pensions. The

report projects that by 2060 Austria's spending on

pensions will increase by 0.5 pps of GDP (vs EU

average of a 0.2 pps reduction).

The government's budgetary support for

pensions is still increasing.

In its Budget Report

2017 and Strategy Report 2017-2020 (BMF,

2017), the Ministry of Finance projects an increase

of 30.3 % in federal contributions to the pension

insurance (excluding civil servants) over 2015-

2020 (from EUR 10.2 billion in 2015 to EUR 13.3

billion in 2020). Similarly, pension expenditure for

public servants (including expenditure for long-

term care) is expected to increase in the same

period by 15.6 % (from EUR 9 billion in 2015 to

EUR 10.4 billion in 2020).

Increasing life expectancy and the low effective

retirement age are the main drivers of higher

pension expenditure.

Significant changes in the

age structure of the Austrian population are

expected by 2040 due to the persistently low

fertility rate and rising life expectancy. As a result,

the population aged over 65 is expected to increase

from 1.6 million in 2015 to 2.8 million in 2060. In

contrast, the number of potential workers is

expected to gradually decrease after 2025, so that

in 2060 the ratio between the population aged 65

and more as a percentage of the population aged

15-64 will be 0.5 (old-age dependency ratio). At

the same time, given the low effective retirement

age, the number of pensioners as a share of the 65+

population (coverage ratio) is projected to remain

far above the EU average up to 2060, though the

gap is expected to decrease (148 % vs 133 % in

2013, 116 % vs 105 % in 2060). The gradual

decline in the working-age population from 2020

and the simultaneous increase in pensioners will

have a dampening effect on economic growth and

change the public revenue and expenditure

structure.

Although pension reform measures launched

since 2014 led to an increase, the effective

retirement age is still relatively low.

Reducing

access to invalidity pensions, better transparency

created by the individual pension accounts, the

higher penalties for entering retirement earlier and

the higher benefits resulting from longer working

lives led to an increase in the effective retirement

age. In the first half of 2015, the effective

retirement age increased by 13 months compared

to the same period in 2014 (

) and by additional 2

months in the first half of 2016, reaching 60 years

and 3 months (BMASK, 2016). (

) However, this

figure still appears low compared to the EU

average, which in 2014 stood at 63 and 6 months

for men and 62 years and 6 months for women.

For men, the gap from the statutory retirement age

of 65 years also remains significant. For women,

the current statutory retirement age of 60 years is

among the lowest in the EU, and it will start to be

aligned with the statutory retirement age for men

only in 2024. In its programme 2017-18, the

government is planning to further harmonise the

pension system of civil servants with the general

pension system (ASVG).

The low labour market participation of women

and the high gender pay gap, combined with

lower pension contributions, led to less

adequate pensions for women.

Austria continues

to face a challenge in terms of pension adequacy

for women, particularly those aged 65+. The

gender pension gap increased from 35 % in 2008

to 39 % in 2015.

3.1.5. HEALTHCARE

Public expenditure on healthcare in Austria

poses a sustainability challenge, as it is expected

to rise significantly in the medium and long

term from already high levels.

At 7.9 % of GDP,

the public expenditure for healthcare in Austria is

among the highest in the EU (EU average of 7.2 %

of GDP, 2014 data). On the basis of the

2015 Ageing Report, healthcare expenditure is

projected to increase by 1.3 pps of GDP from 2013

to 2060, significantly above the average projected

increase for the EU (0.9 pps of GDP). Together

with the projected rise in spending on pensions and

long-term care, this projected increase represents a

medium risk to fiscal sustainability in the medium

and long term.

(

) Part of the increase in the effective retirement age recorded

in 2015 is due to a change in the criteria for classification.

(

) This figure does not consider civil servants. The effective

retirement age of civil servants of the federal

administration was 61 years and 2 months in 2015.

kom (2017) 0090 - Ingen titel

3.1. Public finances and taxation

The financial targets set by the 2013 healthcare

reform and the 2017 financial equalisation law

are not sufficient to ensure the sustainability of

the healthcare system.

With the 2013 healthcare

reform the annual increase in healthcare

expenditure has been limited to 3.6 % from 2013

to 2016, a level which had been set to match future

nominal GDP growth as estimated by the

government. Although it is being met (GÖG and

BMGF, 2016), the expenditure ceiling lacked

ambition and did not imply significant changes in

the existing trend. For health insurance institutions,

this was confirmed by the joint monitoring report

issued on July 2016 (Rechnungshof, 2016). The

2017 financial equalisation law has set more

stringent financial targets, as the cap on healthcare

expenditure growth will be gradually decreased

from 3.6 % in 2016 to 3.2 % in 2021. The new

targets are likely to play a positive role in

containing the overall spending path and

encouraging

efficiency.

Nevertheless,

the

projections of the 2015 Ageing Report pointed to

medium risks for fiscal sustainability even though

they assumed lower growth rates for healthcare

expenditure over the same years. Therefore,

Austria will still face a sustainability challenge

even if the financial targets are met.

Despite the high costs, the outcomes of the

healthcare system are around the EU average,

pointing to unexploited efficiency gains.

The

Austrian healthcare system does not seem to suffer

from problems of accessibility: according to the

EU statistics on income and living conditions,

Austria consistently scores as one of the Member

States with the lowest self-reported unmet needs

for medical care due to costs, distance and waiting

times. However, recent evidence at the local level

suggests some inefficiencies and long waiting

times in specific sectors (Stadtrechnungshof Wien,

2017a/b). Life expectancy is above the EU

average, both for females and males (84 and 79.1

respectively, versus an EU average of 83.6 and

78.1). Nevertheless, the number of healthy life

years is significantly below the EU average (57.8

for females and 57.6 for males, versus an EU

average of 61.8 and 61.4 respectively). This

indicates that although the Austrians are living

longer than the EU average, they tend to live fewer

years in sound health conditions. Overall, the

outcomes of the healthcare system, although of

good level, do not appear to fully reflect the high

costs.

The main driver of the high healthcare

spending is the large hospital sector, while the

less costly outpatient care is underutilised.

Several indicators point to the over-utilisation of

hospital care in Austria. The number of available

acute care beds (535 per 100 000 inhabitants in

2013), is 50 % higher than the EU average (356).

At the same time, even if the average length of

curative care stays, at 6.5 days, is at about the EU

average in 2013, the number of inpatient

discharges(

) per 100 000 inhabitants (26.6) is

among the highest in the EU and more than 50 %

above the EU average (16.5). Consistently, the

number of day-case discharges is lower than

average (6 595 in Austria versus 7 031 in the EU

in 2013). Accordingly, public expenditure for the

hospital sector is among the highest in the EU

(Graph 3.1.4), while Austria at is below the EU

average in terms of public expenditure for

outpatient care (Austria 1.5 % of GDP, EU 2.2 %).

Graph 3.1.4:

Public expenditure for healthcare (2014)

% of GDP

Source:

European Commission

The financial and organisational structure of

the healthcare sector is complex and

fragmented.

The Austrian taxpayer contributes to

the healthcare system directly through compulsory

contributions to social security funds and indirectly

through taxes. While outpatient care is mainly

financed by social security funds, which have

direct agreements with healthcare providers, the

financing of inpatient care is more complex. Public

(

) An inpatient discharge is the discharge of a patient at the

end of an inpatient care service.

Other expenditure

Outpatient services

Hospital services

Total expenditure - EU 28

Hospital services expenditure - EU 28

kom (2017) 0090 - Ingen titel

3.1. Public finances and taxation

hospitals are financed through nine healthcare

funds associated with the federal states, which

collect contributions from the three government

layers and the social security institutions. For each

government subsector, different forms of

contributions exist which depend on different

legislation and relate to different funds. In general,

the complexity of the system does not provide any

stakeholder with full control over the financing or

strong incentives to reduce costs. In addition,

managing and financing responsibilities are not

fully aligned, with federal states owning and

running most of the public hospitals but

contributing to less than half of the hospital

sector’s financing. This set-up provides federal

states with weak incentives to pursue efficiency

within the hospital sector or at health system level

by shifting services to the less costly outpatient

care.

The 2017 financial equalisation law takes steps

to promote efficiency, by reducing the

incentives for hospitals to treat outpatient cases

as inpatient ones.

The system of reimbursement

for hospitals based on the diagnosis-related groups

introduced in 1997 has applied so far only to

inpatient cases. As the ambulatory care department

of hospitals were reimbursed under a different and

less generous regime, hospitals had an incentive to

treat ambulatory cases as inpatients. From 2017,

the diagnosis-related groups reimbursement system

will also apply to the ambulatory departments.

This is likely to promote a shift of excess capacity

from the inpatient to the outpatient sector and a

consequent reduction in acute care beds.

The 2017 financial equalisation law strengthens

the provision of outpatient care outside

hospitals.

To provide patients with an effective

alternative to hospital services, a legal framework

for planning outpatient multi-disciplinary primary

care centres has been created. The framework also

provides for the creation of networks of primary

care providers, which is particularly relevant for

the more scarcely populated areas. Compared to

the traditional single-handed practices, the new

centres would offer a wider range of care services

and more patient-friendly conditions. Although the

establishment of the care centres is subject to the

local supply of outpatient care (which includes

single-handed practices), it was agreed to

implement 75 care centres by 2021, and EUR 200

million have been earmarked. So far, the low

development of outpatient care outside hospitals

was also due to the contracts agreed between

healthcare providers and social security funds,(

)

combining

lump-sum

with

fee-for-service

payments. The success of the multi-disciplinary

primary care centres depends on the

implementation of new payments schemes

ensuring the involvement of both practitioners and

social security funds.

Austria’s hospital sector makes insufficient use

of effective public procurement such as EU-

wide tendering, procurement aggregation and

non-price award criteria.

Effective public

procurement has the highest benefits in healthcare

systems, like Austria’s, which rely in particular on

institutional players such as hospitals. Based on the

EU’s TED database, however, Austria’s public and

confessional hospitals make little use of EU-wide

tendering. The value of health-related tenders

published EU-wide by the Austrian health sector is

0.23 % of GDP, compared to an EU average of

0.62 %; the total amount is EUR 0.78 billion

compared for example to Sweden’s EUR

3.59 billion for a population of similar size. A

related issue is that in a significant number of

tenders only one bid was received (41 % in

medical imaging equipment tenders in 2012-2015),

indicating a lack of competition. Furthermore,

Austria’s hospitals forego volume savings for

commoditised inputs and the amortisation of costly

expertise for complex products by not aggregating

their tenders. In addition, Austrian hospitals used

price as the sole award criterion in 54 % of tenders

in 2012-2015, which points to a lack of

sophistication in tendering practices.

3.1.6. LONG-TERM CARE

Austria has an ageing society whose long-term

care costs are expected to increase significantly.

Austria ranks in the middle of the EU on long-term

care costs as a percentage of GDP. However, it is

one of the countries with the highest projected

increase, with costs expected to double from 1.4 %

of GDP in 2013 to 2.7 % of GDP by 2060

(projected increase of 1.3 pps of GDP versus 1.1

pps for the EU average).

(

) Contracts for physicians are negotiated centrally between

the Medical Chamber and the main association of social

security funds (Hauptverband).

kom (2017) 0090 - Ingen titel

3.2. FINANCIAL SECTOR

Banking sector capitalisation improved in 2016,

but pockets of vulnerability still remain.

Capital

adequacy (including the capitalisation of CESEE

subsidiaries)(

) strengthened further and reached

16.5 % in June 2016 compared with 16.3 % in

2015. The common equity Tier 1 (CET 1) ratio

rose to 13.2 % in June 2016, up by 0.4 percentage

points

compared

with December

2015.

Notwithstanding efforts to strengthen their capital

buffers, the largest Austrian banking groups still

have lower capital ratios than European peers, as

shown also by the results of the 2016 EU-wide

stress test performed by the European Banking

Authority. One of the two Austrian banks included

in the stress test sample (i.e. Erste Bank Group and

Raiffeisen) was among the banks with the weakest

results. The two banks had lower starting point

capital ratios for the stress test and experienced

high credit losses, in particular for their CESEE

operations. Meanwhile, due to their traditional

business model, Austrian banks continue to have

lower leverage ratios than their European peers.

To increase the risk-bearing capacity and

overall resilience of the banking sector, Austria

activated several macro-prudential measures in

2016.

Following a recommendation from the

Austrian macro-prudential body (Financial Market

Stability Board), the Financial Market Authority

identified seven banks as 'other systemically

important institutions' ('O-SIIs') and set the

applicable O-SII buffers at 1 % and 2 %,

depending on the banking group.(

) The O-SII

buffers will be gradually phased in between 1 June

2016 and 1 January 2019. Since 1 January 2016,

the Financial Market Authority has also

implemented a systemic risk buffer (SRB) of 1 %

and 2 % for 12 banks,(

) depending on the

(

) The CESEE (Central, Eastern and South-eastern Europe)

region includes Turkey and the following sub-regions: i)

Central and Eastern Europe (CEE), consisting of the Czech

Republic, Hungary, Poland, the Slovak Republic and

Slovenia; ii) South-eastern Europe (SEE), consisting of

Albania, Bosnia & Herzegovina, Bulgaria, Croatia,

Kosovo, FYR of Macedonia, Montenegro, Romania and

Serbia; iii) the Baltic region, consisting of Estonia, Latvia

and Lithuania; Russia, Ukraine and other countries in the

Commonwealth of Independent States.

(

) The 2 % O-SII buffer applies to: Erste Group Bank,

Raiffeisen Zentralbank, Raiffeisen Bank International,

UniCredit Bank Austria; the 1 % O-SII buffer applies to:

Raiffeisenlandesbank Oberösterreich, Raiffeisenlandesbank

Niederösterreich-Wien, BAWAG P.S.K.

(

) The 2 % SRB applies to: Erste Group Bank, Raiffeisen

Zentralbank, Raiffeisen Bank International, UniCredit

Bank Austria; 1 % SRB applies to: Raiffeisenlandesbank

banking group. The SRB will be gradually phased

in between 1 January 2016 and 1 January 2019 for

the institutions directly supervised by the ECB. For

those not directly supervised by the ECB, the

Authority set a SRB of 1 % from 1 January 2016,

which is applied without a phase-in period.(

)

Only the higher of the O-SII buffer and the SRB

applies.

The increase in real estate prices coupled with

the recent trends in housing loans underscores

the importance of macro-prudential measures.

Against the background of growth in housing

loans, especially over the last year, and signs of

real estate price overvaluation in some parts of the

country, the Financial Market Stability Board

called for the introduction of additional macro-

prudential instruments. In June 2016, the Board

recommended to the Ministry of Finance the

development of a legal basis for introducing limits

on the loan-to-value ratio, the debt-to-income ratio

or the debt service-to-income ratio for new real

estate lending. The Financial Market Stability

Board issued in September 2016 a communication

on sustainable lending standards in real estate

lending, which is crucial for maintaining stability

and growth. Furthermore, the European Systemic

Risk Board, which in 2016 conducted an EU-wide

forward-looking assessment of vulnerabilities

relating to residential real estate, issued a warning

to Austria on vulnerabilities in this sector and

made it public on 16 December 2016.

Austrian banks continue to have liquid balance

sheets.

The increase in deposits that has exceeded

loan growth has allowed banks to maintain a sound

funding profile. Their reliance on wholesale

funding has been moderate, but developments

linked to HETA Asset Resolution, the ‘bad bank’

of the former Hypo Alpe Adria, have hurt investor

confidence and led to an increase in the cost of

funding for senior unsecured debt issued by banks.

However, the cost of these instruments declined

again after the acceptance by creditors of the buy-

back program offered by Carinthia. The cross-

Oberösterreich, Raiffeisenlandesbank Niederösterreich-

Wien, BAWAG P.S.K., Hypo NOE Gruppe Bank,

Vorarlberger Landes− und Hypothekenbank, Hypo Tirol

Bank, Oberösterreichische Landesbank, Sberbank.

(

) These banks are: Hypo NOE Gruppe Bank, Vorarlberger

Landes− und Hypothekenbank, Hypo Tirol Bank,

Oberösterreichische Landesbank.

kom (2017) 0090 - Ingen titel

3.2. Financial sector

border intra-group financing of the largest Austrian

banks with international operations has declined

steadily since 2011 (Graph 3.2.1), as the funding

profile of the CESEE subsidiaries has continued to

improve. Supported by the increase in funding on

the local market due to the rise in customer

deposits but also by an orderly deleveraging

process, the funding gap of the CESEE

subsidiaries continued to decline. Consequently,

the loan-to-deposit ratio of these subsidiaries fell

to 81.0 % in Q3 2016 from 96.7 % in 2014.

Graph 3.2.1:

Intra-group liquidity to CESEE subsidiaries

16Q3*

EUR bln

income. The reduction of the bank levy in 2017

will support profitability.

Although on a declining trend, foreign currency

loans to households remain a matter of concern.

The steady decline in foreign exchange-

denominated loans, in particular Swiss franc loans,

to Austrian households is a corollary of several

supervisory measures to curb foreign exchange

lending adopted by the Austrian supervisors since

2008. Swiss franc loans account for roughly 96 %

of foreign currency-denominated loans granted to

the private sector. At the end of 2015, the

outstanding stock of Austrian banks' foreign

currency loans to households amounted to EUR

24.4 billion, some EUR 14.7 billion lower than in

2008. About two thirds of these loans are 'bullet

loans', most of them linked to repayment vehicles,

which are sensitive to financial market

developments. Roughly 80 % of the outstanding

foreign currency loans to households are set to

mature from 2021 onwards.

Graph 3.2.2:

Net profits of Austrian subsidiaries in CESEE

5.0

4.0

3.0

2.0

1.0

EUR bln

Rest

Note: Liquidity transfers to credit institutions only

Source:

OeNB (central bank of Austria)

Notwithstanding recent positive developments,

banks' capacity to generate profits in the

domestic market remains under pressure.

The

low interest rate environment continues to limit the

generation of net interest income by Austrian

banks which, like German banks, rely heavily on

interest income. Several credit institutions have

implemented cost-cutting measures in the domestic

market, but overall banks continue to have very

dense branch networks. The cost-to-income ratio

of Austrian banks declined in 2015 to 66.2 % from

69.7 % in 2014. However, it is higher than the

cost-to-income ratio for the CESEE subsidiaries,

which fell to 51 % in 2015 from 53 % in 2014.

Return on average equity at unconsolidated level

reached 4.9 % in June 2016, some 0.9 pps lower

than in the same period in 2015. Profitability

continues to be supported mainly by lower loan-

loss provisions than in previous years. Overall,

operating income decreased in the first half of

2016, compared with the same period in 2015, due

to the reduction in net interest income, lower fee

and commission income as well as lower trading

0.0

-1.0

-2.0

-3.0

15Q3* 16Q3*

CESEE total

Rest of CESEE

* Q3 data not comparable with yearly data

Source:

OeNB (central bank of Austria)

The exposure of the Austrian banking sector to

the CESEE region increased slightly in 2015.

Based on data from the Bank for International

Settlements, the total exposure of Austrian banks

to the CESEE countries stood at EUR 187.6 billion

in June 2016, up from EUR 184.8 billion in 2014

but roughly EUR 12 billion below the level

registered in 2008. Due to the transfer in

ownership of the CESEE subsidiaries of UniCredit

Bank Austria to the UniCredit Group, the exposure

of Austrian banks to the CESEE region has

declined considerably (however, this is not yet

kom (2017) 0090 - Ingen titel

3.2. Financial sector

reflected in the June 2016 data). The exposure to

the region accounts for roughly 64 % of the

consolidated foreign claims of majority-owned

Austrian banks. The CESEE exposure has

remained diversified and dominated by operations

in the EU Member States. Exposure to EU

Member States in the CEE region has been

prominent, the highest being to the Czech Republic

and Slovakia. In recent years, operations in

Ukraine, Russia and Turkey have been

increasingly hit by adverse economic and political

developments as well as the international

commodities cycle.(

)

Whereas CESEE operations have benefited

from improved asset quality and profitability,

several challenges remain.

In most CESEE

countries non-performing loans either remained

unchanged or declined significantly (i.e. in

Bulgaria, Romania, Slovenia) in 2015 on the back

of efforts to clean up balance sheets. Meanwhile,

subsidiaries operating in Ukraine and Russia

experienced a further deterioration in asset quality

in 2015. The profitability of CESEE operations

improved considerably in 2015, but the

subsidiaries in Ukraine and Croatia reported

losses, whereas the Russian subsidiaries remained

profitable (Graph 3.2.2). The aggregated net profit

after tax of the CESEE subsidiaries (excluding the

profits of UniCredit Bank Austria subsidiaries in

CESEE) stood at EUR 1.4 billion in June 2016

compared with EUR 0.9 billion a year earlier.

Austrian banks operating in CESEE have been

increasingly impacted by legislative initiatives in

several host countries (e.g. Hungary and Croatia)

aimed at converting foreign currency loans, in

particular Swiss franc loans, into local currency or

another foreign currency. Although declining, the

outstanding stock of foreign currency loans

granted abroad remains sizeable. The total foreign

currency loans granted by the Austrian subsidiaries

stood at roughly EUR 32.7 billion in June 2016.

This was down from EUR 69.3 billion in 2015 due

to the transfer of ownership of the CESEE

subsidiaries of UniCredit Bank Austria to the

UniCredit Group.

(

) Operations in Turkey are no longer part of Austria's

exposure to CESEE since October 2016.

3.2.1. NATIONALISED BANKS

Following a first unsuccessful offer, the

creditors of HETA accepted a second settlement

offer by the state of Carinthia.

In September

2016, Carinthia made a second offer to the

creditors of HETA to acquire certain the HETA

debt instruments for which Carinthia is statutorily

liable as deficiency guarantor (for the State aid

decision, see Commission 2016b). The offer,

which had to be accepted by a two-thirds majority

of HETA creditors in order to be implemented,

was accepted by creditors representing EUR 10.7

billion or 98.71 % of all HETA debt instruments.

The central government’s financial contribution is

substantial, leaving Carinthia with a minor share of

up to EUR 1.2 billion of the total cost, which will

be funded by a loan from the federal government

via its financing agency OeBFA. As all HETA

liabilities were already included in the government

accounts, honouring the offer is not expected to

imply additional costs for the general government.

The remaining assets of the three public

financial defeasance vehicles are being

progressively divested, with different time

horizons and limited risks overall.

The liabilities

of HETA, KA Finanz and Immigon had been

recorded as part of government debt, increasing it

significantly over 2009-2015 (see Graph 1.10, and

Commission, 2016c). The impaired assets of the

three vehicles are being divested over time in order

to cover the respective liabilities and allow a

corresponding reduction in government debt. In

the case of HETA, the impaired assets amounted to

around EUR 14.3 billion at the end of 2015. The

wind-down of HETA’s assets is expected to be

completed by 2020, but the bulk of assets is likely

to be divested already by 2018. The assets have

undergone different valuations, with the last

performed by the Financial Market Authority in

April 2016. As this valuation took a rather

conservative approach, risks that yields will be

lower than the expected values are limited. The

impaired assets of Immigon, a wind-down entity

created from the split of Österreichische

Volksbanken, amounted to around EUR 3 billion

at the end of 2015. Their resolution is expected to

be completed by 2017. In the case of KA Finanz,

the winding-down period of the remaining assets

amounting to EUR 12.9 billion is much longer.

However, the overall risk is limited as the rating of

the assets is relatively positive.

kom (2017) 0090 - Ingen titel

3.3. LABOUR MARKET, EDUCATION AND SOCIAL POLICIES

3.3.1. LABOUR MARKET

The labour market in Austria, although

affected by increased unemployment, remains

one of the best-performing in the EU.

Because

of weaker economic performance the labour

market has recently faced some difficulty in

absorbing the increased labour supply. Although

among the lowest in Europe, the unemployment

rate of 6.1 % (in Q3 2016) was the highest Austria

has seen, at least since 1968. However, this

historical peak is just above the earlier peak of

2004, and the increase in unemployment stopped

by the summer of 2016 as GDP growth picked up.

At the same time some groups of the working-age

population still suffer from weaker labour market

outcomes, notably older workers, low skilled

workers, women and people with a migrant

background.

The increasing labour supply has improved

growth potential and demographic trends, but

has not been fully absorbed by employment.

Labour immigration and an increasing activation

of older workers and women have been expanding

labour supply. Austria had one of the highest net

migration rates in the EU between 2000 and 2015.

Annually some 42 000 more people immigrated to

Austria than emigrated. Furthermore, Austria was

one of the main destinations of posted workers and

received, in net terms, about 60 000 such workers

in 2014. Since 2000, immigration has more than

compensated the effect of demographic ageing,

and the working-age population has expanded by

370 000 (6.9 %). The activity rate for older

workers rose from 47.2 % in 2000 to 62.9 % in

2015. For women it increased from 65.1 % to

74.0 % in the same period. In addition, economic

growth of less than 1 % in real terms between 2012

and 2015 was too weak to absorb the increasing

labour supply.

An increasing labour supply is not necessarily

in contradiction with lower unemployment.

Until 2011 unemployment fell from its 2004 peak

even though the labour supply was already

expanding. In addition, even if unemployment

started to increase in 2011, the long-term

unemployment rate has remained relatively low, at

1.7 % compared with the EU average of 4.5 % in

2015, and turnover on the labour market has

remained high. This is also explained by the high

seasonality of economic sectors like tourism and

construction. Most of the jobs created in recent

years are part-time (full-time employment has

picked up only recently) and a majority of the new

positions are in the low-wage sector.

Graph 3.3.1:

Labour market — key indicators

% of active

pop.

% of total

pop.

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Activity rate 20-64 (rhs)

Unemployment rate 15-64

Long-term unemployment rate 15-64

Young unemployment rate 15-24

NEET

Source:

European Commission

Graph 3.3.2:

Unemployment rate by country of birth

Other EU-born

Non-EU born

Austrian born

Source:

European Commission

The current increase in unemployment is

concentrated in certain groups.

It affected in

particular

non-EU

born

people,

whose

unemployment rate in 2015 was 12.6 % compared

to 4.6 % for native-born people (see Graph 3.3.2).

The increase also particularly hit the low-skilled,

11.2 % of whom were unemployed in 2015,

compared to 5.7 % for all skill levels. By contrast,

the labour market situation of better-skilled

workers remained good. People with low

kom (2017) 0090 - Ingen titel

3.3. Labour market, education and social policies

qualifications also face the highest risk of long-

lasting

unemployment

(see

Graph 3.3.3).

Projections show that supply and demand are

going to diverge even further for low-qualified

labour (CEDEFOP, 2015). The labour force with

the lowest skills is expected to shrink, but the

number of such jobs is expected to shrink by far

more.

Graph 3.3.3:

Unemployment rate by educational

attainment

% labour force,

20-64

policy in response to the rise in unemployment. It

increased the staff of the Public Employment

Service Austria, reintroduced skilled workers

grants, stepped up initial and job-related training

and introduced a training guarantee for persons up

to the age of 25. Furthermore, non-wage labour

costs are being reduced by nearly EUR 1 billion in

several steps from 2016 to 2018 and further

reductions in form of an employment bonus is

announced in the government programme 2017-18.

Graph 3.3.4:

Regional dispersion of unemployment

0.7

0.6

0.5

0.4

0.3

0.2

0.1

2015

Note: Unemployment rates ages 20-64 (% of labour force),

non-seasonally adjusted

Source:

European Commission

Labour market performance also varies across

regions.

Compared to the unemployment peak of

2004, the regional distribution of unemployment in

Austria has increased (see Graph 3.3.4). A regional

comparison of unemployment data shows an east-

west gap, with a stronger increase in

unemployment over recent years in the eastern part

of the country (Vienna, Lower Austria, Upper

Austria, Burgenland). Vienna is especially affected

by the strong increase in unemployment

(particularly long-term unemployment). In its

programme 2017-18 the government proposes

several measures for increasing mobility on the

Austrian labour market.

Expenditure on labour market policies has

increased somewhat as unemployment has

risen.

The budget for active and passive labour

market policies is projected to reach

EUR 8.6 billion in 2017, up from EUR 6.1 billion

in 2012. In September 2016 the government took a

number of measures to strengthen labour market

High skilled

Medium skilled

Low skilled

16Q1-Q3

2004

Note: Dispersion is measured as the coefficient (between 0

and 1) of variation of unemployment rates across NUTS2

regions

Source:

European Commission

Getting older workers into work remains a

challenge, although increasing and targeted

activation measures are delivering good results.

The employment rate of older workers has been

continuously increasing as a result of government

measures targeting this age group, but still only

49.7 % of people aged 55-64 were employed in the

third quarter of 2016, below the EU average of

55.6 %. The employment rate of older women

(41.5 % in the third quarter of 2016) remained

significantly lower than that of men (58.3 %).

Those over 50 face a comparatively lower risk of

becoming unemployed, but once they lose their job

they tend to remain unemployed for a relatively

long period. Over the last few years, the Austrian

government has increased efforts to deliver active

labour market policies targeting these groups, and

employers are encouraged to provide age-friendly

working conditions and employ older workers.

These measures are helping to increase their

kom (2017) 0090 - Ingen titel

3.3. Labour market, education and social policies

employability and keep them longer in

employment. Furthermore, the government

programme 2017-18 announces an employment

initiative of yearly up to 20 000 new jobs for long-

term unemployed above the age of 50. In this

programme, the government also announced its

intention to modify the current provisions in the

field of dismissal protection to facilitate hiring

older workers.

Women’s labour market potential is underused,

as reflected in the high share of part-time

employment and the high gender pay gap.

While the employment rate of women aged 20-64

is above the EU average (70.8 % vs 65.3 % in the

second quarter of 2016), taking full-time

equivalents into account brings it back to average

levels (55.1 % v the EU average of 55.3 % in

2015). The gender gap in pay remains wide

(22.2 % in 2014, compared to the EU average of

16.1 %) but has narrowed slightly (from 24 % in

2010). The high and above-average proportion of

women working part-time is not decreasing and is

largely driven by care responsibilities. In 2015,

52.2 % of young Austrian women (aged 15-39)

working part-time mentioned caring for children or

the elderly as their main reason for part-time work.

This is well above the EU average of 33.6 %.

Childcare provision is improving but Austria is

still below the Barcelona target for children

under 3 years of age.

The number of early

childcare places for children under 3 has been

increased, but the current level of 25.5 % in

2015/2016 is still below the Barcelona target for

this group of 33 %. Moreover, there are still major

regional differences in the level, e.g. Vienna

45.1 %, Upper Austria 14.5 %, Styria 13.4 %,

Carinthia 20.6 % (Statistik Austria 2016).

Furthermore, the percentage of children staying in

formal childcare for 30 hours or more is far below

the EU average for all age groups from 0 to 12

years. A nationwide needs assessment of

additional care places is so far lacking. Women are

still interrupting their professional career for a

relatively long period after giving birth, supported

by the relatively generous system of parental leave

allowances. The share of dependents cared for by

family members in their own or their family’s

home is relatively high. The vast majority of care

givers are working-age women. No high-quality,

recent data exist on the share of informal provision

in the total provision of long-term care, or on the

share of working-age women providing informal

and/or unpaid care.

The proportion of the population with a

migrant background is increasing, while their

labour market potential is underused.

Some

9.3 % of the Austrian population was born outside

the EU, and with an employment rate of 60.6 % in

2015 they are much less likely to be in

employment than native-born people, whose rate

was 76.4 %. By contrast, people born in other EU

countries have an employment rate that is similar

to the native-born population. Since 2011 the gap

has widened as the employment rate of native-born

people has increased by 0.6 pps while that of non-

EU-born people has declined by 3.6 pps.

Employment rates for those born outside the EU

lag behind those for native-born people at all

qualification levels (see Graph 3.3.5) but some

groups appear to face particular challenges. The

female employment rate differs according to the

country of origin. Women born in other EU

countries have similar employment rates to native-

born women (69.5 % v 72.2 % in 2015), while

women born outside the EU have significantly

lower rates (47.6 %).

Graph 3.3.5:

Employment rate by qualifications and country

of birth (2015)

100

4.6

9.6

17.6

49.5

66.5

68.2

1.Low

Non-EU born

2.Medium

Gap to Austrian born

3.High

Austrian born

Source:

European Commission

People born outside the EU are often under-

employed and face a high risk of being

overqualified when employed.

According to data

of the ad hoc module of the Labour Force Survey

2014 (Statistik Austria, 2015a), 23.5 % of foreign-

kom (2017) 0090 - Ingen titel

3.3. Labour market, education and social policies

born people in Austria reported being

overqualified for their current job against 8.8 % of

the native-born population. Especially for some

groups of non-EU nationals this combines with

insufficient knowledge of German, a sometimes

relatively low level of formal education and the

lack of recognition of formal qualifications

obtained abroad. According to the survey

mentioned above, around 75 % of the non-EU

nationals received their qualifications outside

Austria but only around 25 % of them applied for

them to be recognised. The recently adopted

Recognition Act provides various tools to facilitate

the recognition of qualifications of non-EU

nationals. The legal entitlement to recognition and

to an assessment procedure should lead to better

labour market integration of non-EU nationals with

qualifications obtained abroad and help them find

jobs corresponding to their qualification levels

more quickly.

3.3.2. SOCIAL POLICIES

achievements

and

the

influence

socioeconomic status remains important.

The

performance of 15-year-olds in mathematics,

reading and science worsened compared to 2012 as

measured by the 2015 PISA test (OECD

Programme for International Student Assessment)

(see Graph 3.3.6). The proportion of low achievers

reached 21 % in science and 22 % in reading and

maths. The share of top performers in science

decreased from 10 % in 2006 to 8 % in 2015.

These developments may hinder future potential to

innovate. Education outcomes for those with an

immigrant background remained significantly

below those of the population without an

immigration background. The share of low

achievers in science for both first generation

immigrants and children of immigrants in Austria

is among the most pronounced among EU

countries even when adjusted for socioeconomic

status. Between 2012 and 2015, in Austria the

share of low performers in science increased by 5

pps, more than in Finland and Germany, while for

instance Denmark and Sweden registered a

decrease.

Graph 3.3.6:

PISA performance 2012 -2015 in science -

share of top and low performers

The social situation is overall good.

The

proportion of the population at risk of poverty or

social exclusion decreased in 2015 and is one of

the lowest in the EU (18.3 % in 2015 against the

EU average of 23.7 %). The wide gender gaps in

pay, working hours and length of working life

persist, impacting pension adequacy and leading to

a substantial difference between the at-risk-of-

poverty rate for women aged 65 and over (15.1 %)

and that of men of the same age (10.7 %).

Although the effective retirement age is

continuously

increasing,

harmonising

the

retirement ages for men and women by increasing

the statutory retirement age for women, combined

with respective job creation policies, would reduce

the gender gap in pay and pensions and reduce the

risk of poverty for women aged 65 and over. In

addition, the situation of specific groups at risk of

poverty in Austria remains a concern. This applies

in particular to the children of foreign-born

parents, with poverty rates of 34.6 %, above the

EU average of 33.2 %, and the long-term

unemployed.

Top performers

Low performers

Top performers

Low performers

Top performers

Low performers

Top performers

Low performers

Top performers

Low performers

Source:

OECD (2016) PISA 2015, table 1.2.2a

3.3.3. EDUCATION

The amount of science instruction available differs

significantly

between

advantaged

and

disadvantaged schools; in addition both grade

repetition and truancy have increased. Austria has

halved the gender gap in reading but boys continue

to outperform girls in both maths and science.

School education in Austria produces only

average outcomes in terms of basic skills

Top performers

Low performers

kom (2017) 0090 - Ingen titel

3.3. Labour market, education and social policies

Recent measures aim at improving skill levels.

The recently adopted Act on an education and

training obligation until the age of 18

(Ausbildungspflichtgesetz) provides a framework

for upgrading the skills of disadvantaged young

people. In addition, planned standardised forms of

partial qualifications aim at improving the

educational achievement of learners. Though

participation in lifelong learning in Austria, at

14.4 %, almost reaches the EU benchmark of

15 %, the ‘Educational guidance and counselling

Austria’ (Bildungsberatung

Österreich)

initiative

is promoting the extension and further

development of cost-free educational guidance and

counselling for adults (CEDEFOP, 2016). This is

intended to increase their employability.

The government is starting to implement the

first package of the November 2015 education

reform plan.

It provides for a better transition by

linking the last compulsory year of childhood

education and the first 2 years of primary school.

This allows for a more intensive exchange of

information between the institutions and more

tailor-made support to students, including language

support, if needed. Education outcomes are

recorded in the ‘education compass’ and the

system of grading has been adapted in primary

schools. The government programme 2017-18

proposes increasing autonomy of schools and

further strengthening early childhood education

and care through a pilot project exploring

compulsory attendance from age 4 on. The number

of all-day school places more than doubled

between 2007 and 2016 from 77 000 to

approximately 160 000. About 40 % of school

locations now offer all-day schooling, but only

5 % of schools have a curriculum with classes

during the whole day (OECD, 2016a). Austria

already has a EUR 375 million investment

programme to increase the number of all-day

schools between 2015 and 2019. A further

EUR 750 million from federal funding has been

made available for the coming 8 years, with a

particular focus in the first 2 years on increasing

the number of schools with an integrated

curriculum. Simplifying the administration of these

funds will help regions to use them fully, which

has not always been the case in the past.

Austrian teachers do not make sufficient use of

digital teaching tools yet.

According to the

Austrian Education Report 2015 nearly all teachers

— 90 %, irrespective of their age — use digital

means and the internet for preparing lessons but

much less often during the lessons themselves. The

report finds that teachers do not know enough

about relevant digital teaching methods. A new

digitalisation strategy in the government

programme 2017-18 envisages equipping all

schools with broad band and wireless internet

access by 2020/21 and introducing teaching basic

digital skills into the regular curriculum of primary

and lower secondary schools.

Austria faces challenges in meeting the growing

demand of ICT specialists, digital skills among

the general workforce and e-entrepreneurs.

The

share of ICT specialists in the Austrian workforce

of around 4 % is only around the EU average.

Students' motivation to engage in science has

further deteriorated since 2006 and is now at one

of the lowest levels in the EU. Even if interest in

science topics has risen back to the OECD average

again (Bifie, 2016), this comparative lack of

motivation does not help achieve the increase in

human resources devoted to science, technology,

engineering and mathematics that is needed for

Austria to become an innovation leader. Education

and digital skills is one of the 12 focus areas of the

Digital Roadmap Austria.

Funding remains an issue in the higher

education system and is preventing Austria

from improving education outcomes.

Austria’s

tertiary attainment rate was 38.7 % in 2015, the

same as the EU average. Austria reached its

Europe 2020 national target of 38 %. Austria has a

comparatively larger share of studies on ISCED 5

level (OECD 2016b). In 2014, per 1 000

population in the age group 20-29 Austria had

22.5 graduates

science,

mathematics,

computing, engineering, manufacturing &

construction, above the EU average of

18.7 graduates. However, it has a lower proportion

of graduates at higher qualification levels (i.e.

master’s degrees and PhDs) than those countries it

aims to join in its ambition to become an

innovation leader. The big increases in student

numbers over recent years have not been matched

by corresponding staff or funding increases (EUA,

2016). A concept for capacity based financing of

university places is planned in the government

programme 2017-18 and to be implemented by

2019. The government’s university development

plan for 2016-2021 had already identified a

kom (2017) 0090 - Ingen titel

3.3. Labour market, education and social policies

funding gap of EUR 500 million, in addition to the

EUR 600 million generally available for 2016-

2018 to implement such a scheme based on

capacity oriented financing. The additional

EUR 116 million granted to higher education in

2016 falls short of covering this. Adequate funding

and supportive student/staff ratios are a

precondition for realising the ambition of having a

higher education system that is characterised by

excellence. In addition, Austria has developed a

Box 3.3.1:

strategy in 2016 to improve the social dimension in

higher education and therefore make better use of

the human capital available.

Integration of refugees

Austria has made considerable efforts to accommodate and integrate refugees.

The Austrian

government decided in 2016 to implement a programme containing a variety of measures to swiftly integrate

refugees and to some extent also those asylum seekers considered to have prospects of being granted

residency. Key features of this programme are an expansion of German-language and orientation courses,

including education on Austrian values and integration requirements. The package also supports initiatives

for community services to be performed by asylum seekers. For those asylum seekers, with high prospects

of being granted residency, a compulsory integration year together with language classes is planned. The

recently adopted Recognition Act aims to speed up recognition of the qualifications of non-EU nationals and

to introduce more flexible procedures for those who have no formal evidence (certificates) of their

qualifications. Several organisations and the social partners are proposing initiatives for developing an

integration process that starts at the moment of the asylum application, including faster and broader access

to the labour market. Overall, it can be expected that integrating migrants and refugees who entered the

country in 2015-2016 into the labour market quickly and successfully could also help Austriaʼs social

cohesion and growth as well as generate additional tax revenues.

Asylum seekers and refugees are entering the labour market only gradually.

Asylum seekers can enter

the Austrian labour market after a waiting period of 3 months, based on a labour market test that allows

entry into a number of sectors (e.g. tourism and agriculture as well as apprenticeships in occupations facing

shortages). Recognised refugees have full access to the labour market, but face considerable difficulties in

finding a job because of their insufficient knowledge of German, their skills and discrimination (see Country

Report 2016). Overall, there appears to be further room for increasing the number and reach of language

courses — German language courses for refugees often do not go beyond B1 level (BMEIA, 2016). The

process of identifying and registering the qualification level based on competency checks has improved, but

it is still difficult to give an overall assessment of refugees’ qualification levels.

Austria faces a challenge to integrate a large number of asylum seekers and refugees into its education

system.

In 2015, 88 851 people applied for asylum in Austria and by September 2016 a further 35 000 had

done so. The 2015 level was three times the 2014 figure and included 9 331 unaccompanied minors under

18 years and 663 under 14. Integrating over 9 000 pupils (about 1 % of the total school population) into

compulsory schools is a challenge, particularly since refugees tend to concentrate in metropolitan areas, with

a focus on Vienna. This means there is a need to create additional classes and to allocate additional

resources for teaching German as a second language, for integrating pupils from a variety of language

backgrounds and for dealing with traumatised children.

The federal and regional governments have taken several measures to address the integration of

refugees.

In all nine regions, a total of 99 specific transition classes for approximately 1 900 young asylum

seekers/refugees were created. To expand the language training available to refugees additional resources

are being invested in 2016 and 2017, respectively. About 1 150 additional teachers and mobile intercultural

teams with a staff of 80 have been engaged, with most of them in compulsory education. Additional funds

are being made available to finance one-year transition levels in vocational education and training schools

and colleges that allow refugees to catch up on language and other skills. For younger refugees above the

compulsory school age, approximately 2 400 offers for basic education courses focusing on literacy are

available within the Initiative for Adult Education.

kom (2017) 0090 - Ingen titel

3.4. INVESTMENT

3.4.1. GENERAL INVESTMENT SITUATION

Investment growth returned in 2016, but with

continued weaknesses of investment by SMEs

and in the service sector.

Investment increased by

3.6 % in 2016 after an extended period of

stagnation since the crisis, but is expected to grow

more slowly in 2017 (2.4 %) and 2018 (2.0 %). On

a quarterly basis, investments picked up in Q4 of

2015 (0.8 %), peaked in Q1 of 2016 (1.3 %) and

then declined in the two next quarters (1.2 % in Q2

and 0.9 % in Q3), according to WIFO (Austrian

Institute of Economic Research). The good

investment growth in 2016 is mostly driven by

strong equipment investment as firms work

through a backlog of necessary replacements.

Business expansion is the key driver for

investment only for a minority of businesses

(39 %), which cited digitalisation and expected

improvements in market conditions as their main

motives to invest. Investment plans are strong in

the manufacturing and exporting sectors, while

businesses in the service sector (other than

tourism) and SMEs in general are more hesitant

(WKÖ, 2016). Increased investment by Austrian

businesses, notably investment in business

expansion, is crucial for sustained growth and to

absorb the increasing labour supply (see Section

3.3).

3.4.1) (

). The number of trades subject to a

particular access requirement is twice as high in

Austria as, for example, in Germany. This high

level of regulation has gone hand in hand with

declining wage-adjusted labour productivity and

negative levels of allocative efficiency in this area

(European Commission, 2016a, p. 67). It also

limits employment and contributes to wage

inequalities. Around 22 % of the Austrian labour

force works directly in regulated professions.

Graph 3.4.1:

Regulatory restrictiveness indicator 2016

Austria and the EU

Tourist guide

Real estate agent

Patent agent

Lawyer

Civil engineer

Architect

Accountant

score

Source:

European Commission

3.4.2. REGULATORY FRAMEWORK IN THE

SERVICES SECTOR

Austria remains one of the Member States with

the highest regulatory barriers in the services

sector.

In Austria, market services(

) directly

account for 50 % of GDP and 45 % of employment

(European

Commission,

2016d,

pp. 2-3).

Furthermore, around 35 % of the value created by

Austrian manufacturing is created by service

inputs (ECSIP, 2014, p. 59). Better performance in

the services provided to firms (business services)

would therefore have positive productivity effects

on Austrian manufacturing too. In key business

services, such as legal, accounting, architectural

and engineering services, Austrian regulation is

restrictive and, except for lawyers and accountants,

significantly more restrictive than the EU average

(European Commission, 2016e/f and see Graph

(

) Market services are defined as NACE sectors G to N.

The Austrian government announced a revision

of the trade licence act in late 2016 which will

bring welcome improvements but falls short of

removing key barriers.

The trade licence act

(Gewerbeordnung) regulates access to and

exercise of currently around 540 trades. Apart

from administrative simplification aspects, the

draft

revision

removes

specific

access

requirements for 19 of these trades (Teilgewerbe)

but maintains specific access requirement for 80

trades (reglementierte

Gewerbe).

This compares to

41 of such trades in, for example, Germany and

includes trades which typically present low risks to

consumers. The planned reform also increases the

scope of activities a tradesperson can exercise in

other trades without being required to obtain an

additional licence. As a consequence of the current

(

) For civil engineers Austria has the most restrictive

regulation among EU Member States, for architects the

second most restrictive and for patent/trademark agents the

third most restrictive.

kom (2017) 0090 - Ingen titel

3.4. Investment

requirement to hold separate licences, there are one

third more licences than licence holders. The scope

increase will mitigate but not remove this issue.

Other efforts to lower access and exercise

barriers in business services and regulated

professions are not progressing.

Austria has not

yet used the mutual evaluation of regulated

professions to systematically lower regulatory

barriers. By way of numerical example, reducing

the restrictiveness for patent agents in Austria to

the EU average could raise the number of firms by

around 1 % and reduce the profession’s gross

operating rate by 3 %, thus lowering the input

costs of its customers (European Commission,

2016f). Restrictions on interdisciplinary firms

between regulated professions remain in force in

Austria and particularly affect architects, engineers

and patent/trademark agents. Efforts to

systematically review such restrictions started in

November 2015 but have not resulted in changes,

despite a genuine business demand to receive

interdisciplinary services from one provider. A

similar limiting effect can result from

shareholding, company form or exclusivity

requirements, such as exist in Austria notably for

architects, engineers and patent/trademark agents.

Professions such as architects, engineers,

accountants, tax advisers, patent/trademark agents

and tourist guides also have a particularly wide

scope of activities reserved to them in Austria. In

combination with access requirements or high

training obligations, this can limit competition and

investment in the activities covered.

Commission, 2016i). More recently start-up

numbers have been increasing, by 3.5 % from

2015 to 2016 (WKÖ, 2017), partly reflecting the

general recovery of the economy. Implementing its

2015 start-up strategy (Land

der Gründer)

(BMWFW, 2015), in July 2016 Austria announced

a package of measures to facilitate the creation of

new businesses, comprising financial support and

administrative simplification measures.

Austrian start-ups have a good chance of

surviving but face difficulties in scaling up.

The

business survival rate in Austria is above the EU

average (74 % compared to 65 %, both 2013;

European Commission, 2016i). However, in

Austria the share of high-growth firms among

active companies with at least 10 employees is at

7.3 % considerably below the EU average of 9.2 %

(see Graph 3.4.2). This lack of high-growth firms

presents Austria with a productivity challenge, as

company productivity is highly correlated with

firm size. While studies have shown that start-ups

making the transition to become bigger firms

create a disproportionate number of new jobs

(European Commission 2016g), fast-growing

innovative firms represented only about 2.1 % of

employment in the Austrian business economy

compared with an EU average of 3.3 % (2014;

European Commission 2016i).

Business creation and enterprise growth are

held back by a combination of regulatory and

cultural obstacles.

Starting a business in Austria

takes 8 days (the second longest in the EU) and

costs EUR 305 on average, which does not meet

the EU targets of 3 days and EUR 100 set by the

Council in 2011 (figures refer to limited liability

companies) (European Commission, 2016h). In the

composite indicator-set of framework conditions

for high-growth innovative enterprises (European

Commission, 2016i), entrepreneurial culture is an

area where Austria scores below the EU average

(0.32 compared to 0.42). Fear of failure, for

example, is an important deterrent for would-be

entrepreneurs in Austria, which is among the few

European countries where resolving insolvencies

(and thus preparing the ground for an entrepreneur

to get a second chance) has become more difficult

in recent years (European Commission, 2016j,

3.4.3. INVESTMENT IN BUSINESS CREATION AND

SCALING UP

Austria’s rate of creating new businesses is

growing in line with the recovering economy,

but from a comparatively low level.

Austrian

start-ups create on average 2.4 jobs in the first year

and 7.4 jobs in the first 3 years (BMWFW, 2015,

p. 7), which shows the importance of business

creation for employment. Austria’s business

environment has traditionally been difficult for

starting a business. Its enterprise birth rate(

) was

7.4 % compared to an EU average of 10.8 % in

2013, the last year of EU-wide data (European

(

) The number refers to newly created enterprises as a

percentage of the total number of active enterprises.

kom (2017) 0090 - Ingen titel

3.4. Investment

p. 58) (

). In addition, direct transfers of registered

offices from Austria abroad or vice-versa are still

not possible under national legislation, except for

companies which use the Societas Europaea legal

form. This lack of a suitable framework makes it

more difficult and costly for Austrian companies

and companies from other European countries

alike to scale up on a cross-border basis and take

advantage of business opportunities offered by the

single market.

Graph 3.4.2:

High-growth enterprises as % of all active

enterprises with at least 10 employees

3.4.4. FUNDING OF PRIVATE SECTOR

INVESTMENT

Austria has no short-term bottlenecks

regarding bank credit, but private sector

investment would benefit from a more

developed equity financing culture.

Austrian

companies traditionally rely on bank lending for

funding(

) and only 7 % of Austrian businesses

consider finding bank credit to be a problem

(European Commission, 2016k). A more

diversified Austrian funding system would

however broaden the scope of companies, projects

and business models that receive funding and

would also allow a broader class of citizens to

participate and benefit in high-growth projects and

firms. This could compensate for the declining

availability of small-scale financing (business

loans of less than EUR 25 000) (European

Commission, 2016l, p. 11). The alternative

financing law adopted in 2015 has resulted in a

noticeable

increase

crowdfunding,

demonstrating the positive impact that the

regulatory framework can have on funding

options. Social entrepreneurship and (family)

foundations are untapped sources of funding.

Venture capital financing in Austria remains

scarce and relies heavily on the public sector.

Venture capital and private equity fund volumes in

Austria (as a proportion of GDP) decreased by

more than two thirds in the aftermath of the

financial crisis and have not yet recovered. The

availability of venture capital in Austria also

remains below the EU average (0.051 % of GDP in

2015 versus 0.063 % at EU level) (European

Commission, 2016m). The main weakness is the

mobilisation of own funds within Austria – the

inflow of risk capital is higher than the outflow,

which suggests that there are enough suitable

projects to invest in. The public sector carries out a

high share of venture capital investment due to the

weakness of private financing. Austria has

announced a number of measures to stimulate

private venture capital financing, such as the

introduction of a risk capital premium

(Risikokapitalprämie), an increase in the volume

guarantees

given

the

Austria

(

) According to the 2016 SAFE survey (p. 18), 90 % of

Austrian SMEs do not consider equity capital as relevant

for their funding needs, which is higher than in previous

years.

Source:

European Commission

Austria has started to implement fiscal

incentives to stimulate investment.

Given the

impact of taxation and other excises on investment

incentives, Austria has announced a number of

measures in late 2016 and early 2017. These

include partly subsidizing social security

contributions of innovative start-ups from social

security contributions for the first 3 employees and

the first 3 years, thereby mitigating an important

obstacle to job creation by small firms (see also

Section 3.3). Austria also plans to provide a total

of EUR 175 million to SMEs which increase their

capital goods investment compared to the 3

preceding years (Investitionszuwachsprämie).

Finally, Austria announced to grant more

favourable depreciation possibilities to companies

with more than 250 employees for promoting

investment. Such firms are allowed an additional

write-down of 30 % on investment goods in 2017.

(

) In January 2017, Austria has announced a revision of the

insolvency rules to allow failed entrepreneurs a faster

resolution of the insolvency proceedings.

kom (2017) 0090 - Ingen titel

3.4. Investment

Wirtschaftsservice, the creation of an Austrian

private-equity growth fund (EUR 30 million with

expected leverage to EUR 100 million), as well as

a new participation holding (Mittelstands-

finanzierunggesellschaft).

Graph 3.4.3:

Venture capital as % of GDP

0.14

0.12

0.10

0.08

0.06

0.04

% of GDP

most often cited by Austrian businesses (WKÖ,

2016). On average Austria ranks slightly above

other Member States in terms of businesses using

digital technology (European Commission, 2017b).

Austrian businesses are ahead of their European

peers in the use of e-invoicing. This is related to

e-invoicing requirements by Austrian public

authorities and demonstrates how important

government practices can be in promoting the

uptake of digital technologies. But only 15 % of

Austrian SMEs sell online, which despite a 1 pps

increase from 2015 to 2016 is still below the EU

average. While 41 % of Austrian firms exchange

value chain data electronically (above the EU

average of 36%), only 10 % use cloud services

(below the EU average of 13.5 %).

Austria has started to screen and adapt its

regulatory framework to the challenges and

opportunities of digital business models.

Digital

business models, such as those of the collaborative

economy, can provide significant price and choice

advantages for Austrian consumers. They also

allow a wider range of people to participate

productively in the economy than traditional

business models. The uptake of such business

models in Austria is lagging behind the EU

average, with only 2 % of Austrian consumers

having participated in the collaborative economy

and 81 % not having even heard of it (the

respective EU averages are 5 % and 73 %) (ING,

2015, p. 5). Among the Austrian users of these

services, liability questions seem to be a

preoccupation (TNS, 2016, p. 23), while public

authorities have focused on taxation questions

(European Commission 2016n, pp. 42)(

Adopting a modern regulatory framework for

digital business models is one of the 12 guiding

principles of the Digital Roadmap for Austria

(BKA, BMWFW, 2017).

0.02

0.00

Source:

European Commission

Public capital markets underperform in

providing access to capital markets for SMEs

and mid-caps.

Such markets play a pivotal role in

offering exit options for investors through, for

example, initial public offerings. However, the

high administrative burden of regulation,

insufficient research on listed SMEs in Austria and

the resulting low visibility of listed companies for

potential investors create bottlenecks that prevent

junior market segments from growing. Multilateral

trading facilities are particularly suitable to

facilitate SME access to public capital markets.

The respective offering of the Vienna Stock

Exchange (Wiener

Börse)

is however restricted to

registered shares, which hampers its growth

(BMWFW, 2016, p. 47). A further instrument is

the indirect stock exchange participation of SMEs

via a quoted holding company.

3.4.5. INVESTMENT IN DIGITAL

TRANSFORMATION

(

) On 9 November 2016 the Austrian government adopted a

legislative initiative concerning online hotel booking

platforms and their contractual relation to accommodation

providers. In January 2017, Austria announced measures to

address taxation issues resulting from online activities of

foreign firms.

Austrian businesses excel in the use of some

digital technologies (e.g. e-invoicing), but lag

behind their peers in others (e.g. e-commerce).

Digitalisation is one of the investment reasons

kom (2017) 0090 - Ingen titel

3.4. Investment

Box 3.4.1:

Investment challenges and reforms in Austria

Section 1. Macroeconomic perspective

Investment in Austria (see also Section 1) held up fairly well throughout the financial crisis. Compared to

the EU average the decline was less severe and the recovery quicker. Since the end of 2015 investment

activity by the corporate sector has picked up, partly due to replacement needs. Higher private consumption

triggered by the 2016 tax reform has also helped increase investment.

Austrian companies have sufficient financial resources so it is not the availability of bank credit that is

acting as a macroeconomic constraint on investment but rather the lack of opportunities in a climate of

uncertainty and subdued consumption. Regarding public investment, housing demand in Austria is high due

to continuing immigration and a growing population. This calls for higher investment in social housing, but

the availability of fiscal space can constitute a macroeconomic constraint.

Section 2. Assessment of barriers to investment and ongoing reforms

Regulatory/ administrative burden

Public administration

Public

administration/

Public procurement /PPPs

Business

Judicial system

environment

Insolvency framework

Competition and regulatory framework

EPL & framework for labour contracts

Labour market/

Wages & wage setting

Education

Legend:

CSR

Financial Sector

Taxation

/ Taxation

Access to finance

Cooperation btw academia, research and business

R&D&I

Financing of R&D&I

Business services / Regulated professions

Retail

Sector specific

Construction

regulation

Digital Economy / Telecom

Energy

Transport

CSR

No barrier to investment identified

CSR

Investment barriers that are also subject to a CSR

No progress

Limited progress

Some progress

Substantial progress

Fully addressed

Barriers to investment in Austria exist but are relatively modest overall, as the European Commissionʼs

assessment confirms (European Commission, 2015). Some reforms have been adopted in the area of labour

taxation (see Section 3.1) as well as regulated professions and administrative simplification (see

Section 3.4). Continued efforts and further reform measures to improve the business environment and better

meet consumption and housing demand will help strengthen overall investment in Austria.

Main barriers to investment and priority actions underway:

1. Taxes on labour as well as the overall tax wedge remain high despite the 2016 tax reform. Fiscal drag

tends to increase the tax wedge overtime, for which the announced indexation of tax brackets can help to

counter this effect (see Sections 1 and 3.1). Reducing labour costs for companies in general like the

reduction of non-wage labour costs for employers by around EUR 1 billion annually and shifting taxation to

more growth-friendly sources like property or environmental taxes can incentivise investment activities.

2. The high degree of regulation of the services sector as well as of trade licences constitutes a barrier to

investment and competition. While the reform of the trade licence act presented in 2016 brings some

improvements, restrictions on access to trades and professions, and to exercising them, continue to hinder

market access and business development (see Section 3.4).

3. Despite recent efforts, the business environment in Austria can benefit from more start-ups and scaling

up. The enterprise birth rate, while improving, is still on a low level as is the proportion of high-growth

companies. Business creation and growth are key triggers of investment and job creation (see Section 3.4).

kom (2017) 0090 - Ingen titel

3.5. SECTORAL POLICIES

3.5.1. INNOVATION POLICY

Austria ranks second among Member States on

public and private R&D spending but has not

yet achieved a matching performance in

innovation.

In Austria R&D spending as a

percentage of GDP amounted to 3.07 % in 2015

(Eurostat), the second-highest level in the EU.

Austria is also among the EU countries with the

strongest increase in R&D intensity since 2000, as

a result of increases in both public and business

R&D expenditure. However, like in other

comparable Member States, progress on R&D

intensity has slowed in recent years, especially for

public expenditure. Despite the high overall

spending levels, funding of basic research remains

low and there is scope to increase excellence in

research, a field where Austria scores only near the

EU average (11.7 % of publications are highly

cited, compared to an EU average of 10.5 % in

2013). The increase in the budget for universities

by EUR 615 million for the period 2016-2018 is an

important step. Public spending on R&D co-

financed by private companies, an indicator of the

level of public-private cooperation in R&D,

accounted for 0.042 % of Austria’s GDP in 2013,

compared with an EU average of 0.052 %.

Austria’s performance on innovation outputs

leaves room for improvement in some areas. These

include: the sales shares of new product

innovations (9.8 % in 2012, below the EU average

of 12.4 %); licence and patent revenues from

abroad (0.25 % of GDP in 2014, below the EU

average of 0.54 %); and medium- and high-tech

product exports (57.4 % in 2015, only slightly

above the EU average of 56.1 %).

Since formulating its innovation leadership

ambition in 2011, Austria has tabled a

multitude of initiatives and programmes but

has not yet evaluated their overall effectiveness.

In 2011 Austria formulated a comprehensive

national strategy to boost the performance of its

research and innovation system (Der

Weg zum

Innovation Leader).

Among the more recent

follow-up measures are the research action plan

published in 2015 and new guidelines for research,

technology and innovation funding which entered

into force on 1 January 2015. In line with a shift

from direct to indirect support such as tax

incentives, the research premium was increased

from 10 % to 12 % in January 2016. In early 2017

Austria announced a further increase to 14 %

effective as of January 2018. There has also been a

growing number of initiatives in recent years

focusing on improving knowledge transfer and

cooperation between public research (including

research at universities) and business. The ongoing

evaluation of the effectiveness of the research

premium could help to further optimise its impact.

Graph 3.5.1:

Evolution of business and public R&D intensity

2.5

(% of GDP)

2.0

1.5

1.0

0.5

0.0

Public R&D intensity (including higher education expenditure)

Business R&D intensity

Source:

European Commission

3.5.2. TELECOMMUNICATION INDUSTRY

Austria faces particular challenges in ensuring

that next-generation broadband coverage also

extends to rural areas.

In 2016, 89 % of all

households in Austria were covered by a high-

speed broadband (next-generation access) network,

which is above the EU average. Austria increased

the coverage of high-speed broadband in rural

areas from 26 % in 2015 to 41 % in 2016 reducing

the 'digital divide' between urban and rural areas.

However, it only ranks at EU average in providing

adequate access in rural areas for individuals and

businesses to the digital economy and digital

society. In response to the challenge of financing

the high cost of high-speed roll out in rural and

mountainous areas, Austria has started in 2016 to

implement an ambitious funding scheme from the

proceeds of spectrum revenues – distribution of the

so-called Broadband Billion (Breitbandmilliarde).

In January 2017, Austria announced an increase of

its national targets of availability and take-up of

high-speed broadband, including connecting all

schools, SMEs and 75 % of citizens with high-

speed broadband by 2020. In addition, Austria has

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3.5. Sectoral policies

started a process to create a 5G strategy until the

end of 2017 and aims at starting the roll-out of 5G

(mobile) technologies by 2018 leading to coverage

of all regional capitals (Landeshauptstädte) by

2020.

3.5.3. ENERGY, CLIMATE AND RESOURCES

Austria is on track to meet only two of the three

Europe 2020 targets on energy and climate

change.

It is well on track towards its 2020 target

on renewable energy and is stepping up its efforts

to ensure achievement of the energy efficiency

target. However, while it complied in 2015 with its

annual target for reducing greenhouse gas

emissions (EEA approximated data), Austria is

among five Member States which are expected to

miss their target for 2020(

Graph 3.5.2:

Europe 2020 emission reduction targets

-10

-20

-30

management and bidding-zone definition in central

Europe do not necessarily reflect actual congestion

accurately, and this is leading to increasing

limitations on cross-border flows of electricity.

The issue lacks a joint regional solution agreed by

all affected neighbours. Swift implementation of

the planned cross-border capacities in particular

with Germany, Italy and Switzerland remains a

priority. On gas infrastructure, Austria’s role as an

important transit country benefits from the

implementation of a more regional approach to

network planning. A further reinforcement of

interconnections is under development.

There is untapped potential for the Austrian

economy to benefit from more efficient resource

use.

Austria’s resource productivity (which

measures how efficiently the economy uses

material resources to produce wealth) improved

modestly from 1.60 EUR/kg in 2011 to 1.80

EUR/kg in 2015 but remained below the EU

average of 2.18 (Eurostat, 2016). This might be

explained by the high income and its export-

oriented manufacturing sector. No overarching

policy programme exists to move Austria towards

a circular economy, though various government

bodies have taken some measures and initiatives in

recent years relating to eco-innovation and, to a

limited extent, to the circular economy. In 2012

Austria adopted an action plan to improve its

overall resource efficiency by 50 % compared to

2008 by 2020. This target will not be met without

additional efforts, as resource productivity is

expected to grow by only 1.2 % a year under a no-

policy-change scenario.

(reduction as

% of base

year

emissions)

Projected reduction overachievement/not used allowance

Projected ESD emissions reduction in 2020

Gap between 2020 projections and reduction target

ESD reduction target for 2020

ESD allowed emission increases

Source:

European Commission

Active regional cooperation remains critical to

the development and operation of Austria’s

electricity and gas networks.

Implementation of

the new energy infrastructure law adopted in

January 2016 has started. This lays out the

framework for accelerating the granting of permits

for energy infrastructure projects and implements

the one-stop shop required under the TEN-E

Regulation (EU) No 347/2013. Minor progress

was achieved towards completing the high-tension

380-kV ring in Austria with the positive result of

the environmental assessment at regional level.

The current national arrangements for congestion

(

) See also table in Annex A.

3.5.4. PUBLIC PROCUREMENT AND E-

GOVERNMENT

Austria has one of the lowest publication rates

for public procurement contracts advertised at

EU level and also ranks low on joint

procurement between public authorities.

2015 the share of public contracts for works, goods

and services (including utilities and defence)

published by the Austrian authorities and entities

under EU procurement legislation was only 2.2 %

of GDP. This is a slight reduction of 0.1 pp. from

2014 and is only around half the EU average of

4.17 %. Contract notices from Austrian tendering

authorities are not always complete, as in the 32 %

of notices in 2016 where the actual contract

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3.5. Sectoral policies

volume was not indicated. Furthermore, in 2016

Austria used central purchasing bodies on joint

procurement among public authorities for only 5 %

of tenders, which constitutes no improvement over

the 2011 value and is markedly below the EU

average of 9 % (European Commission, 2016o).

The principles of good public procurement

practices also hold for public-private partnerships

and mixed rental and public works agreements.

Austria

scores

highly

providing

e-government to businesses and citizens but

risks problems in rolling out e-procurement.

The vast majority (98 %) of the most-used public

services are available online, notably via the

platform ‘Digitales Österreich’. Of these, 58 % are

mobile friendly. The usability of these services

also scores high in terms of support and interactive

feedback functionalities. Austria plans to introduce

the right for citizens and businesses to digitally

contact public administration (Recht

auf

elektronischen Verkehr mit Behörden).

It also

plans to upgrade the existing e-ID card to an

Box 3.5.1:

A comprehensive income tax reform

electronic proof of identity (elektronischer

Identitätsnachweis)

and to further expand the

mobile accessibility of online public services. In

January 2017, Austria announced that the platform

‘data.gv.at’ will be expanded by 2020 to include

open data from the private sector and enable access

to all public data as open data. In contrast, Austria

has not yet fully transposed the e-procurement

provisions of the 2014 Procurement Directives (

Individual public authorities (e.g. Lower Austria,

Vienna) are beginning to introduce e-procurement

systems but these differ from each other. Ways

exist for the Austrian authorities to ensure that,

even with several technical solutions, bidders

throughout the EU could participate in calls for

tender. The authorities could do so by

implementing

the

principles

from

the

e-government action plan such as ‘once-only’

submitting information on the (winning) bidder

and ‘interoperability by default’, and by using

harmonised technical standards.

(

) Directives 2014/24/EU, 2014/25/EU and 2014/23/EU.

Selected highlights

The 2016 tax reform is a good example of how a comprehensive approach to reducing the cost of labour can

have a very positive effect on growth and economic activity. By lowering taxes for the large majority of

low- and medium-income earners and at the same time increasing the tax rate for the highest tax bracket, it

gave an impulse to private consumption and investment without putting too much strain on public finances.

The question is not merely about raising or lowering taxes but rather how to find the right mix of measures

that have a positive impact on growth without excessively undermining the fiscal position. The introduction

of a ‘negative tax’, in the form of a partial repayment of social security contributions, enabled low-income

earners with no taxable income to benefit from the reform as well.

The income tax reform took effect at the beginning of 2016 and increased households’ disposable income.

This gave a strong boost to private consumption, which grew by 1.5 % in 2016 after stagnating for 3 years

between -0.3 % and 0.0 %. This in turn spurred a 7.0 % jump in investment in machinery and equipment as

companies tried to keep up with the increased domestic demand. GDP growth in 2016 was thus driven

largely by the tax reform and its stimulating effect on private consumption and investment. Moreover, the

reduction in the tax wedge from 49.5 % to 46.7 % helped employment and investment further by lowering

the cost of labour in Austria and increasing the country's attractiveness to foreign investors.

Regarding the social dimension, the tax reform is a step towards improving equality and social cohesion.

The implicit tax rate on labour decreased by around 2 pps (European Commission, 2017c). This reduction

has been more pronounced in the lower half of the income distribution, amounting to around 2.4 pps for the

first five income deciles. The reform also contributed to reducing the poverty rate by about one pp. to

12.5 %. Before the reform 13.3 % of the population had an equivalised disposable income below the poverty

line of EUR 1 117 (60 % of median equivalised disposable income at the individual level).

Overall, the tax reform has increased economic growth and investment as well as social inclusion and

cohesion in Austria. These positive trends could be maintained in the future by continuing to reform the

taxation and social welfare system in order to further reduce the cost of labour.

kom (2017) 0090 - Ingen titel

ANNEX A

Overview table

Commitments

2016 Country-specific recommendations (CSRs)

CSR 1:

Ensure that the deviation from the medium-

term budgetary objective in 2016 and in 2017 is

limited to the allowance linked to the budgetary

impact of the exceptional inflow of refugees in 2015,

and to that effect achieve an annual fiscal adjustment

of 0.3 % of GDP in 2017 unless the medium-term

budgetary objective is respected with a lower effort.

Ensure the sustainability of the healthcare system,

and of the pension system by linking the statutory

pension age to life expectancy. Simplify, rationalise

and streamline fiscal relations and responsibilities

across the various layers of government.

Austria has made

some progress

addressing CSR 1 (this overall assessment of

CSR 1 does not include an assessment of

compliance with the Stability and Growth

Pact):

Summary assessment (

)



Ensure that the deviation from the medium-term

budgetary objective in 2016 and in 2017 is limited

to the allowance linked to the budgetary impact of

the exceptional inflow of refugees in 2015, and to

that effect achieve an annual fiscal adjustment of

0.3 % of GDP in 2017 unless the medium-term

budgetary objective is respected with a lower

effort.



The compliance assessment with the

Stability and Growth Pact will be included

in Spring when final data for 2016 will be

available.

(

) The following categories are used to assess progress in implementing the 2016 country-specific recommendations:

No progress:

The Member State has not credibly announced nor adopted any measures to address the CSR. Below a number of

non-exhaustive typical situations that could be covered under this, to be interpreted on a case by case basis taking into account

country-specific conditions:

• no legal, administrative, or budgetary measures have been announced in the National Reform Programme or in other official

communication to the national Parliament / relevant parliamentary committees, the European Commission, or announced in

public (e.g. in a press statement, information on government's website);

• no non-legislative acts have been presented by the governing or legislator body;

• the Member State has taken initial steps in addressing the CSR, such as commissioning a study or setting up a study group to

analyse possible measures that would need to be taken (unless the CSR explicitly asks for orientations or exploratory actions),

while clearly-specified measure(s) to address the CSR has not been proposed.

Limited progress:

The Member State has:

• announced certain measures but these only address the CSR to a limited extent;

and/or

• presented legislative acts in the governing or legislator body but these have not been adopted yet and substantial non-legislative

further work is needed before the CSR will be implemented;

• presented non-legislative acts, yet with no further follow-up in terms of implementation which is needed to address the CSR.

Some progress:

The Member State has adopted measures that partly address the CSR

and/or

• the Member State has adopted measures that address the CSR, but a fair amount of work is still needed to fully address the CSR

as only a few of the adopted measures have been implemented. For instance: adopted by national parliament; by ministerial

decision; but no implementing decisions are in place.

Substantial progress:

The Member State has adopted measures that go a long way in addressing the CSR and most of which have

been implemented.

Full implementation:

The Member State has implemented all measures needed to address the CSR appropriately.

kom (2017) 0090 - Ingen titel

A. Overview table



Ensure the sustainability of the healthcare system,



Some progress

can be reported in

ensuring the sustainability of the

healthcare system. The 2017 financial

equalisation law has set more stringent

expenditure targets. The provision of

outpatient care has been strengthened by

the creation of a new legal framework for

multi-disciplinary primary care centres

with an earmarked budget. Incentives for

hospitals to treat outpatient cases as

inpatient cases have been reduced.



Limited progress

in ensuring the long-

term sustainability of the pension system,

as financial incentives for working beyond

the statutory retirement age are likely to

marginally

increase

the

effective

retirement age.



by linking the statutory pension age to life

expectancy.



No progress

has been made in addressing

CSR 1 on increasing the sustainability of

the pension system by linking the statutory

retirement age to life expectancy. The

Austrian government has no intention to

take measures establishing a link between

the statutory retirement age and life

expectancy.



Some

progress

simplifying,

rationalising and streamlining fiscal

relations and responsibilities across the

various layers of government. The 2017

financial equalisation law implemented a

few steps to increase the tax autonomy of

sub-national governments, even if the

misalignment between revenue-raising

powers and spending responsibilities

remains high. The system of inter-

government transfers has been slightly

simplified, while the revenue-sharing

system has been made more task-

orientation. The efficiency and adaptability

of the fiscal framework has been improved

with the introduction of the legal basis for

regular spending reviews and a system of

benchmarks. The different government

subsectors have committed to a reform of

their respective competencies.



Simplify, rationalise and streamline fiscal

relations and responsibilities across the various

layers of government.

kom (2017) 0090 - Ingen titel

A. Overview table

CSR 2:

Improve the labour market participation of

women. Take steps to improve the educational

achievements of disadvantaged young people, in

particular those from a migrant background.

Austria has made

addressing CSR 2:

some

progress



Improve the labour market participation of

women.



Some progress

can be reported regarding

increasing childcare infrastructure and

services. The right for part-time workers of

a business to receive information about

full-time job offers has been implemented.

Awareness-raising of the advantages and

disadvantages of full-time and part-time

employment has been enforced. Overall

the increasing labour market participation

of women is mainly based on part-time

employment. No new measures have been

taken to substantially increase full-time

employment of women.



Take steps to improve the educational

achievements of disadvantaged young people, in

particular those from a migrant background.



Some progress

in addressing the need to

improve the educational achievements of

disadvantaged young people, in particular

those from a migrant background. This

progress takes the form of the step-by-step

implementation of the education reform

agreed in September 2015 which allocates

EUR 750 million for expanding the

number of all-day schools over the next 6

years. Reform measures in early childhood

education and care and primary schools

have already been implemented. Measures

to increase schoolsʼ autonomy and

improve task distribution between the

federal level and the regions are planned

for adoption before April 2017. However,

these measures have not yet had an impact

on education outcomes.

kom (2017) 0090 - Ingen titel

A. Overview table

CSR 3:

Reduce, in the area of services,

administrative

and

regulatory

barriers

for

investments, such as restrictive authorisation

requirements and restrictions on legal form and

shareholding, and impediments to setting up

interdisciplinary companies.

Austria has made

limited progress

addressing CSR 3:



Reduce, in the area of services, administrative and

regulatory barriers for investments, such as

restrictive authorisation requirements and

restrictions on legal form and shareholding,



Limited progress.

Austria presented a

draft revision of the trade licence act

(Gewerbeordnung) in November 2016.

This revision removes access barriers for

19 trades (Teilgewerbe), abolishes the

initial registration fee and increases the

scope for performing side activities

without an additional licence (15-30 %

instead of currently around 10 %). The

high number of regulated trades

(reglementierte

Gewerbe)

remains

unchanged, however, and the law still

requires separate licences for each of the

459 free trades (freie

Gewerbe).

Austria is

also simplifying the procedure for

authorising installations on business

premises (Betriebsanlagen). Low-risk

installations will benefit from a simplified

procedure,

deadlines

for

granting

authorisations will be shortened, a one-

stop shop for different types of permits

will be

created

and

publication

requirements will be reduced. As regards

other restrictions on access to and exercise

of the regulated professions, only

relatively minor changes have been

implemented.



No progress.

Efforts which were started in

November 2015 to remove restrictions on

interdisciplinary

companies

have

subsequently been discontinued.



and impediments to setting up interdisciplinary

companies.

kom (2017) 0090 - Ingen titel

A. Overview table

Europe 2020 (national targets and progress)

Employment rate target: 77-78 %

Employment rate for the population aged 20 to

64:

74.4 % in 2012,

74.6 % in 2013,

74.2 % in 2014 and

74.3 % in 2015.

Given the current trend in the Austrian

employment rate, it remains a challenge to

meet the national target of 77-78 % by 2020.

R&D target: 3.76 % of GDP

Austria continued to make progress in

increasing R&D intensity. R&D expenditure

as a percentage of GDP increased from 2.97 %

in 2013 to 3.06 % in 2014 and 3.07 % in 2015,

the second-highest level in the EU. However,

progress needs to be accelerated to meet the

ambitious 2020 target.

Although complying with its annual emission

reduction target in 2015 [EEA approximated

data], Austria is among the five Member

States which are expected to miss their

greenhouse gas emission reduction target for

2020. In the light of the latest projections

submitted by Austria, the emission target for

sectors not covered by the Emissions Trading

Scheme is expected to be exceeded by 4

percentage points (12 % emission reduction

by 2020 compared to 2005 instead of a 16 %

reduction target). Austria may therefore need

to take additional measures to meet its target

or make use of the flexibility mechanisms

provided in the Effort Sharing Decision.

Austria remains on track towards meeting its

2020 target for promoting the use of

renewable energy. Energy from renewable

sources represented 33.6 % of Austria’s

energy consumption in 2015 (proxy), close to

its 2020 target of 34 %(

). Austria ranks

fourth in the EU on the share of energy

obtained from renewable sources.

National greenhouse gas (GHG) emissions target:

-16 % in 2020 compared with 2005 (in sectors not

included in the Emissions Trading Scheme)

2020 Renewable energy target: 34 %

(

) Renewable energy shares for 2015 are approximations and not official data, reflecting the available data (04.10.2016).

kom (2017) 0090 - Ingen titel

A. Overview table

Energy efficiency target:

AT’s 2020 energy efficiency target is 31.5 Mtoe

expressed in primary energy consumption (25.1 Mtoe

expressed in final energy consumption)

Austria is stepping up efforts, however

increased its primary energy consumption

from 30.45 Mtoe in 2014 to 31.33 Mtoe in

2015. Final energy consumption increased as

well from 26.74 Mtoe in 2014 to 27.37 Mtoe

in 2015. Austria has set an ambitious energy

efficiency target, requiring a real reduction of

20 % in energy consumption compared to a

sound and updated forecast. The target is

underpinned

comprehensive

implementation and monitoring. Maintaining

the rate of reduction of primary energy

consumption (2005-2014) would be sufficient

for staying below the primary energy

consumption target for 2020 (31.5 Mtoe).

However, it would not be sufficient for

meeting the final energy consumption target

for 2020 (25.1 Mtoe).

Austria is already outperforming the Europe

2020 targets:

8.5 % in 2011

7.6 % in 2012

7.3 % in 2013

7.0 % in 2014

7.3 % in 2015.

However, efforts to reduce the early school

leaving rate among young people with a

migrant background need to be maintained.

Early school/training leaving target: 9.5 %

Tertiary education target: 38 %

The target has been fulfilled, with a tertiary

education rate of 38.7 % in 2015.

In the baseline year 2008, the number of

people at risk of poverty and social exclusion

was 1 699 000. The respective number for

2015 was 1 551 000, i.e. 147 000 less,

requiring additional efforts to meet the target.

Risk of poverty or social exclusion target: -235 000

kom (2017) 0090 - Ingen titel

ANNEX B

MIP Scoreboard

Table B.1:

The MIP Scoreboard for Austria

Thresholds

Current account balance,

(% of GDP)

3 year average

-4%/6%

-35%

2010

3.3

-5.2

2011

2.4

-1.9

2012

2.0

-3.2

2013

1.7

1.3

2014

1.9

2.2

2015

2.1

2.9

Net international investment position (% of GDP)

Real effective exchange

External imbalances rate - 42 trading partners,

and competitiveness HICP deflator

Export market share - %

of world exports

Nominal unit labour cost

index (2010=100)

3 years % change

±5% & ±11%

-2.0

-1.9

-4.7

0.7

1.9

1.8

5 years % change

-6%

-12.3

-12.1

-21.1

-17.8

-16.3

-9.6

3 years % change

9% & 12%

8.9

5.9

3.7

6.3

7.7

6.1

Deflated house prices (% y-o-y change)

4.4be

3.0

4.8

2.9

1.4

3.5

Private sector credit flow as % of GDP, consolidated

14%

0.3

3.0

1.3

0.7

0.9

2.1

Internal imbalances

Private sector debt as % of GDP, consolidated

General government sector debt as % of GDP

Unemployment rate

3 year average

133%

60%

10%

16.5%

132.9

82.8

4.7

-1.9

130.1

82.6

4.9

1.5

129.2

82.0

4.8

0.4

128.0

81.3

5.0

-3.2

126.2

84.4

5.3

-1.1

126.4

85.5

5.6

0.6

Total financial sector liabilities (% y-o-y change)

Activity rate - % of total population aged 15-64 (3 years

change in p.p)

-0.2%

0.9

0.7

0.8

1.1

0.8

0.4

New employment

indicators

Long-term unemployment rate - % of active population

aged 15-74 (3 years change in p.p)

0.5%

-0.1

0.2

0.0

0.1

0.3

0.5

Youth unemployment rate - % of active population aged

15-24 (3 years change in p.p)

0.1

0.4

-1.3

0.2

1.4

1.2

1) House price index: e = source NCB.

2) b: break in time series. e: estimated.

Note: Figures highlighted are those falling outside the threshold established in the European Commission’s Alert Mechanism

Report. For real effective exchange rate and unit labour costs, the first threshold applies to euro area Member States.

Source:

European Commission, Eurostat and Directorate General for Economic and Financial Affairs (for real effective

exchange rate), and International Monetary Fund

kom (2017) 0090 - Ingen titel

ANNEX C

Standard tables

Table C.1:

Financial market indicators

Total assets of the banking sector (% of GDP)

Share of assets of the five largest banks (% of total assets)

Foreign ownership of banking system (% of total assets)

Financial soundness indicators:

- non-performing loans (% of total loans)

- capital adequacy ratio (%)

- return on equity (%)

Bank loans to the private sector (year-on-year % change)

Lending for house purchase (year-on-year % change)

Loan to deposit ratio

Central Bank liquidity as % of liabilities

Private debt (% of GDP)

Gross external debt (% of GDP)

- public

- private

Long-term interest rate spread versus Bund (basis points)*

Credit default swap spreads for sovereign securities (5-year)*

2011

327.3

38.4

20.9

4.0

13.6

1.4

2.0

3.8

108.8

2.3

130.1

57.3

37.5

71.1

76.8

2012

307.4

36.5

22.2

4.3

14.2

4.1

0.8

2.6

107.4

2.7

129.2

61.2

40.0

87.8

78.9

2013

283.3

36.7

23.1

4.2

15.4

-0.7

-1.0

2.2

103.4

1.6

128.0

66.6

33.2

44.0

19.8

2014

265.1

36.8

24.8

6.2

15.6

1.1

0.5

3.0

100.5

1.8

126.2

74.7

35.1

32.4

20.1

2015

251.3

35.8

26.6

5.5

16.2

7.6

0.6

4.3

99.6

2.1

126.4

70.1

36.9

25.0

16.4

2016

238.5

4.9

16.5

4.0

1.7

4.3

98.5

1.7

70.8

36.7

28.7

18.0

1 Latest data Q2 2016.

2 Quarterly values are not annualised.

* Measured in basis points.

Source:

European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all

other indicators).

kom (2017) 0090 - Ingen titel

C. Standard tables

Table C.2:

Labour market and social indicators

2011

2012

74.4

1.0

69.6

79.3

41.6

25.2

9.3

50.4

4.9

1.2

9.4

6.8

7.8

2013

74.6

0.3

70.0

79.1

43.8

26.0

9.2

44.5

5.4

1.3

9.7

7.3

7.5

2014

74.2

0.9

70.1

78.3

45.1

26.9

9.2

48.9

5.6

1.5

10.3

7.7

7.0

2015

74.3

0.6

70.2

78.4

46.3

27.3

9.1

44.3

5.7

1.7

10.6

7.5

7.3

2016

74.7

1.3

70.8

78.7

49.0

27.7

9.0

6.1

1.9

11.3

Employment rate

(% of population aged 20-64)

Employment growth

(% change from previous year)

Employment rate of women

(% of female population aged 20-64)

Employment rate of men

(% of male population aged 20-64)

Employment rate of older workers

(% of population aged 55-64)

Part-time employment (% of total employment,

aged 15-64)

Fixed-term employment (% of employees with a fixed term

contract, aged 15-64)

Transitions from temporary to permanent employment

Unemployment rate

(% active population,

age group 15-74)

Long-term unemployment rate

(% of labour force)

Youth unemployment rate

(% active population aged 15-24)

Youth NEET

rate (% of population aged 15-24)

Early leavers from education and training (% of pop. aged 18-24

with at most lower sec. educ. and not in further education or

training)

Tertiary educational attainment (% of population aged 30-34

having successfully completed tertiary education)

Formal childcare (30 hours or over; % of population aged less

than 3 years)

74.2

1.6

69.2

79.2

39.9

24.5

9.6

42.5

4.6

1.2

8.9

7.3

8.5

23.6

26.1

27.1

40.0

38.7

3.0

7.0

8.0

7.0

1 The unemployed persons are all those who were not employed but had actively sought work and were ready to begin

working immediately or within 2 weeks.

2 Long-term unemployed are people who have been unemployed for at least 12 months.

3 Not in education, employment or training.

4 Average of first three quarters of 2016. Data for total unemployment and youth unemployment rates are seasonally

adjusted.

Source:

European Commission (EU Labour Force Survey).

kom (2017) 0090 - Ingen titel

C. Standard tables

Table C.3:

Labour market and social indictors (continued)

Expenditure on social protection benefits (% of GDP)

Sickness/healthcare

Disability

Old age and survivors

Family/children

Unemployment

Housing

Social exclusion n.e.c.

Total

of which: means-tested benefits

Social inclusion indicators

People at risk of poverty or social exclusion

(% of total population)

Children at risk of poverty or social exclusion

(% of people aged 0-17)

At-risk-of-poverty rate

(% of total population)

Severe material deprivation rate (% of total population)

Proportion of people living in low work intensity households (% of

people aged 0-59)

In-work at-risk-of-poverty rate (% of persons employed)

Impact of social transfers (excluding pensions) on reducing poverty

Poverty thresholds, expressed in national currency at constant prices

Gross disposable income (households; growth %)

Inequality of income distribution (S80/S20 income quintile share ratio)

GINI coefficient before taxes and transfers

GINI coefficient after taxes and transfers

2010

7,3

2,2

14,2

3,1

1,6

0,2

0,4

29,0

2,4

2010

18,9

22,4

14,7

4,3

7,8

7,5

43,5

11929

0,7

4,3

50,7

28,3

2011

7,2

2,1

14,0

2,9

1,5

0,1

0,4

28,2

2,3

2011

19,2

22,1

14,5

4,0

8,6

7,6

46,5

11957

2,9

4,1

49,9

27,4

2012

7,3

2,1

14,3

2,8

1,5

0,1

0,4

28,5

2,3

2012

18,5

20,9

14,4

4,0

7,7

8,1

44,2

11730

3,8

4,2

49,7

27,6

2013

7,3

2,1

14,6

2,8

1,6

0,1

0,4

28,9

2,4

2013

18,8

22,9

14,4

4,2

7,8

7,9

44,4

11576

0,4

4,1

49,5

27,0

2014

7,4

2,0

14,8

2,8

1,6

0,1

0,5

29,2

2,5

2014

19,2

23,3

14,1

4,0

9,1

7,2

44,5

11920

2,1

4,1

49,9

27,6

2015

18,3

22,3

13,9

3,6

8,2

7,9

45,7

11774

1,6

4,1

49,8

27,2

1 People at risk of poverty or social exclusion: individuals who are at risk of poverty and/or suffering from severe material

deprivation and/or living in households with zero or very low work intensity.

2 At-risk-of-poverty rate: proportion of people with an equivalised disposable income below 60 % of the national equivalised

median income.

3 Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay

their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein

equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing

machine, viii) have a colour TV, or ix) have a telephone.

4 People living in households with very low work intensity: proportion of people aged 0-59 living in households where the

adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months.

5 For EE, CY, MT, SI and SK, thresholds in nominal values in euros; harmonised index of consumer prices = 100 in 2006 (2007

survey refers to 2006 incomes).

Source:

For expenditure for social protection benefits ESSPROS; for social inclusion EU-SILC.

kom (2017) 0090 - Ingen titel

C. Standard tables

Table C.4:

Product market performance and policy indicators

Performance indicators

Labour productivity (real, per person employed, year-on-year %

change)

Labour productivity in industry

Labour productivity in construction

Labour productivity in market services

Unit labour costs (ULC) (whole economy, year-on-year % change)

ULC in industry

ULC in construction

ULC in market services

Business environment

Time needed to enforce contracts (days)

Time needed to start a business (days)

Outcome of applications by SMEs for bank loans

Research and innovation

R&D intensity

Total public expenditure on education as % of GDP, for all levels of

education combined

Number of science & technology people employed as % of total

employment

Population having completed tertiary education

Young people with upper secondary education

Trade balance of high technology products as % of GDP

Product and service markets and competition

OECD product market regulation (PMR)

, overall

OECD PMR

, retail

OECD PMR , professional services

OECD PMR , network industries

2010

2011

2012

2013

2014

2015

5.74

-5.52

0.61

-5.43

3.95

0.88

2010

397.0

25.0

0.23

2010

2.74

5.91

-0.10

3.26

-2.04

1.36

0.23

4.29

1.24

2011

397.0

25.0

0.24

2011

2.68

5.80

-0.03

1.55

-1.22

-0.69

2.96

4.72

4.05

2012

397.0

25.0

0.23

2012

2.93

5.62

0.13

2.04

0.52

0.08

1.73

3.35

3.75

2013

397.0

25.0

0.35

2013

2.97

5.66

0.19

2003

3.50

3.21

2.47

1.13

-1.22

0.36

1.20

4.75

2.22

2014

397.0

22.0

0.41

2014

3.06

0.50

2008

1.37

3.30

3.08

1.84

1.20

-1.18

1.08

1.48

1.84

2.58

2015

397.0

22.0

0.49

2015

3.07

0.09

2013

1.19

2.40

2.71

1.55

1 The methodologies, including the assumptions, for this indicator are shown in detail at

http://www.doingbusiness.org/methodology.

2 Average of the answer to question Q7B_a. ‘[Bank loan]: If you applied and tried to negotiate for this type of financing over

the past six months, what was the outcome?’. Answers were scored as follows: zero if received everything, one if received

most of it, two if only received a limited part of it, three if refused or rejected and treated as missing values if the application is

still pending or or if the outcome is not known.

3 Percentage population aged 15-64 having completed tertiary education.

4 Percentage population aged 20-24 having attained at least upper secondary education.

5 Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are

shown in detail at http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm

6 Aggregate OECD indicators of regulation in energy, transport and communications.

Source:

European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for

the product market regulation indicators); SAFE (for outcome of SMEs’ applications for bank loans).

kom (2017) 0090 - Ingen titel

C. Standard tables

Table C.5:

Green growth

2010

kgoe / €

kg / €

% GDP

% of value

added

ratio

% GDP

kgoe / €

% of value

added

% GDP

€ / kWh

% GDP

kgoe / €

kg / €

HHI

0,12

0,31

0,68

0,13

-2,9

7,86

1,4

13,8

0,10

2,3

0,17

12,8

10,53

0,11

0,04

0,01

59,4

38,7

0,68

1,75

62,9

28,9

0,28

2011

0,11

0,30

0,69

-3,7

8,89

2,2

13,7

0,11

2,4

0,16

14,1

11,44

0,11

0,04

0,01

0,02

56,7

39,3

0,65

1,65

70,3

34,6

0,26

2012

0,11

0,29

0,68

0,12

-3,9

9,09

1,1

14,1

0,10

2,4

0,15

13,7

11,33

0,11

0,04

0,01

0,02

57,7

37,8

0,65

1,65

64,5

40,5

0,27

2013

0,11

0,29

0,66

-3,5

9,41

-0,1

13,7

0,10

2,4

0,16

13,1

10,09

0,11

0,04

0,02

57,7

37,3

0,67

1,75

61,6

25,2

0,27

2014

0,11

0,27

0,67

0,20

-3,0

9,75

-1,8

12,6

0,10

2,4

0,15

12,7

10,20

0,11

0,04

0,02

0,01

56,3

36,8

0,66

1,69

66,1

36,3

0,27

2015

0,11

0,66

8,86

-3,0

0,15

10,33

0,10

0,04

0,02

0,01

56,0

37,4

0,68

60,8

Green growth performance

Macroeconomic

Energy intensity

Carbon intensity

Resource intensity (reciprocal of resource

productivity)

Waste intensity

Energy balance of trade

Weighting of energy in HICP

Difference between energy price change and inflation

Real unit of energy cost

Ratio of environmental taxes to labour taxes

Environmental taxes

Sectoral

Industry energy intensity

Real unit energy cost for manufacturing industry excl.

refining

Share of energy-intensive industries in the economy

Electricity prices for medium-sized industrial users

Gas prices for medium-sized industrial users

Public R&D for energy

Public R&D for environmental protection

Municipal waste recycling rate

Share of GHG emissions covered by ETS*

Transport energy intensity

Transport carbon intensity

Security of energy supply

Energy import dependency

Aggregated supplier concentration index

Diversification of energy mix

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2005 prices).

Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR).

Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR).

Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR).

Waste intensity: waste (in kg) divided by GDP (in EUR).

Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP.

Weighting of energy in HICP: the proportion of ‘energy’ items in the consumption basket used for the construction of the HICP

Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %

change).

Real unit energy cost: real energy costs as a percentage of total value added for the economy .

Environmental taxes over labour taxes and GDP: from European Commission’s database, ‘Taxation trends in the European

Union’.

Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2005

EUR).

Real unit energy costs for manufacturing industry excluding refining: real costs as a percentage of value added for

manufacturing sectors.

Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP.

Electricity and gas prices for medium-sized industrial users: consumption band 500-20 00MWh and 10 000-100 000 GJ; figures

excl. VAT.

Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste.

Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP.

Proportion of greenhouse gas (GHG) emissions covered by EU Emissions Trading System (ETS) (excluding aviation): based on

greenhouse gas emissions (excl. land use, land use change and forestry) as reported by Member States to the European

Environment Agency.

Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value

added (in 2005 EUR).

Transport carbon intensity: greenhouse gas emissions in transport activity divided by gross value added of the transport

sector.

Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of

international bunker fuels.

Aggregated supplier concentration index: covers oil, gas and coal. Smaller values indicate larger diversification and hence

lower risk.

Diversification of the energy mix: Herfindahl index over natural gas, total petrol products, nuclear heat, renewable energies

and solid fuels.

* European Commission and European Environment Agency

Source:

European Commission (Eurostat) unless indicated otherwise

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