Profit from ‘Toll’

The Austrian economy is expected to experience satisfactory growth in 2007, according to institutions engaged in economic development forecasts. According to the most optimistic forecast from the Austrian National Bank (OeNB), Austria should record a gross domestic product growth of around three percent this year. In comparison, Germany’s economy is projected to grow by 1.2 percent this year.

The reasons for the optimism among Austrians are certainly a good investment climate and high export growth. According to preliminary data from the Austrian Federal Economic Chamber, the real Austrian export in 2006 was 10.4 percent higher than in 2005. At the same time, imports increased by 7.9 percent. The significant growth in Austrian foreign trade is, according to analysts from the International Monetary Fund, a result of Austria’s optimal positioning, leveraging its role as a ‘bridge’ between the emerging markets of Central and Southeast Europe on one side and established Western European economies on the other.

Thanks to a favorable economic situation, more than 60 billion euros (60.3) flowed into the Austrian federal budget last year for the first time, two billion more than planned. Austria could reduce its budget deficit to less than one percent of GDP this year and next, but the planned deficit will only be known in mid-spring, in April or May, when the budget for both 2006 and 2007 is finalized. Generally, a continuation of the austerity course in government spending is expected, but it is very likely that more investments will be made in certain areas, such as education, research and development, and measures against unemployment.

At the beginning of this year, a full three and a half months after the elections for the lower house of its federal parliament, Austria managed to install a new federal government. As it was from 1987 to 2000, Austria again has a grand coalition of social democrats and conservatives, in which the nominally larger partner is the Social Democratic Party (SPÖ) led by Alfred Gusenbauer, now the federal chancellor. However, Gusenbauer, after arduous negotiations with the leaders of the Austrian People’s Party (ÖVP), had to give key economic positions to people from the coalition partner.

The ÖVP now again holds the positions of Minister of Finance and Minister of Economy. Meanwhile, the ÖVP has managed to retain its ministers in also very significant ministries of internal and foreign affairs. The ÖVP is satisfied, having extracted the most they could and proven that they should have the areas where money is created and managed, for which, as they say, ‘the socialists lack competence.’

Cost of Dangerous Aircraft

In such a constellation, it was immediately clear that Gusenbauer would not be able to fulfill the pre-election promise to abolish the obligation to pay student tuition fees. The fee in Austria is not excessively high – just under 380 euros per semester – but for students, it is a principled issue as well as a financial one. The SPÖ faced student protests on the very first day of returning to power, which it had not held for the last six full years. As he crossed the street, walking from Ballhaus, the government presidency building, to the Hofburg Palace, to take the oath of office, the police had to cordon off Gusenbauer and his ministers from a few thousand angry, mostly young demonstrators.

In addition to the promise to abolish tuition fees for students, the SPÖ seriously announced during the election campaign that it would withdraw from the contract for the purchase of the most modern multi-role combat aircraft, the Eurofighter. The previous government had signed a contract with the European consortium EADS for the purchase of 18 fighter-interceptors a couple of years ago. The SPÖ, appealing to voters, plastered a mass of posters across Austria last year with the slogan ‘Sozialfighter statt Eurofighter’, a play on words meaning that this party would be a fighter for social justice, not an expensive combat aircraft.

A considerable number of Austrian residents share the opinion that the state does not need the Eurofighter – in the summer of 2002, 624,720 people – 10.65 percent of adult Austrian citizens – signed a petition against the purchase of these aircraft. Although a parliamentary commission has recently been established to determine whether everything was done correctly in the decision-making process regarding the purchase of the Eurofighter, the question remains whether Austria can extricate itself from the obligations of the contract signed by the previous government. Financial non-compliance could be very costly, and EADS is currently building aircraft for Austria.

In any case, this topic deserves special treatment in one of the upcoming reports from Vienna – it concerns several billion euros in costs for the Austrian budget, and other aspects related to defense doctrine, the European aerospace industry, and the project for a new generation European fighter are also interesting. (Milan Ilić)