Showing papers in "Austrian Economic Quarterly in 2009"

Macro-economic Effects of the Fiscal Stimulus Measures in Austria

Abstract: In order to cushion the impact of the financial and economic crisis on the real economy, the Austrian government adopted fiscal stabilisation packages. Relative to GDP, these are among the largest in an international comparison, amounting to 4.2 percent of 2008 GDP in cumulative terms and including similar measures taken by the Lander (federal states). Simulations with the WIFO macro-economic model suggest that these measures, together with those taken by Austria's major trading partners, contribute substantially towards limiting the repercussions of the crisis, reducing the fall in GDP in 2010 by 2.1 percentage points. With a share of less than 30 percent of the total amount spent, investment geared towards raising potential growth in the future receives less emphasis than in a sample of 11 OECD countries with an average share of almost 40 percent.

The Tax Reform 2009-10

Abstract: The tax reform 2009-10 compensates for fiscal drag and makes an important contribution towards combating the current economic crisis. It also includes elements for a better reconciliation of work and family obligations. Other essential economic goals will, however, not be achieved. Neither will the tax system become more environmentally friendly nor will the tax code become simpler. Also, the new measures provide little incentive for economic growth and job creation, with barriers to more mini- and part-time jobs remaining high. No major effort has been made to exonerate labour earnings from social contributions or to shift social security financing from earmarked payroll taxes towards general tax revenues.

Ten Years of EMU – Achievements, Weaknesses, Challenges

Abstract: The assessment of 10 years of EMU is ambivalent. On the one hand, the introduction of the common currency has contributed towards price stability and the euro has acquired a global status next to the dollar. Monetary Union has also stimulated cross-border trade within the euro area. On the other hand, the expected growth "dividend" has so far failed to materialise. Despite the complicated and asymmetric policy framework governing EMU, the responsible institutions have co-operated timely and smoothly during the international financial market crisis, trying to limit the damage for the financial sector as well as for business activity through a co-ordinated approach.

Lacking "Europeanisation" of National Business Cycles as a Risk for the Euro Area

Abstract: Ten years after the start of EMU, the global financial market crisis is putting its viability to a test. Some observers evoke the danger of the monetary union breaking up, but others point to the experience gained with the institutional interplay which has helped so far to cope even with such a severe crisis at hand. The different degree to which the euro area countries are affected by the financial crisis (institutional differences in the banking sector and real estate markets) reveals the risk potential inherent in the widening gap in member countries' price competitiveness since 1999. Already before 1999 some convergence of national business cycles has been observed in Europe, which continued in recent years. However, the financial crisis affects the euro area like an external shock (triggered by the real estate and banking crisis in the USA) with asymmetric effects which may add to national divergences in the business cycle. The conditions for the successful conduct of a euro-area-wide monetary policy are thereby becoming even more difficult.

Potential for Savings and Efficiency Enhancement in Public Administration. Results of an International Benchmarking Analysis

Abstract: The frequently expressed assumption that there is significant savings potential in Austria's public administration is based on the general notion that Austrian bureaucracy is "too large" and/or "too expensive". In the context of ongoing discussions on administrative reform, this study compares administrative expenditures in Austria with expenditures in other EU and OECD countries. Independently of the definition of administrative expenditures selected, Austria generally falls into the international mid-range, with high savings potential found in Austria's general administration. Depending on the country of reference examined, and under the assumption of equal quality and range of administrative services among countries, we find a theoretical efficiency reserve of ¾ to € 2½ billion – even when taking into account diseconomies of scale of Austria as a small country. Based on an international performance and efficiency comparison, we still find significant efficiency reserves in Austria's general public administration. WIFO estimates point toward another € ½ billion of additional savings potential that could be attained by reducing the complexity of legislation and administrative processes.

Draft Federal Budget 2009-10 and Financial Framework 2009 to 2013

Abstract: The current crisis makes for the most difficult macro-economic environment for fiscal policy since the Second World War. The ratio of the general government deficit and of government debt to GDP each rise markedly above the "Maastricht" reference value. The structural (cyclically-adjusted) deficit also widens, since policy has taken measures on both the expenditure and revenue side beyond the cyclically-induced higher spending and revenue shortfalls. Over the medium term, pensions and other transfers will increase as share of total federal outlays. Wage tax and sales tax (VAT) will make a growing contribution to the joint federal revenues, whereas the share of profit taxes will decline noticeably.

Repercussions of Financial Market Crisis Weighing on Medium-Term Growth. Projections for the Austrian Economy until 2013

Abstract: The global economic crisis will slow down Austria's economic growth over the medium term. Over the period from 2009 to 2013, real GDP is expected to grow on average by 1.3 percent p.a. The cyclical downturn will have a negative impact on the labour market and public finances, while keeping inflation low. Restoring the balance of public finances in the aftermath of the crisis would require a determined effort by the government.

Cash-Flow Margin of Austrian Manufacturers Still Resilient in 2008

Abstract: Due to the favourable business conditions prevailing in 2007, the cash-flow/sales ratio of Austrian manufacturers rose to 13.7 percent. In 2008, the more moderate increase in net output of 3.5 percent has probably dampened the earnings power towards its long-term average, to a cash-flow/sales ratio of 10.3 percent as estimated by WIFO. The decline is an early reflection of the international financial market crisis leading to a business cycle downturn in the fourth quarter. The positive earnings trend in 2007 contributed to the fact that for the first time the equity capital ratio in the Austrian manufacturing sector of 38.5 percent exceeded the European average (36.7 percent). Among the service industries, cash flow and equity ratios differ markedly, partly due to different intensities in economies of scale and degrees of competition. Overall, the equity ratio is substantially lower in services than in manufacturing. With a ratio of 15.6 percent of the balance sheet total, financial assets of Austrian manufacturers are relatively low by international standards and have increased only little in the last few years. Klaus Friesenbichler is an economist at WIFO. The author is indebted to Gerhard Fiam (OeNB) for his support, and thankful to Michael Peneder for useful