On February 4th the new government took their position in Vienna. This is when nations across the globe and especially in Europe awoke. In a democratic, prosporous, European country a right-extremist party was allowed to have a big say in the day to day running of the country.
In chapter ?.?, we explore what has happened immediately after this event, and what the effects were.
Economic Situation
Austria depends heavily on foreign trade, which is not surprising for a small European country. Its central location in Europe reinforces that dependency and gives Austria a wide range of trading partners in both Eastern Europe and Western Europe. As a result of that Austria has a wide variety of transportation services and usage.
Austria has used it’s political neutral and geographical central position for being an international conference centre. Especially Vienna holds different offices such as the headquarters of several UN organisations.
Because Austria is aware of it’s dependency it consistently seeks to avoid isolation and has joined international trading systems to ensure markets for its products and access to the goods it needs (see also § ? on Austria and the EU).
Austria's main trading partners are in continental Europe, especially neighbouring Germany, Italy, and Switzerland. Because of a heavy dependency on imports, Austria usually has a negative trade balance, which is compensated for by positive services; tourism is especially important in reducing the negative trade balance.
Agriculture's share of the economy, similar to a lot of European countries, declined steadily after World War II. But agriculture continues to represent an important element of the economy because of its social and political significance. (Why??)
Although industrial production is an important component of GDP, most companies are small and privately owned. Almost half employ fewer than five workers. The larger companies are often state-owned, but in recent years the process of privitasation has finally started.
A more detailed look into the economic situation of Austria will be given in paragraph ?.?
Austria and the European Union
Given its dependence on international trade, Austria has always been interested in some form of customs union. Even though the Austrian government and Austrian manufacturers feared competitive disadvantages in such associations, they always had been more anxious about being excluded. This would prevent them from taking advantage of any economies of scale and could ultimately move them to economic isolation.
Austria was proclaimed politically neutral after WWII, which prevented them to join the EC at an early stage. As an alternative Austria had joined the European Free Trade Association (EFTA) in 1960. EFTA was an alternative to the EC and was formed by Britain, Denmark, Norway, Portugal, Sweden, Switzerland and Austria. It facilitated trade among its partners, but did not involve any loss of sovereign powers.
Due to the fact that EFTA member states were situated on were highly dispersed at the outskirt of the EU, Austria`s trade among its members was less than 15 percent, in contrast to 66 percent with EC countries. Therefor Austria signed an agreement with the EU in 1972, to enable free flow of industrial manufactured goods to and from EU countries, giving them better access to their main trading partner; Germany.
When in the early nineties the European Union experienced another burst of development, when establishing a single market, the old fear of EFTA countries to miss out on economic growth re-emerged.
As a result the European Economic Area (EEA) was created, a free trade zone embracing the EC and EFTA. But some EFTA countries, including Austria, decided that they would go the whole way, and applied for full EU membership. In June ’94 the citizens of Austria gave a positive vote in the referendum on the issue.
On the 1st of January 1995, Austria officially joined the European Union, other countries joining at that time were Sweden and Finnland.
During the debate on joining or remaing outside the EU it became an point on the agendas of the political parties.
Awareness about the European Union among citizens was low, and in the year before the referendum Austria experienced an overall negative growth rate. Haider used the fear of many Austrians for giving up soveiregnity and came out as the main opponent of the EU. The ÖVP and the SPÖ were strongly in favour regarding the EU membership.
Minorities in Austria
After WW2 Austria experienced a surge of immigrants, most of them being etnic Germans from surrounding countries, they settled in Austria and eventually became Austrian citizens.
Since the 1960s foreign workers are an essential part of the Austrian society, representing the largest minority in Austria.
Although Austrian citizens themselves through time also migrated to other countries, almost leading to a balanced figure, there are, and always have been very strong anti-foreigner tendencies within Austrian society. Although the country remained with a small Jewish population, Anti-Semitism is also noticable.
The opening of Eastern Europe beginning in 1989 gave an extra increase in immigration figures, and in the early 1990s the widespread concern that Austria would be overwhelmed by foreigners emerged strongly. For example, a survey in 1992 found that 38 percent of those polled believed that the greatest threat facing Austria was its being overrun by eastern refugees.
Some politicians, most notably Haider, profited from these fears and used them as a point on his political agenda.
Hostility against minorities is espescially strong among older Austrians, low-income groups, and the population of rural areas. Negatives opinions on minorities increase moveing from the left to the right of the political spectrum.
It are these groups and geographical areas that have supported the FPO traditionally.
The role of immigration became a very sensitive political issue because of the erroneous but common perception that legal immigrants and foreign workers are a burden instead of a demographic and economic benefit.
Austrian authorities faced a difficult challenge. New laws were introduced, that sought to reduce the number of those coming to the country and to control the foreign community already being in Austria.
In early 1993, Haider supported and held a referendum, where the public had to decide about the further tightening of the foreigner regulating laws. Although he got a lot of opposition, he tapped into public resentments and widespread fears. All throughout the nineties the position of minorities was discussed quite openly, and it can be said that the position of the FPO on this issue has strongly contributed to their succes in the 1999 elections.
POLITICS
When the chairperson of FPO, Jorg Haider, commended Hitler’s “orderly” policies and praised former members of the Waffen SS as “ decent men of good character” he was an ambitious politician looking for a way to broaden his appeal to older voters. Not just with his passionate defense of Nazi policies, but also with criticism towards immigrants, he appealed to the Austrian public in order to gain the votes for his party. It definitely worked and in 1986 the Freedom party received 5% of the vote but in 1994 the party gained 22.6%.
Since 1995, when Haider last spoke of the SS, his popularity has grown dramatically. His Freedom Party garnered 27% of the vote in general elections in October 1999 and reached as high as 31% in surveys in January this year.
Support for the FPO
Anti-immigrant statements and especially his defense of Nazi policies have helped Haider to earn the dubious reputation of a “contraversial” politician. Haider stated that Austrians have to stop immigration in order to reduce unemployment rate; that immigrants take jobs away from Austrians and import crime from Africa, Eastern Europe and elsewhere. In general he blamed immigrants for growing economic problems. Also, Haider has earned a reputation of a strong defender of Nazi policies and justifying individual actions of the Nazi party during the Second World War.
Some people undoubtedly voted for Haider because they sympathize with Nazism, but many did so because they were tired of the Social Democrats and the People’s Party- two parties that have ruled Austria since the 1950s with a clear majority.
As a winning party from elections held in October 1999, and in coalition with the conservative People’s Party, Haider’s party was entitled to elect the new government in January 2000.
To avoid upsetting Austria’s European Union partners key foreign policy slots were given to the politically more acceptable SPO.
Reactions
The first reactions on the new Austrian government came from Jerusalem. Israeli Prime Minister Ehud Barack called on Europe’s leaders to create a common front to warn Austrians of the dangers ahead, and recalled its ambassador. The next reaction came from the European Parliament when it stated clearly that “it would be intolerable for a party that negates the fundamental principles of respect for human rights to take power in a member state”.
Within the EU, the loudest criticism came from Belgium and France and they were the strongest in favor of sanctions. The USA joined the protest by temporarily recalling its ambassador from Vienna in February; Finland and Germany followed this action by freezing bilateral diplomatic contacts with Austria.
Many countries believed and were concerned that the new Austrian coalition could act as boost for extremist forces and far right parties throughout Europe. See also paragraph/apppendix ?.?
Sanctions
In February 2000 sanctions were imposed against Austria by the other 14 EU members. These sanctions, issued during Portugeese EU presidency, were adopted in protest against the role the controversial FPO took in the new government.
European Union statement on Austria:
- “Austrian ambassadors in EU capitals will only be received at a technical level”.
- “Governments of the 14 member states will not promote or accept any bilateral official contacts at the political level with an Austrian government integrating the Freedom Party”
- “There will be no support in favour of Austrian candidates seeking position in international organisations.”
The sanctions would only be abolished after the FPO would leave the government.
The opinions about the sanctions were divided. Countries like Israel, France, Belgium, Norway and Canada were strongly supporting the sanctions. But Slovenia, Hungary and Slovakia were less convinced, economicly strongly connected, and depending on Austrias vote for future EU membership.
Within Austria itself the general reaction was disaproval. Did the EU have the right to intervere with national politics, with a democratically elected government? To quote the leader of the FPO- Members of the European Parliament, Mr. Peter Sichrofsky: “The only purpose of these sanctions were to turn down the coalition”
But since the coalition survived, and questions on the justification of sanctions rose within the EU, a solution was found in the “Wiseman” delegation. Three representatives were to investigate the record of the coalition government. The team was composed of Martti Ahtisaari, Finland’s former president, Marcelino Oreja, a former Spanish foreign minister and Jurgen Frowein, a German legal expert. The team’s task was to determine whether the Austrian government respected common European values of democracy and human rights as well as evolving the political nature of the FPO, which was seen by the European Union as a threat to these rights.
After a period of seven months where Austria’s political scene and government were closely monitored, they recommended that Europe should end its isolation campaign against Austria.
The Wiseman Report said that the respect for the rights of minorities, refugees and immigrants in Austria is not inferior to those in other EU member countries.
However, the team identified some problems concerning refugees who apply for political asylum. In September the team submitted the report and their findings to the French government, which is current holder of the EU presidency and the most aggressive advocate of sanctions.
Analysis
The reason for the decision to lift the sanctions imposed on Austria lies perhaps in the fact that these sanctions have affected popular Austrian attitudes to the European Union. A July poll found out that only one third of Austrians now support membership and that the friendly opinions towards the EU were quite endangered.
Furthermore, Austrian officials warned the EU that if progress was not made on lifting diplomatic sanctions the government would hold a referendum to seek public support to use suitable means to end them.
In other words, the Austrian government would seek public approval to block EU decisions that require unanimity such as enlarging the Union. They repeatedly warned that Austria could and would veto EU legislation if the isolation continue.
So the EU played their ‘get out of jail free’ card and sent ‘the three wise men’ to write a report with a foregone conclusion. The report surprised absolutely no one by recommending that the EU should lift the sanctions on Austria.
Overall, some of the more important effects of the sanctions and subsequent events are the following:
- An increase in tension between EU countries (or more specifically, between Austria and the rest of the EU).
- Haider not accepting as high of a position, though he probably still has the same amount of influence within the party, and is still, in practice, the figurehead of the party.
- An increase in concern and awareness of extremist groups and tendencies in Austria and other countries (would we be so aware of recent events in Belgium with the Vlaams Blok if the Austrian “debacle” hadn’t occurred?).
It would be hard to find anyone (outside of EU bureaucracy) who would now say that the EU took the smartest action – in fact its now difficult to find anyone who doesn’t think the EU completely failed. However, even in retrospect, one wonders if there really was a better way to go about it.
Firstly, without using utter force, the EU was never going to end the coalition. On the other hand if the EU had turned their back and ignored the situation, the journalists that have been saying the EU went too far, would now be calling for sanction after sanction. Many people believe the best course of action was to give a stern warning and then monitor the situation. Obviously this would have meant less tension at the moment, but it would have given the FPO too much room to manouver in.
In essence, the situation meant eventual “failure” no matter what, and maybe the EU hasn’t done too badly. One positive aspect is that the general public of most countries involved, have remained very critical of Haider-type extremism - their only bone of contention is that they think they could have handled the situation better than EU politicians did. The public is now more aware of opportunist leaders like Haider and the dangers these people provoke. It may be that the biggest revelation of the whole sequence of events, however, was that everyone (i.e. the EU and the rest of the world) saw the weakness of the EU’s infrastructure- Austria threatened to delay EU decisions and the EU had to reconsider. This will have far-reaching implications, and one would not be surprised if the EU countries are now fretting as to what they would do when this type of threat from any member country turns into action
Joerg Haider
In business, one often deals with the differences between ‘symptoms’ and ‘problems’. We’re dealing with symptoms of tension, bad policies, thoughtless reactions - the real problem all along has been Joerg Haider. If it weren’t for the outspoken, attention-seeking figurehead of the FPO, we would only be somewhat aware and concerned of the FPO’s presence.
One must ask, how scary is he?
He managed to cause all kinds of hysteria in the EU, and is now more popular than ever in his home country. Also, he probably now sees himself as an extremely important figure, a sort of political martyr for the far right. When he declined to take a position in the federal coalition, he must have had the biggest smile ever - in knowledge that he won. He won his home support; he made the European Union look impotent, and can wipe his slate clean in the name of ‘good old democracy’ (i.e. he can always point to the fact that he was democratically elected to his position).
Despite all this, one has trouble believing this is a person that could ever become “a second Hitler”. In fact, a comparison with Benito Mussolini is more appropriate; Haider is an opportunist, a pragmatist, and one might get the feeling that his racist comments are not intended to start a revolution, but just to appear on the television. He will probably never be as dogged in his beliefs as, for instance, Le Pen, for the simple fact that it would cost him votes. Everytime Haider apologizes for an earlier controversial remark, he follows it up with something equally controversial, which ensures him of about three more international headlines. In 1995, when the Austrian government compensated victims of Nazi rule in the WWII, Haider famously wanted compensation for victims of Allied occupation to be included.
This was, of course, not included in the bill, but Haider (again famously) voted for the bill anyway - saying “Even though you will not join us in widening the scope of the fund we will not vote against the bill.” This is Haider’s weapon everytime - attack and retreat. And its hard to dispute its effectiveness. This is not to say that people should not be extremely wary of Haider; actually his opportunism combined with his sometimes ingenious rhetoric is reason to be very afraid.
What happens when Austria experiences a huge recession and the public, wanting serious change, chooses an extremist to implement that change? This is, as history has shown, a threat for every country, but with Austria we’re fairly sure of who that extremist would be in such a situation.
Influence on Other Countries
Many European Union countries fear that the success of Austria’s Freedom party will act as a boost for other right parties in EU member states. The following is a table of far right parties in different member states.
One wonders if the postition the EU took in the FPO-case will effect the rest of the European far-right. With more eyes on their activities, how extreme can these parties get without a public backlash?
Bearing the far right influences in the above countries in mind, it is interesting to look at a study carried out in Switzerland, Hungary, Denmark, Italy, France and the UK, at the time the sanctions were in place. Switzerland led the way in answering in favour of Haider’s freedom party (e.g. 50% of the Swiss said the sanctions were wrong, 31% of said they were right.) France gave answers more in support of the EU (42% of the French said Haider is a “real threat” compared to 18% of the Swiss that thought so). Italy and the UK remained more in the middle.
Conclusion
Now that the whole problematic seems a little over, or at least at a rest stop, one wonders what the near future holds for Austria. It seems fairly obvious that the democratically elected coalition government will try and go about their business, albeit with strong external pressure not to implement any kind of anti-immigrant legislature. The FPO may have promised this kind of legislature in order to get elected, but they won’t have a problem with breaking that promise, as they can always tell the voters that its the EU who are holding them back. If the FPO works tactfully they could get even stronger within Austria, as long as they promote the “us against them” feeling. For the EU this would probably fall under a list of “bad things”, and if it happens that, for example, the FPO gets a majority vote in the next election, the EU will have to accept much of the blame. Once again, however, this is not to say that the EU could have done much better.
The EU, with the sanctions, has sent out the right message. The problem is that this message was misunderstood, mishandled, and used against the EU by the far right. Allesandra Mussolini (Benito’s granddaughter), is a Haider supporter and says, “The leftists are the... racist! Let the European Union just tell us straight away who we should vote for, and send those who voted for Haider straight to jail.” Aside from having mastered sarcasm, she does have a point. The EU, when looking at it from a legal perspective, should not have intervened until racist policies were in place. However, this is only in retrospect, and, if the EU had waited, one wonders if they wouldn’t have been too late.
There is, of course, still the question of what can be done to avoid the next rise of an extremist group (from the left or the right) within the EU. That answer sounds rather simple, in that the EU simply needs to be more unified. The presence of a common military, a common foreign policy, and real, structured EU political parties will, like in the U.S., keep extremism at bay. While the center-right and the center-left discuss which color the uniforms of an army should have, groups like the FPO will find support from groups like the Northern league in efforts to decentralize the Union (and yes, it can actually be more decentralized than it is now).
Overall, the EU, Austria included, will have to move on cautiously. As long as Austria sticks to EU legislation, and the FPO gets power through purely democratic means, what can anyone do? The majority of the EU that is against the FPO and Haider can only sit and wait for Austrians, probably the younger generation, to wise up to the evils of any kind of extremism.
ECONOMY
Global Economic Overview
After having thoroughly examined the political situation before and after the bilateral diplomatic sanctions have been proclamed, it is now essential to continue this report by analysing the economical impact on Austria. It is of interest to shortly review Austria‘s economical policy and describe main activities by sectors and then briefly discuss core economical developments in 1999 to position Austria within the EU.
Austria is one of the wealthiest and most stable of the EU member countries. Its economic system, a free market economy with a strong emphasis on social engagements favouring the less privileged, has been retained in the EU, as well as the successful system of Economic and Social Partnership, which has traditionally played an important conciliatory role in the country‘s wages and price policy.
Austria is a highly industrialised nation with an important service sector. Also some agricultural branches occupy leading positions in Europe e.g. wine production.
Agricultural Sector
In 1999 the primary sector (agriculture and forestry) accounted for only 2.8 % of GDP (Gross Domestic Product), which comfirms a global trend in developed countries.
Some 18 % of Austria‘s surface area is covered by farm land, 27 % by grassland and 47per cent by woods and forests. Austria‘s total area suitable for agriculture is 41 % and of all employed persons 5 % work in agriculture and forestry. With 20,000 organic farmers Austria is holding a leading position in Europe.
Industrial Sector
The secondary sector (commodities manufacture, energy and mining) is holding 34.8 % of GDP. The foremost industries are foodstuff and luxury commodities, mechanical engineering and steel construction, chemicals and vehicle manufacturing.
Car industry
Within the vehicle sector, the production of engines and transmissions are the most important areas, accounting for an export excess of 90%. Austria manufactures some 800,000 engines per annum for many major car manufacturers e.g Steyer/Daimler/Puch.
Electronics
In the electronics engineering field, Austria has made a name for itself with the production of customised electronics products like microprocessors and integrated circuits for airbags, ABS braking systems and components for Airbus airliners and for highspeed trains.
Energy
Austria can draw on abundant resources of raw materials and energy generation. It has deposits of ironore, non-ferrous metals, important minerals and earths. However, the constant growth of the industrial sector necessitates supplemantary imports to an ever-increasing degree. This is also true for fuels and energy and for the electricity generating industry.
Austria has its own resources of oil and gas and is the European Union‘s number one generator of hydroelectric power.
Austria‘s handycrafts are famous throughout the world -most notably, costume jewellery, ceramics and glassware e.g. Swarofsky.
Service Sector
The tertiary sector (services, banking, public services, commerce, transport and tourism) accounted for 62.5 % of GDP is the most important revenue source for Austria.
The predominant features of Austria‘s industrial and commercial sectors is its high propotion of medium-sized enterprises. Austrian industry covers every branch of manufacture, from basic goods to the labour intensive production of finished goods.
Construction
Ever greater importance attached to plant construction, encompassing the planning, delivery and assembly of turnkey industrial facilities including the requisite operational expertise. This field is strongly export-oriented, as is the electronics sector e.g. production of integrated circuits.
Transports
In the field of transport Austria has a wide variety of services and usage, reflecting the diversity of its geography and its central position in Europe. Austria is therefore an important segment of the European railroad network, and a number of high speed international trains pass through the country e.g. Deutsche Bahn intercity train.
Since an increasing volume of freight is transported by trucks which cause traffic and pollution, the government imposed regulations to counter this threats by limiting the size of international trucks traversing the country and by shipping freith to less noisy and polluting rail ways.
Tourism
Tourism is a very important part of Austria‘s service sector. In 1999 foreign tourists accounted for earnings of almost ATS 200 billion, offsetting the negative trade balance and deficits in services and other accounts. Tourism is a principal industry and source of foreign exchange.
Austrias per capita tourist revenue is actually the highest in the world. Foreign tourists account for continuous high earnings, almost offsetting the negative trade balance and it is also a source of foreign exchange.
Most tourists come from European countries, especially Germany (65%), the Netherlands (10%) and Britain (5%).
Austria made significate progress in becoming an international conference center e.g. United Nations City, International Atomic Energy Agency and numerous East-West conferences.
Financial services
Austria‘s banks tend to maintain close relations to industry and play the central role in the Austrian financial system, especially in coporate finance. They play prominent roles in advising firms with respect to business and investment decisions. There is an important bond market for government and bank issues.
Foreign Trade
As an export-oriented country, Austria maintains a wide-ranging and highly diverse foreign trade system. It trades with some 150 countries, of which other EU member countries account for two-thirds of foreign trade.
In the years immediately following the opening of Eastern Europe, some 40 % of all direct investments came from Austria. The trend reached its apex in the early nineties. By 1999 the figure had declined to 5.3%. Major trading partners are Hungary, Czech Republic and Poland. An important branch of Austria‘s foreign trade is transit trade, in conjuction with the mediation of East-West trading transactions.
Now that we have described and situated Austria and outlined the main activities, we will continue to discuss developments in 1999.
Economical features
First we will quote an OECD Country Report:
„The recent macroeconomic performance of the Austrian economy has been impressive, based on relatively rapid growth, low inflation and rising employment. With world trade slowing, the peak of the present business cycle seems to have passed, but wages, prices and productivity are projected to continue to develop favorably-in great part due to the major changes in the structure and operation of the economy in recent years…there is still doubt that the long-run economic performance should continue to be favorbale“
Low inflation
Consumer Price Index, at 0.4% for the June, remains near a fourty-year low, after the all-time low of 0.2% in April.
Industrial Boom
According to the institute on Economical research, Austria has increased its share of total industry production in the EU from 2,1 to 2.7%. Thereby surpassing Finland and closing in on Sweden. The country also belongs to the leaders of industrial growth.
Leader in innovation
According to Eurostat (European Statistical Institution) Ireland, Germany and Austria have the highest quota of „innovative enterpreneurs“ among twelve EU countries.
Innovative firms were defined as having introduced new or improved products within three years.
The leaders in industry were respectively Germany, Ireland then Austria and Sweden exequo.
In the service sector Ireland is leading in front of Austria, Luxembourg and Germany.
Unemployment
For July unemployment decreased by 9.5%. The number of vacancies rose by 32.1%. Austria has the lowest unemployment rate for young people in the world.
Foreign investment
During the first six months in 1999, 46 foreign companies invested $160 million in comparison to $60 million in 1998 in Austria.
Exports to EU
Exports increased tby 7.4 % in 1998, continuing the trend upwards since Austria entered the EU five years ago. Exports to the US are also booming.
Retailers expand
320 large retailers, many of them from abroad, were looking for 1200 to 1500 new sites in Austria according to Regio-planning-Consulting e.g. McDonald‘s, Burger King, Hooter‘s, Taco Bell and HagenDazs.
Winter Tourism
From November ‘98 to April ‘99, revenues from tourism increased by 5,8% to Sch 100 billion ( $7.7 billion) while overnight stays rose by 5%.
Summer Tourism
With a growth rate of 5% Austrian tourism will break the “magical” Sch 200 billion mark in 2000.
As one can observe Austria is a wealthy country which performed at an economical stage very well during 1999. Austrians are in general satisfied and feel socialy as well as financialy secure.
Bearing that in mind, it is now of major interest to examine whether the sanctions influenced the economical situation of the nascent coalition.
Impact on Austria’s Economy
The main question is whether political sanctions, in the form they were set on Austria, can have an impact on the economical situation of the sanctioned country.
When we hear about sanctions in the news, than they are mostly political and economical. The USA, for instance, can be regarded as sanctioning World Champion, putting sanctions on a large number of countries (Iraq, Libya, Iran, Cuba, Yugoslavia). Whether those sanctions fulfill their aim is doubtful, but they certainly have an impact on a country’s economic situation.
For Austria on the other hand, it is different since the sanctions were only of political nature. Nevertheless, throughout the rest of this part we will examine how badly (if at all) political sanctions have touched Austria’s economy.
Due to the fact that this historical event only happened at the start of the year 2000, we are forced to rely very much on forecasts, mostly given by the Austrian government. Although there might be a small marge for errors, we believe that these forecasts can still give us a global trend, which will help us to come to a conclusion.
In the paragraphs before we have seen that Austria was one of the wealthiest countries in the world. But is it still today?
General behavior of Austria’s economy
In general, Austria’s economy has continued its upward trend during the first half of 2000.
In fact the real economic growth is expected to be 3.5%. Ironically the real economic growth had been expected to be only 2.7% before the sanctions took place and had been revised during the sanctions to 3.1% and finally to 3.5%.
The growth rate expected for Austria is therefore in accordance with the economic growth expected for the whole EU for the year 2000. Whether it could have been higher without the sanctions is hard to tell, but rather unlikely.
From a recent OECD GDP ranking one could observe that Austria has managed to increase its index figure up to 114. By this they even left behind countries as Germany, The Netherlands and France. Austria resides now on the 10th position in this ranking, which reflects their healthy economical environment.
Another important point of analysis is Austria’s unemployment rate. The analysis of the labor market is an important factor when it comes to evaluating the economic situation of a country.
Again we can see that the unemployment rate was higher before the sanctions and therefore declined during the political isolation of Austria.
Unemployment rate
Graph 2
Finally we will take a look at Austria’s inflation rate. It has always been one of the lowest in the EU and maintained its position after the political sanctions. We can see a drastic jump from 0.6% in 1999 to almost 2.0% in 2000. The increase of the inflation rate was caused by a considerable increase of the energy costs. Only two EU member states, namely Sweden and Great Britain, boast even more stable prices.
Austria’s Inflation Rate
Graph 3
With regards to Austria’s overall economy we can therefore conclude that, despite of political sanctions, economy improved well and followed and sometimes even outperformed the EU trend.
In the following paragraph we will answer whether the export-oriented businesses has suffered.
Austria’s Exports in danger?
The EU-14 sanctions couldn’t stop or slow down Austria’s export boom. In fact an increase in exports of 11.1% in the year 2000 is expected. This would mean the best result for the country since the 1960’s. Strangely enough Austria had its biggest increase in exports to the two most determined sanctions supporters, namely France and Belgium.
The boom is partly cause and reason for an increase in public investments (+4.3% in 2000). That shows that the sanctions couldn’t disturb the publics’ positive beliefs in Austria’s economy.
The head of the Austrian chamber of commerce used these results to declare: “After seven months, we can honestly say that the sanctions have not had any negative implications.”
Even more in some cases the sanctions even had positive consequences for some Austrian companies.
Seventeen percent of Austrian businesses stated that they had positive experiences with their foreign partners because of the sanctions. Especially since they paid more attention to their foreign partners and, obviously, got into closer contact with their partners because of explanatory needs.
But Austria feared negative impacts on products having a high brand value. In fact such highly famous Austrian brands as they are in the Wine, Ski and Handycraft Industry could suffer immensely from Austria’s bad image.
Hence we could observe delays in orders because clients wanted to see how the whole situation would develop. But shortly after that those apparently lost orders were made good.
In addition to that clients showed a demonstrative solidarity towards Austria. For instance through a sensational number of visitors at Wine presentations in Great Britain and the Scandinavian countries, or through an unexpectedly big success for Austria’s Ski producers at a Sports-fair in Grenoble.
Investments in Austria
Another point is whether foreign multinationals would still install their outside plants or headquarters in Austria.
Obviously those decisions are made years in advance and the actual political situation appeared stable enough to Companies to invest in Austria. And in fact big multinationals as Coca-Cola and Ford decided to place their headquarters for Central and Eastern Europe in Vienna.
Furthermore the car industry intends to transform the country into “Autoland” Austria, and General Motors, BMW, Mercedes and VW are expanding their facilities in Austria. Also Saab decided to shift its production of convertibles to the province of Styria were they could benefit from the special qualification of Magna group’s Steyr-Daimler-Puch Fahrzeugtechnik.
Finally, Eli Lilly, a big pharmaceutical multinational decided to expand its R&D facilities in Vienna. The Elli Lilly’s Area Medical Center Vienna will become the largest research center outside the U.S.
We can therefore definitely say that foreign companies do like Austria and don’t hesitate to invest.
Austria’s tourism in danger?
We can say that the dreaded downturn in tourism, an integral part of Austria’s economy, never came.
By June 2000, tourism as a whole was up by nearly three percent from the previous year, with 1.3 million more nights in hotels booked around the country.
In Vienna, which enjoyed nearly five percent more tourists in July 2000 than in the same month last year, visitors were swarming in to admire this European Capital.
Josef Magreiter, head of the Tyrolean tourist board, said shortly after Belgian Foreign Minister Louis Michel told Belgians not to holiday in Austria: “there is a big difference between what European politicians go on about, and what the tourist think – who have in some case known a hotelier for years. These guests know what they like and why they return.”
But life was not all rosy for Austrians during its seven months of diplomatic isolation within Europe. Lucrative ‘congress tourism’, when professional groups meet abroad, did suffer, primarily because organizers pulled out, fearing that participants might not show up.
Similarly, a number of universities experienced the occasional withdrawal of a speaker or guest professor who wanted to show their disapproval of Austria’s political choice.
After the Austrian media presented tales of misery of Austrians being treated badly when abroad, they were shunning holidays in other member states. And indeed in April 2000 one could realize a significant decrease in holidays to Belgium and France. But when people realized that the media blew things out of propotion one could observe a hundred percent recovery in bookings.
All in all, only few negative incidents occured and it appears to be an obvious fact that, with regards to tourism, nowadays matters turned back to a “business as usual” status.
Effects on the New Economy
The very international oriented Information Technology Industry is one of the only fields were a negative economic effect of the sanctions is evident. One could argue that people in this sector are far more sensible to subjects as intolerance and racism. Moreover, due to the fact that “brain power” is far easier to replace than production means, Austria’s IT businesses has experienced some difficulties.
Business is not Politics
To restate our main question: whether political sanctions, in the form they were set on Austria, can have an impact on the economical situation of the sanctioned country. The answer appears to be a rather straightforward: NO!
The outcome of the sanction showes a clear division between Economy and Politics. Foreign trade partners in general did not change their position towards people they had done business with for years. It could even indicate that the sanctions didn’t even have broad popular support in the international business environment.
The same goes for the European poeple, and when coming to practical implemtation the public ignored political opinion, and still went to Austria and bought Austrian products.
But political sanctions can become dangerous when politicians try to make them economical, as it was the case with the Belgian Prime Minister Louis Michel. But also those threats seemed to have only a short time impact and were consolidated in a short period of time. Furthermore it would be even against EU-law to imply economic sanctions, and therefor we find it very questionable that politicians have tried to influence the economy of a third country.
In general we can say that sanctions had some very few negative but also positive aspects for the Austrian Economy. All in all things didn’t change too much and the positive trend Austria’s economy took, has continued dispite the political sanctions.
The
Origin
Founded in 1889, at the time known as the Social Democratic Workers' Party (SDAP)
Changed name in 1991 from Socialist Party of Austria to Social Democratic Party of Austria.
Characteristics
Government control in business environment
Social equality
Voters
The socialists
Urban working class of Vienna and other cities
Intellectual class
The
Origin
Founded in Vienna in 1945 by leaders of the former Christian Social Party (CSP)
Characteristics
conservative,
democratic
Christian values, tied to the Roman Catholic Church
diverse interests.
Voters:
Catholic-conservatives
Small towns
Farming communities
The
Origin:
Founded in 1956 to form an alternative against coalition governments of the SPÖ and ÖVP.
Founded by Anton Reinthaller, who had served in the Seyss-Inquart national socialist government formed in collaboration with Hitler after the Anschluss in 1938.
Philosophy that Austrians should think of themselves as belonging to a greater German cultural community.
Characteristics
Anticlerical pro-German , free enterprise and individual initiative opposed a larger role for the state in the ownership of enterprises against the socialist idea of striving for greater equality between socioeconomic groups.
Voters:
German-nationalist
former Nazis
whitecollar professions.
Haider
Personel Data Educational Career
Name: Haider, Jörg Matura (At. Higher education): 1968
Date of Birth: 26.01.1950 University of Vienna: 1969 – 1973
Place of Birth: Bad Goisen, Austria studied law and political science
Status: Married, two children
Political Career Other offices
1973 ~ 1976 Scientific-assistant at the Univ. of Vienn 1971 Became a member of the FPÖ
1976 ~ 1983 Statesecretary of the FPÖ in Carinthia 1979 ~1983 Member of the FPÖ
1983 ~ 1998 FPÖ Staterepresentative for Carinthia Executive Commity
1986 ~ 2000 Nationwide FPÖ Chairperson 1986 ~1989 Member of the National council
1999 ~ today Chairperson of Carinthia
Who is Haider?
Jörg Haider comes from the nationalist wing of the party and since he took control of the party in 1986 the party has achieved dramatic gains. It can be said that since Haider appeared at the top of the political scene, Austrian politics has taken a turn to the right. Haiders personel desire is to cut down the number of foreigners living in the country, because he argues that immigration is excessive and is causing serious problems for Austrians in areas of employment and housing.
Critics accuse him of having neo-Nazi tendencies, what Haider himself confirmed many times with giving remarks and statements about the positive sides of the Third Reich and the Austrians proper place in the German cultural community.
Haider is famous for his rhetoric of right wing-populism and his nattiness (what does this mean) of escaping difficult political situations.
6 November 2000 Page
Hitch-H
www.adl.org/backgrounders/joerg_haider.html