About the CBI

February 2006

Background Note: Austria

Flag of Austria is three equal horizontal bands of red (top), white, and red.

PROFILE

OFFICIAL NAME:
Republic of Austria

Geography
Area: 83,857 sq. km. (32,377 sq. mi.); slightly smaller than Maine.
Cities: Capital--Vienna (2003 pop. 1.6 million). Other cities--Graz, Linz,
Salzburg, Innsbruck, Klagenfurt.
Terrain: Alpine (64%), northern highlands that form part of the Bohemian
Massif (10%), lowlands to the east (26%).
Climate: Continental temperate.

People
Nationality: Noun and adjective--Austrian(s).
Population (2003): 8,117,754.
Annual growth rate (2003): 0.41%.
Ethnic groups: Germans 98%, Croats, Slovenes; other recognized minorities
include Hungarians, Czechs, Slovaks, and Roma.
Religions: Roman Catholic 73.6%, Lutheran 4.7%, Muslim 4.2%, other 5.5, no
confession 12.0%.
Language: German 92%.
Education: Years compulsory--9. Attendance--99%. Literacy--98%.
Health (2003): Infant mortality rate--4.2 deaths/1,000. Life expectancy--men
75.9 years, women 81.7 years.
Work force (2003, 3.9 million): Services--67%; agriculture and forestry--4%,
industry--29%.

Government
Type: Parliamentary democracy.
Constitution: 1920; revised 1929 (reinstated May 1, 1945).
Branches: Executive--federal president (chief of state), chancellor (head of
government), cabinet. Legislative--bicameral Federal Assembly (Parliament).
Judicial--Constitutional Court, Administrative Court, Supreme Court.
Political parties: Social Democratic Party, People's Party, Freedom Party,
Greens.
Suffrage: Universal over 18.
Administrative subdivisions: Nine Laender (federal states).
Defense (2003): 0.8% of GDP.

Economy
GDP (2004): $290 billion.
Real GDP growth rate (2004): 1.9%.
Per capita income (2004): $35,820.
Natural resources: Iron ore, crude oil, natural gas, timber, tungsten,
magnesite, lignite, cement.
Agriculture (2% of 2003 GDP): Products--livestock, forest products, grains,
sugarbeets, potatoes.
Industry (30% of 2003 GDP): Types--iron and steel, chemicals, capital
equipment, consumer goods.
Services: 68% of 2003 GDP.
Trade (2003): Exports--$89 billion: iron and steel products, timber, paper,
textiles, electrotechnical machinery, chemical products. Imports--$92
billion: machinery, vehicles, chemicals, iron and steel, metal goods, fuels,
raw materials, foodstuffs. Principal trade partners--European Union,
Switzerland, U.S., and Hungary.

PEOPLE AND HISTORY
Austrians are a homogeneous people; 92% are native German speakers. Only two
numerically significant minority groups exist--15,000 Slovenes in Carinthia
(south central Austria) and about 17,000 Croats in Burgenland (on the
Hungarian border). The Slovenes form a closely-knit community. Their rights
as well as those of the Croats are protected by law and generally respected
in practice. The present boundaries of Austria, once the center of the
Habsburg Empire that constituted the second-largest state in Europe, were
established in accordance with the Treaty of St. Germain in 1919. Some
Austrians, particularly near Vienna, still have relatives in the Czech
Republic, Slovakia, and Hungary. About 74% of all Austrians are Roman
Catholic. The church abstains from political activity. Small Lutheran
minorities are located mainly in Vienna, Carinthia, and Burgenland.

The Austro-Hungarian Empire played a decisive role in central European
history. It occupied strategic territory containing the southeastern routes
to western Europe and the north-south routes between Germany and Italy.
Present-day Austria retains this unique position.

Soon after the Republic of Austria was created at the end of World War I, it
faced the strains of catastrophic inflation and of adapting a large
government structure to the needs of a new, smaller republic. In the early
1930s, worldwide depression and unemployment added to these strains and
shattered traditional Austrian society. In 1933, Engelbert Dollfuss formed a
conservative autocracy. In February 1934, civil war broke out, and the
Socialist Party was outlawed. In July, a coup d'etat by the National
Socialists failed, but Nazis assassinated Dollfuss. In March 1938, Germany
occupied Austria and incorporated it into the German Reich. This development
is commonly known as the "Anschluss" (annexation).

At the Moscow conference in 1943, the Allies declared their intention to
liberate and reconstitute Austria. In April 1945, both Eastern- and
Western-front Allied forces liberated the country. Subsequently, the
victorious allies divided Austria into zones of occupation similar to those
in Germany with a four-power administration of Vienna. Under the 1945 Potsdam
agreements, the Soviets took control of German assets in their zone of
occupation. These included 7% of Austria's manufacturing plants, 95% of its
oil resources, and about 80% of its refinery capacity. The properties
returned to Austria under the Austrian State Treaty. This treaty, signed in
Vienna on May 15, 1955, came into effect on July 27, and, under its
provisions, all occupation forces departed by October 25, 1955. Austria
became free and independent for the first time since 1938.

GOVERNMENT
The Austrian president convenes and concludes parliamentary sessions and
under certain conditions can dissolve Parliament. However, no Austrian
president has dissolved Parliament in the Second Republic. The custom is for
Parliament to call for new elections if needed. The president requests a
party leader, usually the leader of the strongest party, to form a
government. Upon the recommendation of the Federal Chancellor, the president
also appoints cabinet ministers.

The Federal Assembly (Parliament) consists of two houses--the National
Council (Nationalrat), or lower house, and the Federal Council (Bundesrat),
or upper house. Legislative authority resides in the National Council upon
elections. Its 183 members serve for a maximum 4-year term in a three-tiered
system, based on proportional representation. The National Council may
dissolve itself by a simple majority vote or the president may dissolve it on
the recommendation of the Chancellor. The 62 members of the Federal Council
are elected by the legislatures of the nine states for 5- to 6-year terms.
The Federal Council only reviews legislation passed by the National Council
and can delay but not veto its enactment.

The highest courts of Austria's independent judiciary are the Constitutional
Court; the Administrative Court, which handles bureaucratic disputes; and the
Supreme Court, for civil and criminal cases. While the Supreme Court is the
court of highest instance for the judiciary, the Administrative Court acts as
the supervisory body over government administrative acts of the executive
branch, and the Constitutional Court presides over constitutional issues.
Justices of the three courts are appointed by the president for specific
terms.

The legislatures of Austria's nine Laender (states) elect the governors.
Although most authority, including that of the police, rests with the federal
government, the states have considerable responsibility for welfare matters
and local administration. Strong state and local loyalties have roots in
tradition and history.

Principal Government Officials
Federal President--Heinz Fischer
Federal Chancellor--Wolfgang Schuessel
Vice Chancelor--Hubert Gorbach
Foreign Minister--Ursula Plassnik
Ambassador to the United States--Eva Nowotny
Ambassador to the United Nations--Gerhard Pfanzelter

Austria maintains an embassy in the United States at 3524 International
Court, NW, Washington, DC 20008 (tel. 202-895-6700). Consulates General are
in New York, Chicago, and Los Angeles, and honorary consulates are in
Anchorage, Atlanta, Boston, Buffalo, Charlotte, Columbus, Denver, Detroit,
Honolulu, Houston, Indianapolis, Kansas City, Miami, Milwaukee, New Orleans,
Philadelphia, Pittsburgh, Portland, Richmond, St. Paul, St. Louis, St.
Thomas, Salt Lake City, San Francisco, San Juan, and Seattle.

POLITICAL CONDITIONS
Since World War II, Austria has enjoyed political stability. A Socialist
elder statesman, Dr. Karl Renner, organized an Austrian administration in the
aftermath of the war, and the country held general elections in November
1945. All three major parties--the conservative People's Party (OVP), the
Socialists (later Social Democratic party or SPO), and Communists--governed
until 1947, when the Communists left the government. The OVP then led a
governing coalition with the SPO that governed until 1966.

Between 1970 and 1999, the SPO governed the country either alone or with
junior coalition partners. In 1999, the OVP formed a coalition with the right
wing, populist Freedom Party (FPO). The SPO, which was the strongest party in
the 1999 elections, and the Greens formed the opposition. The FPO had gained
support because of populist tactics, and many feared it would represent right
wing extremism. As a result, the European Union (EU) imposed a series of
sanctions on Austria. The U.S. and Israel, as well as various other
countries, also reduced contacts with the Austrian Government. After a period
of close observation, the EU lifted sanctions, and the U.S. revised its
contacts policy. Following 2002 elections, the OVP in February 2003 renewed
its coalition with the FPO.

The Social Democratic Party traditionally draws its constituency from blue-
and white-collar workers. Accordingly, much of its strength lies in urban and
industrialized areas. In the 2002 national elections, it garnered 36.5% of
the vote. The SPO in the past advocated heavy state involvement in Austria's
key industries, the extension of social security benefits, and a
full-employment policy. Beginning in the mid-1980s, it shifted its focus to
free market-oriented economic policies, balancing the federal budget, and
European Union membership.

The People's Party advocates conservative financial policies and
privatization of much of Austria's nationalized industry. It finds support
from farmers, large and small business owners, and some lay Catholic groups,
mostly in the rural regions of Austria. In 2002, it received 42.3% of the
vote. The rightist Freedom Party traditionally had a base in classic European
liberalism. However, a mixture of populism and anti-establishment themes
steadily gained support in recent years. It attracted about 27% of the vote
in the 1999 elections, but only 10% of the vote in 2002. The Liberal Forum,
founded on libertarian ideals, split from the Freedom Movement in February
1993. It received 3.7% of the vote in the 1999 election and thus failed to
enter the national legislature. The Greens, a left-of-center party focusing
on environmental issues, received 9.5% of the national vote in 2002.

ECONOMY
Austria has a well-developed social market economy with a high standard of
living in which the government has played an important role. The government
nationalized many of the country's largest firms in the early post-war period
to protect them from Soviet takeover as war reparations. For many years, the
government and its state-owned industries conglomerate played a very
important role in the Austrian economy. However, starting in the early 1990s,
the group broke apart, state-owned firms started to operate largely as
private businesses, and the government wholly or partially privatized many of
these firms. Although the government's privatization work in past years has
been very successful, it still operates some firms, state monopolies,
utilities, and services. The Schuessel government has presented an ambitious
privatization program, which it is implementing, and which should further
reduce government participation in the economy. Austria enjoys well-developed
industry, banking, transportation, services, and commercial facilities.

Some industries, such as several iron and steel works and chemical plants,
are large industrial enterprises employing thousands of people. However, most
industrial and commercial enterprises in Austria are relatively small on an
international scale.

Austria has a strong labor movement. The Austrian Trade Union Federation
(OGB) comprises constituent unions with a total membership of about 1.4
million--about 40% of the country's wage and salary earners. Since 1945, the
OGB has pursued a moderate, consensus-oriented wage policy, cooperating with
industry, agriculture, and the government on a broad range of social and
economic issues in what is known as Austria's "social partnership." The OGB
has announced opposition to the new government's program for budget
consolidation, social reform, and improving the business climate, and
indications are rising that Austria's peaceful social climate could become
more confrontational.

Austrian farms, like those of other west European mountainous countries, are
small and fragmented, and production is relatively expensive. Since Austria
became a member of the EU in 1995, the Austrian agricultural sector has been
undergoing substantial reform under the EU's common agricultural policy
(CAP). Although Austrian farmers provide about 80% of domestic food
requirements, the agricultural contribution to gross domestic product (GDP)
has declined since 1950 to about 2%.

Austria has achieved sustained economic growth. During the 1950s, the average
annual growth rate was more than 5% in real terms and averaged about 4.5%
through most of the 1960s. In the second half of the 1970s, the annual
average growth rate was 3% in real terms, though it averaged only about 1.5%
through the first half of the 1980s before rebounding to an average of 3.2%
in the second half of the 1980s. At 2%, growth was weaker again in the first
half of the 1990s, but averaged 2.5% again in the period 1997 to 2001. After
real GDP growth of 1.4% in 2002, the economy grew again only 0.7% in 2003,
with 2001-2003 being the longest low-growth period since World War II. In
2004, Austria's economy recovered and grew 2.0%, driven by booming exports in
response to strong world economic growth. Predictions are for the economy to
grow 2.2-2.3% in 2005 and 2.2-2.4% in 2006.

Austria became a member of the EU on January 1, 1995. Membership brought
economic benefits and challenges and has drawn an influx of foreign
investors. Austria also has made progress in generally increasing its
international competitiveness. As a member of the Economic and Monetary Union
(EMU), Austria has integrated its economy with those of other EU member
countries, especially with Germany's. On January 1, 1999, Austria introduced
the new Euro currency for accounting purposes.

In January 2002, Austria introduced Euro notes and coins in place of the
Austrian schilling. Economists agree that the economic effects in Austria of
using a common currency with the rest of the members of the Euro-zone have
been positive.

Trade with other EU-25 countries accounts for about 71% of Austrian imports
and exports. Expanding trade and investment in the new EU members of central
and eastern Europe that joined the EU in May 2004 represent a major element
of Austrian economic activity. Austrian firms have sizable investments in and
continue to move labor-intensive, low-tech production to these countries.
Although the big investment boom has waned, Austria still has the potential
to attract EU firms seeking convenient access to developing markets in
central and eastern Europe and the Balkan countries.

Total trade with the United States in 2003 reached $8.2 billion. Imports from
the United States amounted to $3.5 billion, constituting a U.S. market share
in Austria of 3.9%. Austrian exports to the United States in 2003 were $4.6
billion, or 5.2% of total Austrian exports.

FOREIGN RELATIONS
The 1955 Austrian State Treaty ended the four-power occupation and recognized
Austria as an independent and sovereign state. In October 1955, the Federal
Assembly passed a constitutional law in which "Austria declares of her own
free will her perpetual neutrality." The second section of this law stated
that "in all future times Austria will not join any military alliances and
will not permit the establishment of any foreign military bases on her
territory." The date on which this provision passed--October 26--became
Austria's National Day. From then, Austria shaped its foreign policy on the
basis of neutrality.

In recent years, however, Austria began to reassess its definition of
neutrality, granting overflight rights for the UN-sanctioned action against
Iraq in 1991, and, since 1995, contemplating participation in the EU's
evolving security structure. Also in 1995, it joined the Partnership for
Peace with NATO, and subsequently participated in peacekeeping missions in
Bosnia.

Austrian leaders emphasize the unique role the country plays both as an
East-West hub and as a moderator between industrialized and developing
countries. Austria is active in the United Nations and experienced in UN
peacekeeping efforts. It attaches great importance to participation in the
Organization for Economic Cooperation and Development and other international
economic organizations, and it has played an active role in the Organization
for Security and Cooperation in Europe (OSCE).

Vienna hosts the Secretariat of the OSCE and the headquarters of the
International Atomic Energy Agency, the UN Industrial Development
Organization, and the UN Drug Control Program. Other international
organizations in Vienna include the Organization of Petroleum Exporting
Countries, the International Institute for Applied Systems Analysis, the
Comprehensive Test Ban Treaty Organization, and the Wassenaar Arrangement (a
technology-transfer control agency).

Austria traditionally has been active in "bridge-building to the east,"
increasing contacts at all levels with eastern Europe and the states of the
former Soviet Union. Austrians maintain a constant exchange of business
representatives, political leaders, students, cultural groups, and tourists
with the countries of central and eastern Europe. Austrian companies are
active in investing and trading with those countries as well. In addition,
the Austrian Government and various Austrian organizations provide assistance
and training to support the changes underway in the region.

U.S.-AUSTRIAN RELATIONS
Austria's political leaders and people recognize and appreciate the essential
role the U.S. played in the country's reconstruction and in the Austrian
State Treaty. It is in the interest of the U.S. to maintain and strengthen
these strong relations and to maintain Austria's political and economic
stability.

Principal U.S. Officials
Ambassador--Susan McCaw
Deputy Chief of Mission--Carol van Voorst
Counselor for Economic and Political Affairs--Gregory E. Phillips
Counselor for Public Affairs--William H. Wanlund
Counselor for Commercial Affairs--Catherine Houghton
Counselor for Management Affairs--W. Douglas Frank
Counselor for Agricultural Affairs--Quintin Gray
Consul General--Charisse Phillips
Defense and Army Attache--Col. Scott Salyers
Consular Agent in Salzburg--Jeanie Mayer

The U.S. Embassy in Austria is located at Boltzmanngasse 16, Vienna 1091,
tel. (43) (1) 313-39 (after office hours: (43) (1) 319-5523). The U.S.
Consular Agency in Salzburg is located at Alte Markt 1, 5020 Salzburg, tel.
(43) (662) 848-776.