Austria: essentially no Agenda 2010

In his eagerly-awaited debut keynote speech yesterday the Austrian Chancellor Kern unveiled his “Plan A” for Austria. Kern sees the programme for “affluence, security & good spirits” that he outlined in the speech as an ambitious longer-term social democratic plan that is intended to tackle Austria’s structural problems, above all its increased unemployment.

 

Ahead of the speech a lot had been written suggesting that Kern would unveil a visionary programme based substantially on Germany’s Agenda 2010, which Schröder, the Social Democratic Chancellor at the time, had pushed through in the years 2003 to 2005.

 

But Kern’s message falls far short of the high claims that have been touted around in the past. As regards the contents of the plan, Kern tries to close the gap between business-minded reforms and welfare feel-good policies. In concrete terms, the Chancellor talks about taking the pressure off the economy by cutting non-wage labour costs while at the same time pushing for job guarantees for over 50-year olds and a minimum wage of EUR 1500 per month.

Austrian employees are to be protected against competition from other EU states – in concrete terms Kern cites Eastern Europe here. The cheaper competition from Eastern Europe is allegedly responsible for the increased Austrian unemployment rate. The causality of this is not completely convincing here given the high non-wage labour costs that Kern also concedes Austrian companies have to pay. It is far more likely that Austria’s high welfare standards have had an impact on the increase in the unemployment rate. Otherwise, the same causality would also apply to the high-wage country Germany, at least to a lesser extent.

Kern’s proposals spell protectionism: in sectors with a high level of unemployment, domestic applicants are to be given preference over foreign workers from EU countries. Kern subjects this passage to the proviso that he intends to canvass the EU with respect to this reform. However, he fails to address the question of how this plan can be successfully implemented while the dispute about the free movement of labour is looming between the EU and Great Britain. One may well suspect that SPÖ Chairman Kern is also aiming the proposal at his populist right-wing competitor, the FPÖ.

Overall, the A plan is supposed to create 200,000 jobs by 2020. Since the scope of the relief planned for companies is limited, Kern is also backing a demand-oriented policy aimed at increasing consumer spending by EUR 5.5 bn. Besides guaranteed training for young people more government money is to be invested in education, innovation and digitalisation as well as in public sector infrastructure projects. Kern is banking on these investments being largely financed out of higher growth and job creation. The rest is to be financed out of a net worth tax and higher taxes for international groups.

While Schröder with his Agenda 2010 sought to increase the individual citizen’s responsibility for his own well-being, lowered high welfare standards and made the labour market more flexible, Kern is clearly avoiding calling for large cuts into the Austrian system and is betting more on state demand policy – at the risk of ultimately increasing the national debt after all.

Just how much of the A Plan will ultimately become part of Austrian government policy depends on the coalition partner ÖVP, with which the plan still has to be agreed and which will undoubtedly try to add some black to the red plan.

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