Austria has been something of a showcase for a reforming government in western Europe since the turn of the century. In 1998, it had the highest general government debt among AAA rated EU sovereigns and an unwieldy, expensive public sector. Its debt burden may still be large in absolute terms but it has instituted a remarkable turnaround through the implementation of responsible macroeconomic policies and modernising microeconomic reforms.
The restructuring of tax, pension and healthcare systems, and privatisation efforts have created a wealthy, diversified and competitive economy, and supported solid productivity growth. After two years of strong growth, averaging 3.4% in 2006-07, the economy is forecast to cool down, but 2.1% in 2008-11 is still respectable. Government debt is on a solid downward trend – dropping from 66% of gross domestic product in 2002 to less than 60% last year – and analysts expect this kind of policy prudence to continue.
