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Austria’s economy sees biggest slump in European Union

Austria suffered the worst economic slump in the EU in the last quarter of 2020, new preliminary figures reveal.

Austria's economy sees biggest slump in European Union
Austrian Chancellor Sebastian Kurz. Photo: DPA

In the fourth quarter of the year, from October to December, the Austrian economy shrunk by – 4.3 percent compared to the previous quarter, the figures show.

That figure represented a bigger drop in GDP than any other EU economy for which data was available (see table below), according to the statistical office of the European Union (Eurostat).

However it was preceded by a 12 percent growth in the third quarter of the year, when the country was fairly open and the second wave of Covid was yet to hit.

The slump in last quarter obviously coincided with the second wave of the coronavirus pandemic, which hit Europe hard and forced countries including to Austria, to re-introduce strict lockdowns and widespread closures.

Eurostat's “flash estimates” showed of all the member states for which data was available for the fourth quarter of 2020, Austria's GDP recorded the largest decrease (-4.3%) compared to the previous quarter.

It was followed by Italy, whose economy shrunk by 2 percent and France, which contracted by 1.3 percent. 

When compared year on year with other European countries, Austria’s economy also showed a big slowdown.

A comparison with the previous year shows a fall in GDP of 7.8 percent. Only Spain, which had a fall of 9.1 percent GDP, was harder hit by the pandemic than Austria. 

For the EU as a whole combined GDP fell by 0.5 percent between the third and fourth quarters and by 4.8 percent compared to the previous year.

Reacting to the figures Der Standard newspaper commented Austria was doing “particularly badly” economically during the pandemic and said the depth of the recession was “surprising”, while broadcaster ORF pointed out that GDP in the Eurozone shrank by the largest amount since records began in 1996.

However, Austrian Institute for Economic Research (WIFO) boss Christoph Badelt told the ZIB2 programme that the numbers were estimates and should be treated with caution.

Badelt said the plummeting GDP between the third and fourth quarter of 2020 could be explained by Austria’s summer tourism success. From this higher level of economic activity in the summer, the slump would be stronger.

And he said he was certain once Covid-19 is contained, there will be a “massive upswing”.

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WORKING IN AUSTRIA

Austria extends its short-term work system until the end of 2022

The Kurzarbeit system was limited until June; the Federal Government this Tuesday extended its validity.

Austria extends its short-term work system until the end of 2022

Austria’s short-term works scheme, the Kurzarbeit, which was set to expire by the end of June, was officially extended until the end of the year.

The scheme allows companies particularly affected by the coronavirus pandemic to ask for government assistance as long as they keep their workforce. Employees in Kurzarbeit work fewer hours and receive a fraction of their salary, paid by the scheme – up to 90 per cent, depending on their pay.

Discussions are still ongoing between the trade union and the Chamber of Commerce on the details of the short-time work extension, broadcaster ORF reported.

Employers want the government to increase the percentage of the salary paid to workers, asking all employees receive a 90 per cent net replacement for wages. Workers with higher salaries could receive as little as 70 per cent of their wages from the scheme, leading to a significant loss of income.

READ MORE: EXPLAINED: How to get your €500 Kurzarbeit bonus in Austria

Austria’s Labour Minister Martin Kocher said that the extension was only possible after “significant compromises” and that the system will only exist in very specific cases in the future. He didn’t give further details, though.

One of the reasons for the extension, ORF reports, was to cushion the economic consequences of the Ukraine war.

Kurzarbeit and unemployment rates

April 2020 saw the highest number of people, more than one million, on the scheme. Around 53,000 people were still pre-registered for short-time work at the beginning of the week. From March 2020 to the end of March 2022, government spending on coronavirus short-time labour amounted to € 9.56 billion.

READ ALSO: Six official websites to know if you’re planning to work in Austria

At the same time, the domestic labour market has seen a decrease in unemployment, even with the slowdown due to the war in Ukraine and soaring energy prices.

Compared to just one week ago, 4,216 fewer people were unemployed. Currently, 324,977 people are registered with the Public Employment Service Austria (AMS) as unemployed or in training. 251,633 of them are looking for a job, and 73,344 are in training measures of the AMS.

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