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Austrian report Austrian report
by Euro Reporter
2012-01-02 10:31:48
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Austrians brace for harsh health reform

Karlheinz Kopf said he was currently trying to convince the Social Democrats’ (SPÖ) debt brake negotiators that there was a savings potential of 1.8 billion Euros until 2017. SPÖ Health Minister Alois Stöger remained tight-lipped regarding details of the discussion with ÖVP health sector experts but made clear that he had no idea how Kopf came up with this figure. Stöger made aware of the ongoing health reform which should come into effect in 2014. The minister plans to raise clinics’ efficiency. The reform discussions between Stöger and health sector representatives are now overshadowed by the ÖVP’s call for harsher cost reductions. The conservative party – which formed a coalition with the SPÖ in 2007 – feels confirmed in its opinion by statements of the Audit Office (RH).

RH chief Josef Moser said earlier this month Austria would be well advised to slash its health sector expenditures in the coming years. The RH’s latest report – featuring 599 tips how to lower public service costs – stresses that Austria spent 59 per cent more on health concerns in 2009 than in 1998. Moser made clear that the RH’s list of advice was not about brutal austerity measures but focused on various steps to increase the public sector’s efficiency. He said that hospitals could reduce their costs significantly by cooperating with other clinics situated nearby about cleaning and administration. Moser claimed that 7.5 million Euros could be saved a year. He added that the state’s spending on the police force would decline by 10 million Euros if officers were freed from managing office tasks and bureaucratic procedures. Kopf did not comment on reports claiming that the government speaks about a possible increase of the value-added tax (VAT) on drugs. The tax burden on the purchase of medication by citizens was halved to 10 per cent only two years ago. The rate could be slightly increased to channel a few million Euros into the public budget, according to newspaper reports from yesterday.

A VAT increase on food, newspapers, magazines and theatre tickets is rumoured as well. The rate is 10 per cent at the moment while clothes and various other goods are charged with a VAT rate of 20 per cent. Economists have warned that a strong VAT hike could strangle the fragile growth of the domestic economy. SPÖ and ÖVP are allegedly considering an increase of just a few percentage figures, hoping that negative effects could be avoided this way. The government currently checks measures to immediately improve Austria’s financial situation since health sector spending cuts and various other reforms might have a long-term impact if at all. Commentators accuse the coalition of having nothing but the next elections in mind. They claim that the current debt limit feud is the start of campaigning for the ballot of 2013. Johannes Voggenhuber, who had represented the Austrian Green Party in the European Parliament (EP) for 14 years until 2009, said yesterday the SPÖ might try to reschedule the next election date by around one year.


Moody's keeps Austria at AAA

Moody's held Austria's top sovereign rating with a stable outlook on Friday but warned the debt crisis posed a credit risk for it and most euro zone states, putting pressure on the region's policymakers to take action. "The longer the sovereign and bank funding markets remain volatile, the more likely it is that further credit pressures will develop for most euro area countries, including Aaa-rated (ones)," the rating agency said. The statement from Moody's, which had said this month it would review the ratings of all 27 EU states in the first quarter of next year, echoed the concerns of its peers. Standard & Poor's warned on Dec 6. That the sovereign debt crisis could prompt it to downgrade the ratings of 15 euro zone members, including Germany, France and Austria.

Separately, two independent European government sources told Reuters on Friday that Standard & Poor's is expected to release its eagerly awaited verdict on debt ratings for 15 euro zone countries in January. "We have got an informal signal from Standard & Poor's that they will come only in January," said one of the sources who declined to be named because exchanges with the rating agency are confidential. On December 16, Fitch put six euro zone economies including Italy and Spain on watch for potential near-term downgrades, saying it thought a comprehensive solution to the euro zone's debt crisis was beyond reach.

Policymakers struggling to reach a consensus on tackling the debt crisis are focused on a plan for tighter euro zone fiscal rules, which they hope will prevent the problems from worsening. But the market response to a December 9 EU summits at which that plan was thrashed out has been cool, due also to the European Central Bank's reluctance to play a more interventionist role. Moody's said on Friday that, while Austria's AAA ratings were still stable, that outlook increasingly depended on a resolution of the euro zone crisis "which has begun to negatively affect core euro area member states like Austria."


Most Austrians fear the future

A vast majority of people living in Austria are sceptical about the New Year, according to a new poll. Research centre Imas spoke with around 1,000 Austrians to find out that 57 per cent of them were worried about developments in 2012. Only 37 per cent said they were optimistic. It was the 40th time that Imas conducted the annual study. The agency said this year’s share of people with negative feelings considering the coming year was nine per cent higher than the long-term average. The new poll reveals that especially poorly skilled labourers (70 per cent) and pensioners (68 per cent) are worried about how things would develop in the next 12 months. The Imas check comes shortly after a pre-Christmas survey showed that Austrians intended to spend 386 Euros per capita on presents this year, four Euros less than for Xmas gifts in 2010. Researchers are currently trying to find out how much money was eventually spent on gifts this year.

Store owners and shopping mall bosses told newspapers and radio stations yesterday (Weds) that business was not overly good on 27 December which is traditionally the day with the highest turnover in the whole of December. However, reports also have it that sales went well ahead of the celebrations. Especially books, vouchers and home entertainment appliances were in great demand. Relatively mild weather meant weak activity at sports equipment and fashion stores. The Austrian economy could grow by only 0.4 per cent from this to next year, according to Karl Aiginger of the Institute for Economic Research (WIFO). WIFO had to correct is forecast from September of 0.8 per cent to 0.4 per cent some weeks ago. Aiginger said Austria’s economy and labour market would be affected by developments in the Eurozone and an expected slack of export business activities. He warned that the domestic jobless rate could increase.

WIFO experts claimed that the Eurozone’s gross domestic product (GDP) would not rise from 2011 to 2012. Institute for Advanced Studies (IHS) boss Bernhard Felderer announced his think tank agreed with predictions about a slight rise of the Austrian unemployment rate. He underlined that there was great uncertainty considering future economic developments. Aiginger added that chances for a slight economic downturn were high while there was a slight possibility for a strong decrease. News that nearly six in 10 Austrians were concerned about the year 2012 may also have to do with the government’s plan to introduce an austerity package in April. Social Democratic (SPÖ) Chancellor Werner Faymann and People’s Party (ÖVP) Vice Chancellor Michael Spindelegger said on Tuesday two billion Euros must be saved from next year. The government leaders are at loggerheads about whether new taxes were needed to restore the state’s fiscal household.

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