Austria Prepares Stimulus to Start ‘Phase 2’ of Corona Recovery
Austria Prepares Stimulus to Start ‘Phase 2’ of Corona Recovery
(Bloomberg) -- Austria has signaled it wants to adopt stimulus measures swiftly as Chancellor Sebastian Kurz’s government meets with corporate leaders to discuss ways to jump-start the economy.
“We have to start a second stage now, and start negotiating ways to increase supply and demand to get back to growth,” Finance Minister Gernot Bluemel said in a Bloomberg TV interview. Measures are to exceed the 38 billion euros ($41 billion) already committed to help cushion fallout from the coronavirus outbreak.
Austria was among the first European countries to impose and also ease contact restrictions. While Kurz’s administration managed to keep new infections below 100 a day for weeks now, its unemployment rate rose to a postwar record. The economy is on track to post its biggest contraction in 75 years, prompting the government to evaluate options to revive growth.
Among the proposals are direct payments and vacation vouchers, higher unemployment compensation and lower taxes on wages. Details are already being hammered out for a program under which companies could recover some of their fixed costs such as rent from the government. Kurz and his economic team will meet executives of the country’s leading companies later on Thursday.
Austria’s export-driven economy is struggling with trade restrictions and eroded demand for its car parts and machinery. Domestic consumption is also subdued as almost 2 million people are either unemployed or on shorter working hours with lower compensation.
Airline Aid
European Union rules are holding back Austria to a “certain extent” because of restrictive state-aid guidelines, Bluemel said. While Austria would like to pay out subsidies to most companies that were only just profitable before the crisis, the EU is focusing on forward-looking business plans that companies are struggling to develop at such uncertain times.
“We have one big challenge, the European state-aid support scheme,” Bluemel said. “It would speed up the process and make it less bureaucratic if we could pause these restrictions for the time of the crisis.” Austria argues that a company should be eligible for state aid if it was healthy before the crisis, Bluemel said.
The most pressing issue for the country is Austrian Airlines AG, the country’s flag carrier that needs almost 800 million euros in aid to stay afloat. While the German government is close to an agreement with parent Deutsche Lufthansa AG, Austria has said it will only approve support if the company guarantees a certain amount of connections to and from Vienna.
“Of course we are willing to help Austrian Airlines because it’s simply important for Austria and the hub in Vienna,” Bluemel said, but “it’s taxpayers’ money, so we need something in return.”
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