Don’t underestimate the real recession! Industrial location at a turning point; clear political commitment required. Implement electricity price compensation and reduce additional wage costs
Vienna (OTS) – “We are in a real recession,” says Georg Knill, President of the Industrial Association (IV) in the ORF press hour. It is not a “mild recession” as is often claimed, but the sharpest real economic decline since 1951. The IV President sees this as a threat to prosperity in Austria, because industry is an essential foundation of economic success and a guarantee for secure and attractive jobs. “If we put the industry at risk by damaging the location, it will have an impact on all of us,” warns Knill, who sees Austria already at a turning point.
The relocation of domestic industry abroad is already happening and is “a symptom of a gradual development at national and European level over the years. Be it bureaucratic requirements and obligations, high KV agreements, high energy prices or failures in infrastructure development – at first glance and when viewed individually, the challenges are manageable – but cumulatively the barrel is about to overflow. Domestic companies are constantly carrying the rucksack of national and intra-European burdens in the global race and therefore have to deliver the same performance, which is becoming increasingly difficult,” says Knill.
High wage agreements influence international competitiveness
The high wage agreements this year are an “economically painful compromise” that the industry has taken note of. “The fact that companies that have to assert themselves on international markets every day and are currently in a deep recession are increasingly being put under pressure by collective bargaining agreements in protected areas – such as civil servants or pensioners – is definitely a wrong development,” states Knill and explains further : “High wage costs are particularly demanding in international competition, because in industry the competitor is not around the corner but is based in China, India or South America.”
Quickly implement additional wage cost reductions and electricity price compensation
What does it take to turn things around in this difficult economic situation for Austria? Knill calls for a focused economic policy with a clear commitment to the industrial location: relief through a strategic reduction in the tax and duty ratio, which is currently the fourth highest in the EU at 43.2 percent, to 40 percent by 2030; A noticeable reduction in non-wage labor costs; rapid infrastructure expansion by speeding up approval procedures; Expansion of electricity price compensation (SAG), which targets indirect CO2 costs, by 2030 as in almost all EU countries; Targeted skilled worker strategy that appeals to workers and skilled workers from abroad and increases domestic workforce potential through performance incentives.
The idea of enshrining a reduction in working hours with full wage compensation in law puts additional pressure on competitiveness. This would further increase the already high wage costs in Austria and thus make production even more expensive in international comparison. On the contrary, labor costs must go down.
According to Knill, anyone who argues that these are currently just “political ideas” is missing one thing: the prospect of a worsening situation is often enough to get people to act. Austria’s competitiveness is already not in good shape, as international rankings show. The effect this has on investments by domestic companies can already be seen in the direct investments reported by the National Bank. In the years 2019 to 2022, investments by domestic companies abroad were twice as high as in the previous comparable period. Companies that are internationally positioned are already shifting their investments. That should be enough of an alarm signal to urgently take measures to increase competitiveness.
EU: Reduce reporting requirements, as announced
In order for the recovery to be successful, the IV President believes that not only smart economic policy is needed at the national level, but also efforts at the EU level. “It’s sad enough to have to realize that the EU’s industrial policy would still be in a deep sleep if the USA hadn’t put pressure on us with the Inflation Reduction Act. Thanks to the USA,” says Knill. “But it takes real industrial policy change more: The next EU Commission must address the issue of investment conditions in Europe more comprehensively and, in particular, avoid regulatory over-extension.” In the current EU legislative period (2019-2023), European lawmakers have imposed a total of 850 new obligations on companies, which represents more than 5,000 pages of legislation.
Establish trade partnerships – implement the Mercosur agreement
It has always been the opening up to other regions of the world and the removal of trade barriers that have brought strong economic growth in Europe. Especially against the background of the current challenges in the European neighborhood, the focus should now be even more on strengthening the relationship with dynamic economic areas. The agreement currently concluded with New Zealand, which will come into force in 2024, is a positive signal. Another important step is now to finalize the long-negotiated partnership with the South American Mercosur countries. There are geostrategic opportunities for both sides. “Anyone who shouts “No” loudly today should not be surprised tomorrow if Europe continues to lose its importance and international connection,” says the IV President.
Questions & Contact:
Industrial Association
Marlena Mayer
Press spokesperson
+43 (1) 711 35-2315
marlena.mayer@iv.at
https://iv.at/