Austria booming thanks to EU enlargement

Austria will find itself in the center of the European Union when the bloc takes in 10 new members in May 2004 and is poised to benefit more from enlargement in terms of investment and exports than almost any of the 15 current EU members.

Chancellor Wolfgang Schuessel, a conservative and pro-Europe politician, has been driving this message home for months.

"We will go from sitting on the cusp of Europe to being at its very heart. Nobody will benefit more from enlargement," he said.

But economists say Austria has already been reaping the benefits of the EU's historic eastward expansion for several years.

"The opening up of the eastern countries has for about 12 years been raising Austria's gross domestic product by 0.2 percent per year, and that is a lot," Fritz Breuss of the Institute for Economic Research (WIFO) in Vienna, said.

Breuss said Austria exported more products to the former communist countries than it imported from them, and this was the main reason for the increase in economic growth.

Also, it was "thanks to Eastern Europe" that Austria in 2002 managed to have a trade surplus of 316 million euros, the first in its history.

The Alpine state, which has a population of 8 million, is a big exporter of industrial equipment, which is in high demand in Central Europe as companies replace the obsolete machinery they inherited from the communist era.

Curiously, Austria boasts no company of world renown but has managed to survive and prosper in the shadow of the industrial giant Germany, which is by far its biggest export market and main source of tourism.

Since 1998, Austria's per capita GDP has been consistently higher than that of Germany, which suffered as a result of the reunification of the country after the fall of the Iron Curtain.

In 2001, it was one of the highest in Europe at $28,600, according to the Paris-based Organization for Economic Cooperation and Development.

The country's unemployment rate is 4.3 percent.

As a neighbor of Slovenia, Hungary, the Czech Republic and Slovakia, Austria is trying to cash in on these smaller economies in transition, which are growing at twice the average rate of EU countries.

It is the biggest investor in Slovenia and Croatia, accounting for respectively 45 percent and 30 percent of their direct investment, and the third-biggest investor in Hungary, the Czech Republic and Slovakia, according to the Austrian Statistics Institute.

Austria's Erste Bank has taken only five years to build one of the biggest finance networks in Central Europe, cornering about 30 percent of the Czech market, 12 percent of the Croat market and 5 percent each of the Slovak and Hungarian markets.

Erste Bank boss Andreas Treichl said he considered these countries along with Austria as "our domestic market."

Erste Bank economist Thomas Karall said, "Austrian companies are firmly entrenched in Central Europe, notably in the industrial, building, energy and food and agriculture sectors, where they have found room for growth and profits."

But Austria is also attracting foreign companies that are drawn by its closeness to the new markets of the old Eastern bloc.

"More than 1,000 international companies have established their headquarters for Central Europe in Austria," the Austrian agency for promoting investment said.

Breuss said he believed the "enlargement effect" would taper down in coming years so that it contributes 0.1 percent of economic growth.

"The explosion of economic activity that followed the opening of the countries to the east is already behind us, but the competition that comes with being at the heart of a big market is going to continue to boost growth."