Austria

Stagnation followed by some modest growth

The Austrian economy is slowly stepping out of its longest recession in the history of the Second Republic. After two years of negative growth rates, GDP stabilised in late 2024 and the first half of 2025. The economy should grow modestly from the second half of 2025, while the growth rate should increase slightly more throughout 2026. Private consumption should be make a broad contribution to this growth, as purchasing power and consumer sentiment are expected to continue to improve, albeit cautiously. In Austria, wages, pensions, and retirement benefits are adjusted for inflation with a one-year delay. Following the strong 8.5% increase in nominal wages following the collective wage bargaining agreement in 2024, the Austrian Central Bank expects nominal wage increases of 3.8% and 2.7% in 2025 and 2026, respectively. After deducting inflation, this means that real wage growth was 5.3% in 2024 – the first growth since 2019 – before levelling off at 0.4% and 0.5% respectively in 2025 and 2026, which would still be above the long-term average of 0.3%. In fact, inflation has been rising noticeably again since the end of 2024. One reason is the expiry of the electricity price cap initiative and the end of other energy price support measures at the beginning of 2025 which have caused household energy costs to rise significantly. In addition, the price of the KlimaTicket (an annual ticket for public transport throughout Austria) was increased by 19% in August 2025. From 2026, inflationary pressure should ease somewhat again, once energy prices normalise year-on-year. However, prices for services are likely to remain under pressure as they are very labour-intensive, and the KlimaTicket will also be 8% more expensive. Last, purchasing power will be affected by the discontinuation of climate bonus payments (compensation for CO2 pricing for private households, which can range from EUR 145 to EUR 290 per person per year depending on the location), which were last made in February 2025. Given the increased savings rate of private households over the last two years, these additional costs should be offset by a slight reduction in savings.

Construction investment should also provide a minor positive boost, particularly from 2026. At the beginning of 2025, there was a noticeable upturn in demand for loans for residential construction on back of the European Central Bank's (ECB) looser monetary policy. In the first half of 2025, the ECB cut its main interest rate (deposit rate) by a total of 0.5 percentage points to 2%, which is considered the neutral level. Given the eurozone’s modest economic growth and the stable inflation outlook, two more cuts of 25 basis points each could be made by the end of 2025. Although the key interest rate is likely to remain unchanged in 2026, two further cuts cannot be ruled out if recovery remains slow. This will support demand in the construction sector, especially for housing, from 2026. Conversely, corporate investment in equipment and machinery is expected to decline due to low-capacity utilisation in the manufacturing sector. External demand for Austrian products (roughly 50% of all locally produced goods are exported) should remain limited. Given the strong increase in labour-costs compared to the European average, the price competitiveness of Austrian goods has declined in recent years. Uncertainty subsists over the EU-US trade agreement as, at the time of the writing, no EU-US trade deal officially exists apart from a political agreement which sets the US-import tariffs on EU goods at 15%. This tariff will apply to cars and car parts, as well as pharmaceuticals, but excludes steel, aluminum, and copper, all of which have a tariff of 50%. There are a few exemptions, e.g., for aircraft, generic pharmaceuticals and chemical precursors.

The US is Austria’s second-largest export destination, accounting for 8.2% of its exports: mainly machinery, pharmaceutical equipment and car parts are sent across the Atlantic. However, Austrian exports will also be impacted by Germany’s economic development, its neighbour being far the most important trade partner. Although Germany should generate slow growth (especially in 2026), spending more on defence and infrastructure, Austrian companies can only take limited advantage of this as Austria has no meaningful defence industry. Moreover, the state has begun to implement a strict austerity policy. Consequently, no support from the public side is expected to boost growth in 2025 and 2026.

EU deficit procedure started

Not long ago, Austria was considered one of the frugal EU countries. This changed in 2025 . In July 2025, the EU started an excessive deficit procedure. After the already high deficit in 2024, 2025 sees another deficit above the Maastricht-criteria of 3% of the nominal GDP that pushes total debt further above the EU’s maximum-target of 60%. Although the deficit should decrease in 2026, this will not be enough to comply with the EU 3% goal by 2028. The unusually high level of debt in the last years the result of the high inflation as a result of the energy price crisis and the automatic adaption of pensions, social benefits and personnel costs in the public sector. In response, the government has launched a major consolidation programme. In addition to savings in climate-related projects (abolition of the climate bonus and cuts in subsidies, as well as savings in ministries), the government decided to eliminate a state-financed upskilling leave scheme and changes in the pension system. From June 2025, the health insurance contributions for pensioners increase, and, from 2026, early retirement will be only possible from the age of 63 (instead of 62) and a minimum insurance contribution of 42 years (instead of 40). Moreover, new pensioners will only get 50% of the automatic inflation adaption. The effect on the budget will be limited in 2025, as the inflation indexation and high interest rates costs will balance out the spending cuts. The impact, especially from the pension reform, should slowly become visible from 2026, and take full effect in 2027. Accordingly, the budget deficit will decrease slowly, and debt ratio will increase further.

Austria´s current account surplus grew noticeably in 2024 on the back of the strong improvement in the goods trade balance due to better terms of trade. Given the more pessimistic outlook for exports, the goods trade surplus should decrease in 2025 and 2026. Some of it should be balanced by a further increase in the strong services trade balance thanks to very robust tourist numbers. No big change is expected on the primary income balance (the balance of foreign investments revenues) or the secondary income deficit (mainly driven by foreign workers’ remittances and contributions to international organisations).

Candy-Coalition under pressure

Christian Stocker of the conservative Christian-democratic ÖVP is the current chancellor and leads the Candy-Coalition formed from the ÖVP, the social-democratic SPÖ, and the liberal NEOS. The coalition’s name is a nod to the parties’ colours: turquoise, red and pink. The coalition was only formed following protracted negotiations period that came in the wake of the September 2024 Nationalrat election results and the landslide victory of the far-right FPÖ. It was the FPÖ’s first electoral victory at national level in Austria's modern history. The FPÖ was able to improve on their 2019 score by an astonishing 12.7 percentage points to 28.9%, giving the party 57 out of a total of 183 seats. The majority of the extra FPÖ's votes came from the conservative Christian Democratic ÖVP, whose tally decreased by 11.2 percentage points from the previous election 26.3%, giving it 51 seats. Originally, all parties in the Nationalrat ruled out any form of cooperation with the controversial right-wing extremist leader of the FPÖ, Herbert Kickl. Consequently, federal President Alexander Van der Bellen tasked the ÖVP, which came second, with starting coalition talks. The ÖVP approached the SPÖ and the Neos. In early 2025, the Neos left the negotiating table as they complained about the SPÖ and ÖVP’s lack of willingness for bigger reforms. Then, after a change in the leadership of the ÖVP, the conservatives turned to the FPÖ for coalition talks, which failed as well as the FPÖ was unwilling to make compromises. The alternative to one of these two coalition options would have been fresh elections in which, according to the polls, the FPÖ would have gained even a greater share of votes, so the parties of the Candy Coalition” started negotiations again and formed a government in March 2025 after agreeing to introduce some fiscal reforms.

It is unclear whether the Candy Coalition will be able survive the full term until the next scheduled elections in 2029. Although the parties agreed to tax increases and spending cuts in 2025 and 2026, they have not finalised the details for the budget plan for the ensuing years. In general, the ÖVP and (in part) the NEOS support tax cuts, while the SPÖ pushes for tax increases. Furthermore, all parties agreed on tightening immigration policy and proposed a plan that aims to introduce a permanent quota system for family reunification. They are being pushed by an even bigger increase in public support for the FPÖ, which reached 34% in the summer 2025 polls (compared to 29% at the last elections). Meanwhile, support for the ÖVP lost some ground to 22%, although it still ranks second.

Payment

SWIFT and SEPA (within the EU) transfers are commonly used for domestic and international transactions and offer a cost-effective, quick, and secure means of payment.

Bills of exchange and, to a lesser degree, cheques are most commonly used as a means of financing or payment guarantee. Nevertheless, neither are widely used nor recommended, as they are not always the most effective means of payment., bills of exchange must meet relatively restrictive mandatory criteria to be valid, which deters business people from using them. In parallel, cheques need not be backed by funds at the date of issue, but must be covered at the date of presentation. Banks normally return bad cheques to their issuers, who may also stop payment on their own without fear of criminal proceedings for misuse of this facility.

Debt Collection

As a rule, the collection process begins with the debtor being sent a demand for payment by registered mail, reminding him of his obligation to pay the outstanding sum plus any default interest stipulated in the sales agreement or terms of sale.

Where there is no interest rate clause in the agreement, the rate of interest applicable semi-annually from August 1, 2002 is the Bank of Austria’s base rate, calculated by reference to the European Central Bank’s refinancing rate, marked up by eight percentage points.

FAST-TRACK PROCEEDINGS

For claims that are certain, liquid and uncontested, creditors may seek a fast-track court injunction (Mahnverfahren) from the district court via a pre-printed form. The competent district court for this type of fast-tract procedure expedites the requisite action for ordinary claims up to EUR 75,000 (previously EUR 30,000).

With this procedure, the judge will issue an injunction to pay the amount claimed plus the legal costs incurred. If the debtor does not appeal the injunction (Einspruch) within four weeks of service of the ruling, the order is enforceable relatively quickly.

A special procedure (Wechselmandatsverfahren) exists for unpaid bills of exchange under which the court immediately serves a writ ordering the debtor to settle within two weeks. However, should the debtor contest the claim, the case will be tried through the normal channels of court proceedings.

If the debtor has assets in other EU countries, the creditor may request the Vienna Commercial Court to issue a European Payment Order for undisputed debts, enforceable in all EU countries (except Denmark).

ORDINARY PROCEEDINGS

Where no settlement can be reached, or where a claim is contested, the last remaining alternative is to file an ordinary action (Klage) before the district court (Bezirksgericht) or the regional court (Landesgericht) depending on the claim amount or type of dispute. Defendants have four weeks to file their own arguments.

With regards to the regional courts, defendants are expected to put forward their own arguments in response to the summons, and are allowed four weeks to do so.

A separate commercial court (Handelsgericht) exists in the district of Vienna alone to hear commercial cases (commercial disputes, unfair competition lawsuits, insolvency petitions, etc.).

During the preliminary stage of proceedings, the parties must make written submissions of evidence and file their respective claims. The court then decides on the facts of the case presented to it, but does not investigate cases on its own initiative. At the main hearing, the judge examines the written evidence submitted and hears the parties’ arguments as well as witnesses’ testimonies. An enforcement order can usually be obtained in the first instance within about ten to twelve months. The Civil Procedure Code provides that the winning party at issue of the lawsuit is entitled to receive full compensation from the losing party of all necessary legal fees previously incurred.

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Enforcement of a Legal Decision

A judgement becomes enforceable when it becomes final. If the debtor does not respect the court’s judgement, the court can issue an attachment order or a garnishment order. Alternatively, the court can seize and sell the debtor’s assets.

For foreign awards, circumstances may vary depending on the issuing country. For EU countries, the two main methods of enforcing an EU judgment are the European Enforcement Order or under the provisions of the Brussels I regulations. For non-EU countries, judgments are recognized and enforced provided that the issuing country is party to an international agreement with Austria.

Insolvency Proceedings

OUT-OF COURT PROCEEDINGS

Out-of court restructuring efforts and negotiations are usually antecedent to insolvency proceedings. They constitute a means to obtain recapitalization loans in exchange for a secured creditor status.

RESTRUCTURING

A pre-requisite for a restructuring proceeding is that the debtor files for the opening and at the same time submits a restructuring plan. This proceeding is either self-administrated or administrated by an administration. For self-administrated restructuring, the debtor must file an application of self-administration complemented by qualified documents and a restructuring plan that provides a minimum quota of 30%.

LIQUIDATION

Liquidation proceedings aim to equitably realise the various creditors’ rights. The proceedings are led by a trustee in bankruptcy which takes control of the business, sells the assets, and divides the proceeds among the creditors.

RETENTION OF TITLE

Similar to Germany, Retention of Title is a written clause in a contract, which states that the supplier will retain the ownership over the delivered goods until the buyer made full payment of the price. This usually takes one of three forms:

simple retention: the supplier will retain the ownership over the goods supplied until full payment is made by the buyer;

expanded retention: the retention is expanded to further sale of the subsequent goods; the buyer will assign the claims issued from the resale to a third party to the initial supplier;

extended retention: the retention is extended to the goods processed into a new product, and the initial supplier remains the owner or the co?owner up to the value of its delivery.

Last updated: August 2025