The front line of the European Union’s latest crisis has shifted from Hungary to Austria. Serene and prosperous, the country has a history of successful migrant communities. How will the new refugee crisis impact Austria’s economy?
Austria has become a central player in the decision to facilitate the movement of thousands of refugees further into the EU’s Schengen zone.
The Alpine republic and its citizens have taken extraordinary measures to help more than 120,000 refugees and provide them with transportation, food, and shelter. But the Austrian government has since opted to end the emergency actions and attempt a return to normalcy.
Evidently, Austria may be following suit with its larger neighbor, Germany, which has temporarily limited participation in the Schengen zone’s freedom of movement by restricting train transportation from Austria. The ongoing situation will no doubt have a short and long term impact on Austria’s economy.
This comes at a time when Austria’s economy has been struggling. Last May, the European Commission projected Austria would have one of the lowest GDP growth rates in the EU at 0.8 percent.
Reactions from all around
In the short term, there are a growing number of companies that reap the benefits of government contracts to handle the crisis. The Swiss-based company ORS Service AG is tasked with managing the Austrian government’s refugee shelters, and recorded revenues of $99 million last year.
The Austrian government has also taken on a role through funding Catholic Charity Caritas and the Red Cross, which are active at the train stations in Vienna and Salzburg, and in providing professional infrastructure. But the international reviews of the government’s performance have been mixed. Small grassroots organizations such as Refugee Welcome and Train of Hope have sought to fill the void.
Your GRI correspondent spoke to Dr. Farid Hafez with the University of Salzburg’s Department of Political Science who explained the history of Austria’s refugees and migrants:
“Before the refugee crisis, the so called Gastarbeiter (guest workers) as well as migrants [escaping] the war in former Yugoslavia have been included in the textile, ski, and paper industries. At the same time, jobs in the major industries had been reserved for domestic workers. Many Turkish women, who came after family reunification in the 1980s, found work in the booming tourism business.”
But today most of the refugees will likely not be staying in Austria – rather, they hope to make their way on to Germany. Austria could potentially stand to benefit from the influx of immigration. The Organization for Economic Cooperation and Development (OECD) estimated that Europe would need another 50 million workers to its workforce by 2060 to cope with ageing populations. Austria has one of the earliest retirement ages in Europe.
Meanwhile, the far right in Austria uses Islamophobia to heighten the sense of peril for European Christendom by likening the refugee crisis to the Siege of Vienna in 1683. But it is not just a matter of religion. The Freedom Party of Austria (FPÖ) has been very successful in using economic fear mongering to win elections. The German Anti-Muslim organization, PEGIDA, has relatively failed to gain much traction in Austria. But the head of FPÖ and Austrian MP Heinz-Christian Strache stated, “PEGIDA in Austria is in parliament. That’s us.”
The greater context
Though not typically associated with corruption, the number of scandals that are common among Austria’s political class and the Freunderlwirtschaft (Friend’s economy) are having a negative impact on the economy, as well. Studies in recent years have pegged the harm to be some 27 billion Euros every year (8 percent of Austria’s GDP). This source of public frustration, along with a healthy dose of xenophobia, drives Austrian voters to the FPÖ.
The growing concern in Europe over the source of the refugee crisis is being felt in international diplomacy, as well. Urgent solutions are being sought to end the Syrian Civil War and the ongoing presence of the Islamic State (IS) in its territory. The Austrian Foreign Minister Sebastian Kurz even advocated to include Syria’s Assad in the coalition against IS. This comes on the heels of Austrian President Heinz Fischer’s visit to Syria’s key ally, Iran, to secure 300 million euros in bilateral trade.
Other regional crises that are closer to home (Russia’s sanctions and the Ukraine conflict, for example) have had minimal impact on Austria’s foreign trade. Concurrently, the Austrian Central Bank hopes that tax cuts will spur domestic spending and bring about 1.9 percent growth in 2016.
Economic growth, reform, and a humanitarian solution to the refugee crisis will be a key determinant of a sustainable path forward for the Alpine republic.