In the midst of the campaign for the legislative elections on September 29, Austrian Chancellor Karl Nehammer (conservative) has prepared a formula to justify the clouds gathering over the industrial activity of his country of nine million inhabitants. “When the German economy has the flu, our economy has a cold”he repeats to counter his opponents, who accuse him of being responsible for the crisis that threatens their economy.
Austria’s gross domestic product (GDP), which has continued to decline on a quarterly basis since spring 2023, is expected to stagnate at best during 2024. This slowdown is almost entirely due to industrial production, which is falling quarter after quarter due to the drop in exports to neighbouring Germany, the main customer of Austrian factories.
“Weakness in the productive sector continues”The Bank of Austria deplored this in its latest economic report in August, noting that “The hypothesis that the recovery of services, stimulated by falling inflation and strong increases in real wages, could trigger a significant recovery of the national economy, has not yet been realized.”
extreme dependency
In contrast, announcements of social plans are increasing in industry. In August, for example, the machine manufacturer B & R announced 240 redundancies in Upper Austria, the German chip manufacturer Infineon 360 at its Villach plant (south), while the car supplier Steyr Automotive wants to lay off 200 unemployed employees. The number of job seekers in the industrial sector increased by 17% in August compared to 2023.
If Austria, with its high labour costs, is among the countries hardest hit by the German industrial slowdown, it is actually the whole of Central Europe that is currently experiencing a massive industrial slowdown. Successfully constructed following the eastward enlargement of the European Union in 2004, the Danube industrial model, with its subcontracted factories set up in low-cost ex-communist countries producing for German assembly lines, is weakened by its extreme dependence on the German situation.
“I often say that when Germany catches a cold, the Czech Republic gets pneumonia.” explains Otto Danek, vice-president of the Czech Exporters’ Association, slightly adapting the Austrian maxim to his country of 10 million people, whose economy is the most exposed in the entire region to a German collapse. “More than a third of Czech exports go to Germany, so we have a big problem”sums up this boss, who runs a company that produces small electric motors, ATAS, whose “70% of contracts” come from Germany.
You have 56.66% of this article left to read. The rest is reserved for subscribers.
