Faster than the German economy: Three years of economic progress

Faster than the German economy: Three years of economic progress

In an exclusive interview for Country Reports, Professor Ewald Nowotny, governor of the Central Bank of Austria (OeNB), explains Austria’s monetary policy and recent financial successes within Central Europe.


In 2012, the EU Central Bank governor Mario Draghi said that the European Central Bank (ECB) is ready to do whatever it takes to preserve the euro. How do you assess their actions, and are we better off today?

We are clearly much better off today. The actions taken by Austria since Draghi’s declaration have been effective. There was a risk then that the eurozone would break up—the re-denomination risk—and there is no such risk today. Markets fully accept the existence of the euro, and we have confidence in the markets. What the ECB did, like the Federal Reserve in New York, is decrease interest rates. We have one rate, the deposit rate, which is negative. The policy interest rate is still at zero.

The successful purchasing program for bonds that we launched has also put us in a position to begin the normalization of monetary policy. We have mimicked the ECB’s strategy, and at the end of last year we stopped the asset purchase program. We maintain a low interest rate, and we have also publicly declared that we will continue to buy stocks. We do not foresee a reduction in the balance sheet. Fundamentally, we are doing things that are similar in style and structure to what has been done by the Fed, but at a later point, because the economic cycle develops later in Europe than in the U.S.

What are the strengths and the crucial factors of the Austrian economy?

The Austrian economy has grown sharply in recent years, and our growth rate for the past three years is above the EU average—and above the German growth rate. We anticipate 3 percent-growth this year, and slightly lower for 2019.

Growth rates are impressive: unemployment is below the European average and we have had stable labor relations for several years. We have the lowest number of strikes per 1000 employees, and the fewest hours lost to strikes. Our education and vocational training systems are excellent, which means we turn out skilled workers. And we have a strong infrastructure, having invested millions in our railways. Vienna, of course, is a European hub of online systems with excellent connectivity.

“Our growth rate for the past three years is above the EU average.”


We have traditional industries such as iron, steel, and chemicals, which today are booming. And research has brought an influx of foreign investment, from large companies like the German pharmaceutical company Boehringer Ingelheim, who are constructing their second-largest research center here. Austria is also home to Swiss pharmaceutical companies, and we have a strong automobiles and parts industry—one example is the
manufacture of Jaguar’s new electric car here. We now have immense investment in the electronics industry, which is closely involved with Austrian universities. We have excellent technical universities in Vienna and in Graz; in fact Graz is the automotive center for Austria. The university where I teach, the Vienna University of Economics, is an education center for the whole region. Many of the new managers in Central and Eastern Europe are colleagues from this university.


How do you evaluate the Austrian banking and financial services sector for EU and global players?

The Austrian financial sector has traditionally held a strong position in Central and Eastern Europe (CEE) and some of the largest banks are Austrian-owned. We see the structure as both Austrian and Central European. In practice, this means that the biggest banks have to be CEE banks, serving Austrian industry and the region overall. We are a financing hub for the whole region. Our style is more conservative, with no major investor banking activity; the clear focus is on lending to consumers and industry. We have, like Germany, an important number of small and medium companies (SMEs). For SMEs, bank financing is extremely important. Given the structure of our economy, our financing system is essentially a bank-based system, unlike the U.K. or the U.S. where capital market financing plays a much bigger role.