Given these doom-laden predictions, you’d expect Austrian economists and bankers alike to be despondent. But you’d be wrong…
Amongst the barrage of screaming headlines that have been piling the pressure on already damaged global markets since last autumn, no market – emerging or mature – has been immune to damaging conjecture. But perhaps the most insidious rumours are the ones that talk up the collapse of Central and Eastern European (CEE) countries. Naturally, the implication behind these vociferous fears is that the ensuing fiscal avalanche would engulf the entire European Union. And right now, the daily business pages have Austria in their sights as the nation most likely to suffer from a CEE crash. Worst case scenarios invariably make good newspaper copy, but the tittle-tattle hasn’t done much for Austria’s hitherto cast iron reputation. The Financial Times –famously being a friend to "The Honest Financier and the Respectable Broker" – were among the first to fire their broadside. Austria’s exposure to the automotive industry and other ventures in Eastern Europe, they point out, has destabilised Austria’s dependable economic strength. So, is it a case of no smoke without fire? Well, not exactly. The nation’s three major banks, Bank Austria, Erste Bank and Raiffeisen have all come in for criticism having lent a total of €210bn (£235bn) to CEE clients in the region. Crunching the numbers, that’s equivalent to 68 per cent of Austrian gross domestic product. In other words, quite a lot…
As a consequence these banks have all bore the brunt of the deepening financial crisis. In happier times, Erste Group Bank AG made almost 70% of its profit from emerging European economies. That was as recently as summer 2008, which now seems like a distant memory since the markets took a dramatic shift at the tail end of the year. Together with Raiffeisen International Bank-Holding AG, which operates only in the region, the two banks have lost more than 85 percent of their peak share value. This is one of the main contributing reasons why the Austrian Traded Index has plummeted almost 70% from its height in July 2007.
Given these doom-laden figures, you’d reasonably expect Austrian economists and bankers alike to be despondent about the situation. But you’d be wrong.
The mood in amongst financial and political circles in Vienna is stoical but nonetheless confident. They contend that, going forward, Austria’s dealings with their eastern European neighbours will still benefit the nation’s finances rather than ruin them. "There is and will be a very severe recession in the Eastern European region, but there will be no meltdown, there is no default scenario," explains Ewald Nowotny, head of the Austrian National Bank and European Central Bank governing council member. "It is very important to state that it is misleading to have any doomsday scenarios for the region. It is important to say that this is a region with positive long-term growth perspectives.” Nowotny indicates that the Czech Republic and Slovakia, two of Austria’s closest trading partners, have economies which remain comparatively robust. “Austria is most exposed in those countries that are still expected to grow,” he continues. “I believe we can manage all the problems (of emerging European banks) but I also believe that the business model of the past is over and needs to be changed.”
"There is room for adjustment. And if we go that way together, we'll see an Eastern European banking sector that won't be as dynamic as we've seen, but will be offered the chance of long-term stable growth.” Fitch Ratings have responded in line with Nowotny’s candour confidence by affirming Austria's triple-A credit rating. Fitch believe that Austria’s sovereign credit fundamentals were strong enough to cover potentially substantial losses tied to Austrian banks' exposure to Eastern Europe.
"This status is underpinned by a high value-added, diversified and competitive economy with moderate levels of household and corporate indebtedness and government debt of around 60% of [gross domestic product], similar to some other AAA sovereigns," said Andres Klaar, Fitch's primary sovereign analyst on Austria. The outlooks on the long-term ratings are stable, Fitch said, having previously voiced concerns about the country's rating last month.
Of course, whether any of Austria’s outward investments go bad or not is beside the point. An attractive country like Austria, with a cultural treasure trove, immense political influence, and a wonderfully well-appointed position at the geographical heart of Europe means people will always flock here for business, pleasure, and enlightenment. Often, all three simultaneously...Located on the ancient Danube trade route –at the crossroads of north, south, east, and western Europe, Austria is surrounded by seven separate nations. It has always been and will continue to be a meeting place. That’s why we at the New European Economy are backing Austria’s conferencing and congresses to revive the economy. After all, it will take more than a few rash investment decisions to completely undermine Austrian infrastructure. Business confidence will eventually be reinstated, but it will be built on face to face meetings.
The Ferry Porsche Congress Centre (FPCC) in Zell am - the embodiment of Austria’s stunning potential – will provide strong foundations for new relationships to develop. Flexible and strikingly modern, this truly extraordinary facility is a perfect example of how the exhibition industry is becoming more creative and more daring in its thinking. Situated right at the epicentre of Austria’s tourist region, FPCC lies about 80 kilometres from the cultural capital of Salzburg and a little over an hour by road from Munich.
The Ferry Porsche facility is perfectly proportioned for medium-sized events with 1,360 square metres of space with up to eight rooms are available as separate units. Up to 700 visitors can be seated at tables, the number expanding to 1,000 guests for seminars. The facility is also capable of fully accommodating the surrounding Alpine panorama with a magnificent 800-square-metre open-air area. A breath of fresh air to exhibitors and delegates alike, you might say…
The Austrian Business Network and Austrian Convention Bureau should be your first post of call for all your meetings requirements.
The nation’s rehabilitation also depends on government strategies which have an eye on the long game having prioritised business policies to encourage research and development (R&D). The government has also initiated a shift from traditional manufacturing and service-based economy to high-tech, knowledge-based economy and being particularly favourable to companies who excel in highly specialised, niche areas.
Keres Partners, Viennese Law Firm are the perfect partnership to guide any prospective investors into the Austrian business landscape. With over twenty years experience they specialise in all aspects of the legal milieu including banking & finance, competition & antitrust, corporate mergers and acquisitions, dispute resolution, intellectual property and information technology, as well as real estate.
With a population of about 1.7 million, Vienna is by far the largest city in Austria. Vienna is the eighth wealthiest region in Europe according to Eurostat. However, it’s influence as a cultural, economic and political centre extends well beyond the Austrian border.The Austrian capital is firmly on the diplomatic map, being home to many important international organisations – a fact that won’t harm it’s progression any. The administrations based here include the International Atomic Energy Agency (IAEA), OPEC - the Organisation of Petroleum Exporting Countries, and of course, a number of United Nations offices, including the United Nations Industrial Development Organization (UNIDO). Indeed, Austria is already attracting a slew of new inward investment from the world’s big players. Germany’s national airline Lufthansa recently signed a deal to buy the loss-making Austrian Airlines to make it Europe's biggest airline.
Meanwhile, Swedish industrial giants Sanvik have swooped to acquire Wolfram Bergbau- und Hütten-GmbH a world-leading producer and supplier of tungsten. The acquisition is expected to be completed during the second quarter of 2009, after approval by relevant anti-trust authorities. Sandvik specialise in machinery and tools for rock excavation, stainless materials, special alloys, metallic and ceramic resistance materials. By the same token, Austrian companies still have an appetite for investment outside their own country – especially amongst construction companies. Strabag SE are in the process of a takeover of the German firm Hermann Wellmann Tiefbau, who are based in Hamburg. While Strabag and their main Austrian competitor, Porr are competing in separate consortiums for a Romanian motorway-construction contract, said to be worth between 2.0 and 2.3 billion Euros.
The plan is for construction of a 58-kilometre-long segment of the Bucharest-Brasov motorway between Comarnec and Brasov, and includes a concession for operation of the motorway for 30 years. The European Commission last month predicted negative growth of 1.2 per cent in 2009 and positive growth of 0.6 per cent in 2010 in Austria. The Economist Magazine predicts that real GDP is forecast to grow at an annual average rate of 1.3% for the next four years. That’s half of what it was in the last four years – but Austrians will be thankful for small mercies…