Austria, once a symbol of economic stability in Europe, is grappling with the longest recession in its postwar history. According to the latest report from the Austrian Institute of Economic Research (WIFO) in September, the business cycle remains weak, inflation is accelerating to 4.1 percent, and GDP is growing by just 0.3 percent in the second quarter. Against this backdrop, the governing coalition of the OVP and the Greens has announced a stimulus package worth 1 billion euros for the autumn.

The WIFO report paints a bleak picture. After two years of recession, Austria's economy is stabilizing at a low level. GDP grew by 0.2 percent in the first quarter and 0.3 percent in the second quarter of 2025, but that is too little to speak of a recovery. Industry, a key sector for the country, shows a slight improvement in business sentiment surveys, but industrial production fell in the second quarter after an initial rise. Construction continues to shrink, with value added declining by 0.4 percent in the second quarter.

Inflation, which in the fourth quarter of 2024 was lower than the eurozone average, has now diverged from it by 2 percentage points. In July it reached 3.7 percent; in August, according to preliminary estimates by Statistik Austria, it hit 4.1 percent (using the harmonized index HICP). The main culprits: rising energy prices (+8.6 percent), services (+4.5 percent), and food (+4.8 percent). In the eurozone, inflation holds steady at 2.1 percent, underscoring the exceptionality of the Austrian case. The European Central Bank has maintained interest rates at 2.15 percent since June, which is not helping the fight against the cost of living.

The labor market is suffering as well. The number of employed has not changed since the end of 2023, and unemployment is rising, albeit more slowly — in August the rate (including those in training programs) stood at 8.4 percent, up 0.2 percentage points from July. That amounts to 367,000 people without work, a year-on-year increase of 4.2 percent. Companies are posting fewer vacancies, signaling a strained situation.

Similar problems are evident among Austria's neighbors. In Germany, according to a July Deutsche Bank report, exports have been losing competitiveness since 2015 amid challenges from China and the United States. There too, GDP fell by 0.3 percent in the second quarter, while inflation is lower. Austria, dependent on trade with Germany (ranked 8th among Berlin's top 25 trading partners, with turnover of 65.8 billion euros in the first half of 2025, up 2.1 percent), feels these turbulences. As Deutsche Bank emphasizes, Germany is seeking new markets in the Global South, which could inspire Vienna.

In response to the crisis, the government of Chancellor Karl Nehammer (OVP) and Vice-Chancellor Werner Kogler (Greens) has adopted an "autumn package" worth 1 billion euros. It focuses on growth, employment, prices, and competitiveness, while maintaining budgetary discipline. Key elements:

Investment incentives: Doubling of the general investment premium from 10 to 20 percent, and the green premium from 15 to 22 percent. In effect from November 2025 to December 2026, with a budgetary impact of approximately 220 million euros in 2026 and 2027. Objective: encouraging investment in the green transition.

Support for energy-intensive industries: 150 million euros (75 million per year in 2025 and 2026) in energy cost compensation. The compensation act is to be amended this week.

Digital infrastructure: 120 million euros for broadband internet development (40 million per year from 2027 to 2029), to strengthen business locations.

Labor market: A skills offensive for specialized workers, strengthened vocational apprenticeships, a supplementary earnings model for retirees, a "55 Plus" initiative against long-term unemployment, and a freeze on the threshold for minor earnings until 2027. A location fund will be established to mobilize private capital.

Combating inflation: Limiting rent indexation to 1 percent in 2026 and 2 percent in 2027.

"The challenges are enormous: high inflation, cautious growth, geopolitical uncertainty. The road to recovery is a marathon," says Wolfgang Hattmannsdorfer of the Federal Ministry of Economy, Energy, and Tourism (BMWET). Markus Marterbauer adds: "We must stimulate the economy and fight inflation on a lasting basis." State Secretary Sepp Schellhorn calls for structural reforms and a reduction of bureaucracy.

Media outlets such as Der Standard are calling the package a "mini-Wumms" — a reference to Germany's stimulus packages. After two years of recession, the coalition is searching for funds for small conjunctural impulses. The opposition criticizes: Too unambitious, failing to address structural problems like bureaucracy and lack of innovation. Experts from WIFO point out that the improvement in industrial sentiment is fragile, and that geopolitics (U.S. tariffs) is worsening the situation.

Compared with Germany, where Deutsche Bank proposes three pillars — strengthening the EU market, agreements with the South, and trade defense — the Austrian package appears modest. There, exports to the Global South could yield 125 billion euros in growth. Austria, facing similar challenges (China as a rival in high-tech), could benefit from integration with the EU-27, where barriers amount to a 44 percent tariff equivalent for industry.