- Business Monitor International Ltd www AustriA Q- ---- core Views net exports have been a key driver of economic growth over the past decade for Austria. However, declining cost competitiveness and subdued demand from regional trading partners, most notably Germany, will see this component s contribution to real GDP growth remain subdued in the years ahead. ...Bulgaria, where South Stream enters mainland Europe, has already been warned about the potential of EU infringements, and we believe a similar threat to Austria would place strains on Vienna s relationship with Brussels. The nationalist Freedom Party of Austria (FPO) performed worse than we had anticipated in the European Parliamentary elections in may, coming third behind the parties of the governing coalition: the centre-left Social Democrats and centre-right People s Party. we do not believe this marks the start of a decline for the FPO as a political force. ...This will not only hurt Austrian business confidence, reining in fixed investment levels, but also prove more of a drag on net exports than we currently forecast. - Business Monitor International Ltd www executive summary
...Gazprom s South Stream pipeline will continue to receive support from the Austrian government despite the threat of EU sanctions if the line is constructed. Bulgaria, where South Stream enters mainland Europe, has already been warned about the potential of EU infringement, and we believe a similar threat to Austria would place strains on Vienna s relationship with Brussels. ...Our Oil & Gas team remains bearish towards the final completion of South Stream, but we believe even if the pipeline remains on the drawing board, the stance taken by the Austrian government will be enough to weigh on Austrian dealings with Brussels. The government has proved reluctant to impose economic sanctions on Russia over the Ukraine crisis, as the shelving of the Nabucco West pipeline in ---- means that Austria will remain reliant on Russian gas (which accounted for -- of total gas imports in ----) for the foreseeable future. Any Austrian support for shifting away from Russian gas supplies or from imposing EU sanctions could jeopardise Austria s long-term energy security. ...However, we believe Austrian (as well as Hungarian and Bulgarian) support for the pipeline highlights cracks in the facade of EU unity.
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