30 years in the EU

Handling of the pandemic halted success story

The EU must ensure that it exploits its potential and secures prosperity with an ambitious competition policy, warns the expert.

(Bild: stock.adobe.com)

Membership of the EU has been a success story for Austria's economy. Particularly at the beginning and from 2004 onwards, gross domestic product recorded strong growth. Since 2019, however, the picture has deteriorated compared to other EU countries. The "main problem": "We have fared worse than other member states as a result of the pandemic and the energy price crisis," points out Wifo economist and WU Vienna professor Harald Oberhofer.

This has more to do with national policy and less to do with EU membership. In principle, however, gross domestic product is "the most difficult of all indicators" to measure the influence of EU membership on economic success, as it includes all possible effects that have nothing to do with the EU. However, it is generally true that Austria, as a small, open economy, would be "insignificant in global economic terms" on its own and could only assert its own interests in conjunction with the other EU states. This even applies to a larger country like Germany. Only through EU membership would Austria gain economic weight on the world stage.

Biggest asset internal market
"Our biggest asset is the internal market," says Oberhofer, describing the impact of EU membership on the economy. This leads to more competition, better and cheaper products and more choice for consumers. And if there are currently many complaints about the excessive bureaucracy in the EU, this does not affect the common standards. These are essential so that separate product variants do not have to be produced for each country - such as special lighting for cars sold in Sweden in the past, as Oberhofer recalls.

(Bild: stock.adobe.com, krone.at-Grafik)

However, the EU has little room for maneuver, as its budget only accounts for one percent of the EU's GDP, explains Oberhofer. It therefore has to regulate in order to steer the economy - "that can of course be excessive". The Supply Chain Act, which requires the collection of all possible data internationally right down to the last supplier, could well fall into this category. Oberhofer is "skeptical that it will achieve its goal", while at the same time it could reduce the competitiveness of the domestic economy.

Austrian politicians should play an active role in the EU
However, the economist reminds politicians who complain about such EU rules that Austria has full participation rights in the EU bodies. The representatives could get involved in a different way "and not decide things at EU level and then distance themselves from them as a government two minutes later". This is also a "fundamental problem in the relationship between the nation state and the European Union".

"Of course" Austria had also become more innovative through competition in the internal market. Only through innovation, research and development, high-tech products and specialization, i.e. "being able to do something better than the rest of the world", could a high-price country like Austria remain competitive.

EU faces challenges
Austria has benefited from its EU membership, not least due to its geographical location and the eastward expansion of the Union. However, there are also major challenges at European level, for example in dealing with new technologies and demographic change. The EU must ensure that it exploits its potential and secures prosperity with an ambitious competition policy.

The Union was founded by 15 similar countries, and the rules of the time are no longer suitable for a Union that has almost doubled in size and become much more diverse. In order to leverage the potential of the EU, it is necessary to discuss the distribution of competences, what should be decided EU-wide and what should be decided nationally. Oberhofer advocates a joint expansion of the railroads, for example - but this would require a corresponding budget. The fight for decarbonization should also be led jointly. However, a "more efficient" relationship between the EU and nation states would also mean giving up elements of national sovereignty in certain areas - this is "very difficult to discuss in Europe".