Lying in the heart of Europe, Austria is dominated by the Alps in the west of the country, while fertile plains make up the east and north. A separate republic after the collapse of the Austro-Hungarian Empire, Austria was absorbed into Hitler's Germany in 1938. It regained independence in 1955 after the departure of the last Soviet troops from the Allied Occupation Force. Its economy encompasses successful high-tech sectors, a tourist industry which attracts wealthier visitors, and a strong agricultural base. Joining the EU in 1995, in 2002 it was one of 12 EU states to adopt the euro.

Austrian society is homogeneous. Almost all Austrians are German speakers, although Austrians like to stress their distinctive identity in relation to Germany. Minorities are few; there are some ethnic Slovenes, Croats, and Hungarians in the south and east, as well as some Roma communities. These minorities have been augmented by large numbers of immigrants from eastern Europe and one-time refugees from the former Yugoslavia. The result has been a perceptible increase in ethnic tension, particularly as the far right claims that migrants are taking jobs from the local population.

The nuclear family is the norm in Austria. It is common for both parents to work. While gender equality is enshrined in the constitution, in practice society is still strongly patriarchal. Compared with the rest of Europe, few women enter politics.

Young Austrians tend to live in their parental home until they marry. This practice reflects the long time taken to complete university degrees, for which students do not receive maintenance grants. Austrians marry at a younger age than the European average. Nominally a Catholic country, Austria is socially less conservative than Catholic German states.

Strengths

Large manufacturing base. Strong chemical and petrochemical industries. Electrical engineering sector, textiles, and wood processing industries. Highly skilled labor force. Tourism is an important foreign currency earner.

Weaknesses

Lacks natural resources. Reliant on imported raw materials, particularly oil and gas. Process of introducing greater competition and deregulation has been slow.

Profile

Austria's industrial and high-tech sector is highly developed and contributes over a quarter of GDP. Some services, notably tourism, are highly sophisticated and profitable, although tourism receipts have been down in recent years.

A recession in the early 1990s was reversed by a rapid increase in exports to eastern Europe and Germany and by increased domestic demand.

There have been benefits from EU membership since 1995. Prices for many products, particularly food and books, have fallen. The Austrian labor market has also seen an influx of migrant labor more willing to accept flexible working arrangements and lower wages. Foreign investment has increased, as more multinationals locate their headquarters for east European operations in Austria. A far-reaching fiscal stabilization program instituted after accession enabled Austria to meet the economic convergence criteria necessary for it to join the final stage of economic and monetary union, fully adopting the euro in January 2002.

Austria is a federal, multiparty democracy. The chancellor (premier) holds real executive power.

Profile

The long-established "grand coalition" between the socialist SPÖ and the conservative ÖVP, governed Austria almost without interruption from the 1950s until 1999. Their hold on power, with no real alternative, reached into all areas of public life. The far-right FPÖ achieved a breakthrough in elections in October 1999, when it came equal second with the ÖVP. A new right-wing coalition of the ÖVP and the FPÖ was mat with regional and international criticism. FPÖ leader Jörg Haider drew strong condemnation, having openly expressed admiration for some of Hitler's policies. He remained a driving force behind the party despite resigning formal leadership in May 2000. Later in that year, local elections showed dwindling support for the FPÖ, prompting talk of Haider's return to the forefront of Austrian politics. By 2002 the ruling coalition was under strain. The FPÖ adopted a far more skeptical approach to EU enlargement, calling for a veto of the Czech Republic's membership bid unless the Czech Temelín nuclear energy plant was closed.

The nine provincial assemblies and governments have considerable powers. Vienna, with provincial status, has long been dominated by the SPÖ.

Main Political Issue

Relations with EU partners

Austria's population is divided over the merits of EU membership. While the farming lobby remains apprehensive of EU agricultural policies, the country as a whole has benefited from lower food prices and greater consumer choice. Fears that membership is eroding national identity, as well as encouraging an influx of cheap east European labor, provided an electoral basis for the nationalist FPÖ. In turn, EU states responded to the FPÖ's membership of the ruling coalition in 2000 by imposing diplomatic sanctions for seven months.

Despite the importance of relations with Germany, Austria's powerful northern neighbor and main trading partner, there has been a conscious policy of stressing Austria's independence and creating some diplomatic distance. Austria is keen to maintain its relationship with the USA, which is reinforced by Austria's role as supplier of small arms to the US Army. The inclusion of the far right in the Austrian government in 2000 provoked the imposition of diplomatic sanctions by EU states for seven months.

Austria's status as a neutral state has begun to be questioned since it joined the EU and NATO's Partnerships for Peace program. Austria is part of the Schengen Convention, ending border controls with other participating EU members. Its geopolitical position gives it considerable influence in eastern Europe, and exports to the region trebled in the 1990s. The ÖVP has strongly supported the eastward enlargement of the EU, but the FPÖ is more hostile.

Under the 1955 State Treaty, which granted Austria its full independence, Austria is neutral, although it has participated in NATO's Partnerships for Peace program since 1995.

Despite the small size of its own forces, the Austrian arms industry is strong. It not only meets most of the hardware needs of its own army, but also exports arms to the USA and other countries.

Austria has few resources. It lacks significant oil, coal, and gas deposits and has to import a large amount of its energy. Russia is a key energy supplier, and gas is provided via pipelines running through the Czech Republic and Slovakia. Oil is imported up the Danube. Russia and Germany are the major suppliers of iron ore and raw steel for Austria's industry.

Environmental awareness is high and the government invests nearly 3% of GDP in environmental protection. Roughly half of all domestic waste is separated for recycling, with heavy fines for failing to observe regulations. The safety of nuclear reactors in the neighboring Czech Republic, Slovakia, and Slovenia is a major concern.

Austria's central geographic position in Europe has encouraged the development of a sophisticated communications and transportation network.

Austria has relatively high levels of spending on health, accounting for 13% of total government expenditure. However, private spending on health is increasing and accounts for nearly one-third of the total, the highest proportion of any EU state, as patients increasingly choose to use the private health sector to avoid waiting lists for operations.

Of total government expenditure some 10% is spent on education. Children are streamed into two types of secondary school according to their academic ability. Those in a Gymnasium (11–18) take the Reifeprüfung or Matura which determines entry to university, but children in a Hauptschule (11–15) do not. The universities are oversubscribed; students take six years or more to finish their first degrees.

Austria's crime rate is below Europe's average. However, the number of burglaries is rising. The arrival of the Russian mafia in Vienna has led to an increase in money laundering.

Despite four decades of mainly left-of-center government, Austria has retained many of its traditional social divisions. Inherited wealth is still respected above earned wealth, and social mobility is lower than in neighboring Germany. Austrians have the highest savings rate of any OECD country. Relatively few Austrians own stocks and shares, and most companies are dominated by a single shareholder. Limited amounts are invested in property. Legislation in 2000 banned anonymous savings accounts, a system unique in the EU to Austria which, it had been argued, encouraged money laundering and insider dealing. Government bonds offer low rates of interest and the property market is weak; many people, particularly in Vienna, tend to rent rather than buy their apartments. Refugees from the conflicts in the former Yugoslavia form the poorest group in Austrian society.

Well-developed Alpine skiing and winter sports resorts account for almost one-third of the country's total tourist earnings. Many resorts, such as St. Anton and Kitzbühel, cater for the top end of the market. In the summer season, which peaks in July and August, tourists visit the scenic Tirol and the lakes around Bad Ischl. Year-round major attractions are Vienna, with its coffee houses and the Prater park (whose Ferris wheel was immortalized in The Third Man), and Salzburg, Austria's second city. The latter is internationally famous for its summer music festival and as the birthplace of Mozart.

Austria came under the control of the Habsburgs in 1273. In 1867, the Dual Monarchy of Austria-Hungary was formed under Habsburg rule. Defeat in World War I in 1918 led to the breakup of the Austro-Hungarian Empire and the formation of the Republic of Austria.

• 1934 Chancellor Dollfuss dismisses parliament and starts imprisoning social democrats, communists, and National Socialist (Nazi) Party members. Nazis attempt coup.
• 1938 The Anschluss – Austria incorporated into Germany by Hitler.
• 1945 Austria occupied by Soviet, British, US, and French forces. Elections result in ÖVP–SPÖ coalition.
• 1950 Attempted coup by Communist Party fails. Marshall Aid helps economic recovery.
• 1955 Occupying troops withdrawn. Austria recognized as a neutral sovereign state.
• 1971 SPÖ government formed under Chancellor Bruno Kreisky who dominates Austrian politics for 12 years.
• 1983 Socialists and the FPÖ form a coalition government under Fred Sinowatz.
• 1986 Kurt Waldheim, former UN secretary-general, elected president, despite war crimes allegations. Franz Vranitzky replaces Sinowatz as federal chancellor. Nationalist Jörg Haider becomes FPÖ leader, prompting the SPÖ to pull out of government. Elections produce stalemate. Return to "grand coalition" of SPÖ–ÖVP.
• 1990 ÖVP loses support in elections.
• 1992 Thomas Klestil (ÖVP) elected president. Elections confirm some traditional ÖVP supporters defecting to FPÖ.
• 1995 Austria joins EU. Elections after coalition disagreement over budget; SPÖ and ÖVP increase representation; "grand coalition" re-forms in early 1996.
• 1997 Vranitzky resigns; replaced by Viktor Klima.
• 1998 Klestil reelected president.
• 1999 Haider's FPÖ wins 40% of votes in Carinthia regional poll, is equal second with ÖVP in general election in October; SPÖ remains as largest party.
• 2000 ÖVP accepts FPÖ into coalition, with Wolfgang Schüssel as chancellor; political crisis. EU imposes diplomatic sanctions, lifted after seven months.
• 2002 Euro fully adopted.