Austria’s economic caution clashes with EU-Mercosur trade deal pressure
Austria’s economic outlook remains cautious, with growth projections barely exceeding 1% for next year. Meanwhile, the country faces pressure to reconsider its opposition to the long-delayed EU-Mercosur trade deal. Martin Kocher, governor of the Austrian National Bank (OeNB), has warned that rejecting the agreement could leave Europe at a disadvantage while benefiting rivals like China.
The EU-Mercosur pact was originally set to conclude by the end of 2022 but stalled due to resistance from France and Italy. Negotiations were pushed back to January 2023, yet Austria’s stance remains a hurdle. Kocher argued that the deal has improved since 2019, now including stronger protections for farmers and stricter rules to safeguard the Amazon rainforest and biodiversity.
Kocher stressed that Austria, as a small, export-dependent economy, cannot afford to miss out on the agreement’s potential benefits. He warned that if Europe walks away, countries like China could fill the gap without upholding the same environmental or human rights standards. Advocates, including Kocher, believe the deal could boost Austrian exports and ease current economic struggles. Separately, the OeNB is tightening its belt, planning to cut €80 million in costs by 2031. The reductions will come through attrition and scrapping certain bonuses, avoiding forced layoffs. The bank’s new president, Johannes Hahn, will take office on January 1, 2026, replacing Harald Mahrer, who resigned in November 2025. Kocher also urged the government to strengthen competition in sectors where prices remain volatile. He sees this as key to controlling inflation, which continues to weigh on Austria’s economic stability.
The OeNB’s cost-cutting measures and leadership change come as Austria’s economy faces modest growth. The EU-Mercosur deal remains a point of contention, with Kocher warning that rejection could shift trade influence to less regulated competitors. The government now faces decisions on both economic policy and international trade strategy.
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