Central and Eastern Europe
Background: Once the center of power for the large Austro-Hungarian Empire, Austria was reduced to a small republic after its defeat in World War I. Following annexation by Nazi Germany in 1938 and subsequent occupation by the victorious Allies, Austria's 1955 State Treaty declared the country "permanently neutral" as a condition of Soviet military withdrawal. Neutrality, once ingrained as part of the Austrian cultural identity, has been called into question since the Soviet collapse and Austria's increasingly prominent role in European affairs. A prosperous country, Austria joined the European Union in 1995 and the euro monetary system in 1999.
Climate: temperate; continental, cloudy; cold winters with frequent rain in lowlands and snow in mountains; cool summers with occasional showers
Terrain: in the west and south mostly mountains (Alps); along the eastern and northern margins mostly flat or gently sloping
Geography - note: landlocked; strategic location at the crossroads of central Europe with many easily traversable Alpine passes and valleys; major river is the Danube; population is concentrated on eastern lowlands because of steep slopes, poor soils, and low temperatures elsewhere
Economy - overview: Austria with its well-developed market economy and high standard of living is closely tied to other EU economies, especially Germany's. Membership in the EU has drawn an influx of foreign investors attracted by Austria's access to the single European market. Through privatization efforts, the 1996-98 budget consolidation programs, and austerity measures, Austria has brought its total public sector deficit down to 2.1% of GDP in 1999 and public debt - at 63.1% of GDP in 1998 - more or less in line with the 60% of GDP required by the EMU's Maastricht criteria. Cuts mainly have affected the civil service and Austria's generous social benefit system, the two major causes of the government's deficit. To meet increased competition from both EU and Central European countries, Austria will need to emphasize knowledge-based sectors of the economy and deregulate the service sector. Growth, which slowed to 2.0% in 1999, probably will rebound to 2.8% in both 2000 and 2001.
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