Inside Millions of euros in the secret bank accounts of a dead politician and Doing Business in purported donations from Muammer Gaddafi are the subject of an article by Chris Bryant AUSTRIA Page 3 FINANCIAL TIMES SPECIAL REPORT | Friday October 22 2010

www.ft.com/austria­2010 | twitter.com/ftreports Bid to build on short­term resilience

The swiftness of the recovery is partly due to stimulus measures but growth is expected to slacken next year, says Chris Bryant

or about 90 minutes this sum- mer Austria was the centre of the western world’s attention. Russian and US aircraft Fparked side by side on the tarmac at a sun-drenched Vienna airport in July to carry out the biggest spy swap since the Cold War. Officials in Vienna maintained a cool, knowing silence long after the jets had departed with their reclusive cargo – a posture that is second nature to a city well versed in the ways of espionage. While that event put the country in the spotlight, its economy is staging a quiet recovery. Bankers and officials squirmed last year when Austria’s exposure to central and eastern Europe of approximately €200bn became fodder for economic doomsay- ers. But these fears have since sub- sided and after a comparatively mild recession, the economy is set to expand 2 per cent this year, according to Austrian Institute of Economic Research (Wifo). Exports are driving the rebound as newly-confident German companies place orders for Austrian parts and Going places over the Danube: exports are driving the economic rebound as newly confident German companies place orders for Austrian parts and other supplies Dreamstime other supplies. Meanwhile, the return of growth in parts of emerging Europe recession. Accordingly, the govern- about whether some tax increases are able to run up unfundable obligations. overcrowding and underfunding and base their headquarters in Vienna, has provided a boost to Austrian com- ment – an at times uninspiring coali- necessary. Meanwhile, voters have Although no other state has liabilities the country has fared comparatively incentivised by a favourable tax panies that invested heavily in the tion of the Social Democratic party shown themselves disinclined to to rival Carinthia, the affair only poorly in the international Pisa educa- regime. Indeed, the capital has con- east before the crisis. “There is an (SPÖ) and conservative Austrian Peo- reward the government for its diligent added to pressure to reform federal tion rankings. Many analysts saw sistently ranked among the world’s investment boom above all in Asia, ple’s party (ÖVP) – is unlikely to test crisis management. fiscal relations. exposure to central and eastern most desirable cities to live. Excellent from which the German export econ- the market with signs of fiscal profli- The far right Freedom Party (FPÖ) Weaknesses in the education system Europe as a weakness during the cri- public transport, low crime, and a omy is profiting very strongly. We’re gacy. picked up more than a quarter of the should also be a worry for an econ- sis. But domestic policymakers and near unrivalled cultural offering have the suppliers of German exporters. So, Under a fiscal framework agreed by vote in elections in Vienna earlier this omy whose long-term success depends businesspeople insist that the con- provided a strong incentive for reloca- in a way, Germany for us is the door parliament in June, Austria plans to month, sparking a bout of soul-search- on producing high-value products trary is the case, given the medium- tion, tempered only by a punishing to the global market,” says Markus cut its deficit to below the Maastricht ing among the coalition partners. using highly skilled labour to differen- term potential for higher growth rates top rate of personal income tax. Marterbauer, senior economist at threshold of 3 per cent of GDP by With the economy performing rela- tiate it from low-cost locations. Stu- in the region. Economic recovery has underscored Wifo. 2013. tively well, the FPÖ’s electoral suc- dents occupied university buildings in Accordingly, companies with an eye Austria’s short-term resilience. Politi- The swiftness of the recovery is also Government officials are in the cess arose from its focus on issues of Vienna last year to protest against on eastward expansion have rushed to cians must now focus on growth. partly thanks to stimulus measures process of negotiating the details of immigration and integration. The gov- that supported consumption and the 2011 budget that will set the politi- erning parties must now find a way to investment during the downturn, as cal tone until the next general elec- keep the FPÖ at bay without suc- well as formal and informal flexible tion in 2013. “We have two challenges cumbing to populist or fiscally-impru- labour arrangements that prevented ahead of us – one is making a wise dent politics. Similarly, there is a dan- mass layoffs. fiscal consolidation. The other is to ger that Austrian politicians are so As a result, the unemployment rate try to use the way out of the crisis to busy patting themselves on the back of 4.3 per cent is among the lowest in strengthen strong points and make for the measures they took to over- the European Union and less than Austria more economically attractive come the crisis that some of the big half the average, according to than it was before,” says Andreas structural weaknesses revealed by it Eurostat. “The Austrian economy is Schieder, state secretary in the are overlooked. doing much better than everyone finance ministry. The country’s dependence on parts expected,” says Herbert Stepic, chief The budget talks have recently been for the German automotive industry executive of Raiffeisen International, complicated by two factors. Higher exacerbated the downturn. As manu- one of Austria’s biggest banks. “Meas- than anticipated tax revenues have facturers look to trim overheads by ures taken by industry not to sack triggered a debate within the coalition switching production to low-cost loca- people but to give them part-time tions, Austria may not be able to rely employment instead…ultimately on the car industry to sustain growth helped them to stay in business and forever. Furthermore, its dependence generate more income.” on exports to Europe could hinder The cost of these crisis measures growth as emerging markets econo- has of course taken its toll on the mies race ahead. The quota of non- budget, but a projected deficit this European exports has improved in year of 4.1 per cent seems manageable recent years, but is still less than 20 compared with the fiscal imbalances per cent of the total. on Europe’s periphery. Still, efforts to Furthermore, society is ageing cut state spending, particularly in because of one of the lowest birth neighbouring countries, could cause Inside this issue rates in the EU. The pension system the recovery to slacken next year, Banking The pre­crisis fad of cannot forever withstand the tempta- with Wifo forecasting growth of 1.9 issuing loans in foreign currency tion of many Austrians to retire early, per cent. has turned into a liability, says often on spurious health or disability As a member of the eurozone, Aus- Chris Bryant Page 2 grounds, while the flexibility of its tria also cannot shield itself from mar- labour market could also be improved. ket worries about the health of the Industry The murky outlook The government wants to encourage currency bloc: its credit default swap can be gauged by the low level of more skilled migrants into the coun- spreads – a measure of sovereign risk investment spending at most try which may temper some of these – widened in June in tandem with companies, writes Eric Frey Page 2 problems – but with the far-right in other big European economies. the ascendancy, the government is Winter sports Austrian groups Although the public debt is set to unlikely to throw open the doors in proudly emphasise their domestic climb from 67.6 per cent of gross origins and affiliations. Haig Simonian the near future. domestic product in 2009 to 70 per reports Page 4 Another difficulty is Austria’s cent this year and about 72 per cent in recent unfortunate reputation for cor- 2011, it remains not far above the Wine Kester Eddy on the anti­freeze ruption. The near collapse of Hypo Maastricht target of 60 per cent. Mar- scandal that initiated a revolution in Group Alpe Adria, a Carinthian bank, ket sentiment has improved of late the vineyards Page 4 in December is under intensive inves- although lingering worries remain tigation. The scandal threw a spot- about the possibility of a double-dip light on how federal states have been

Rightwing shadow on image abroad

The Freedom Party’s same challenge. But no Politics showing fell just short of other far-right group can the 28 per cent it received boast such wide support as No other far­right in Vienna in 1996 under the Austria’s Freedom Party. group can boast leadership of Jörg Haider, Even though the strength its late leader, once of the far right is unlikely such broad support, Europe’s most prominent to have a direct effect on writes Eric Frey rightwing rabble-rouser government policies, it who died in a car accident casts a shadow on political two years ago. However, his life and may hurt Austria’s For veteran observers of party had moved even fur- image abroad. Mr Hofer Austrian politics, it is a ther to the right since Mr mostly blames feeble cam- familiar picture: a grand Haider split off to form his paigns by the other two coalition of Social Demo- own group in 2005, making opposition parties in crats and conservatives that the latest result all the Vienna, the conservative is nearly paralysed as the more shocking. Heinz­Christian Strache People’s party and the far-right makes impressive Mr Strache started poli- Greens, for the rightwing gains in every election. tics in a German nationalist mas Hofer, a political con- success. But he also notes On October 10, the Free- student fraternity and, as a sultant. “So the speed of its that, anti-foreigner feeling dom Party under its leader, young man, moved in recent rise is quite surpris- in Austria is more pro- Heinz-Christian Strache, extremist circles that were ing.” nounced than in any other garnered 26 per cent of the close to neo-Nazi ideology. In the mid-1990s, Austria country in the European vote in the Vienna munici- But the growing anxiety was one of the first coun- Union, and is on the rise. pal elections, nearly dou- about immigrants from Tur- tries in western Europe The share of the popula- bling its result in the last key and other Islamic coun- where a rightwing party tion that expresses some vote. The surge in support tries offered them a chance with an anti-immigration xenophobic sentiment in also helped to break the to appeal to a broader spec- and xenophobic platform the European values study absolute majority of the trum. “The party is focused made big electoral gains. increased from 45 per cent long-ruling Social Demo- on one issue, immigration Today, countries such as in 1994 to 55 per cent in crats and the popular and foreigners, and is really the Netherlands, Sweden mayor, Michael Häupl. a one-man show,” says Tho- and Hungary are facing the Continued on Page 2 2 ★ FINANCIAL TIMES FRIDAY OCTOBER 22 2010 Doing Business in Austria Shadow Standing by for a long­awaited adjustment over the heady years that preceded banks must still contend with should never be the goal of a assumptions than required. Nev- after taking steps last year to Banking the crisis, when Austrian banks growing portfolios of non-per- bank tax.“ ertheless, analysts expect most sell a problematic credit portfo- image rushed to buy assets and open forming loans, requiring them to Austria’s government is likely institutions to raise capital over lio. Double­digit growth branches across central and east- make large provisions to cover to impose its own €500m bank the coming years, not least However, with a focus almost is unlikely to return, ern Europe. The double-digit potential losses that can only levy but, compared with the size because they must one day repay exclusively on the Austrian mar- growth rates they once enjoyed partly be offset by interest and of taxable assets, this is much capital received from the Aus- ket – it is required to sell a 10 per abroad write Chris Bryant and are unlikely to return, even as trading income. more digestible and officials say trian state during the crisis. cent stake in Hungary’s MKB to Neil Buckley most of the economies in emerg- The pre-crisis fad of issuing its design will avoid double taxa- The combination of all these comply with EU state aid rules – Continued from Page 1 ing Europe pull out of recession. loans in foreign currency – once tion. new burdens could accelerate the opportunities for growth are lim- Instead, the future could well wildly popular with consumers These challenges come at a long-awaited consolidation of the ited. “It doesn’t seem very excit- 2008. The Freedom Party’s Austrian banks are dusting be less profitable and will cer- because of their comparatively time when banks are being country’s “overbanked” market. ing but we are not an investment Vienna campaign was spe- themselves off after a volatile tainly be more tightly regulated. low interest rates – has since urged to lend more to support Raiffeisen this month completed bank we are a traditional retail cifically targeted at this period but for many the hard The outlook for the region is turned into a liability for banks the recovery and as regulators a merger with RZB, its unlisted and commercial bank,” says segment. In posters and work is not over and a period of highly heterogeneous and banks’ as the weakening of domestic Austrian commercial banking Byron Haynes, chief executive. mass mailings, the party consolidation awaits. fortunes may fluctuate according currencies made repayment Hungarian bank parent, bringing to an end a five- In spite of the tougher condi- promised that it would pro- The country’s leading institu- to exposure to particular mar- more expensive and caused some tax is being used year period as a purely eastern tions, Austrian banks operating tect “free women” against tions – Raiffeisen International, kets. borrowers to default. Lending in to fill short­term Europe-focused retail lender. in eastern Europe say they religious repression and Erste Group and Bank Austria Some countries in central Swiss francs has all but disap- budgetary holes, Management explained that the remain committed to the region save the Austrian character (owned by Italy’s UniCredit) – Europe, for example, have peared, with some governments says Raiffeisen’s merger would help the bank gain in the belief that the east’s battle of the city. remained profitable throughout received a boost from renewed moving to ban or restrict these Herbert Stepic access to both debt and equity to catch up with living standards A poster that called for the crisis, in spite of fears that German demand for their loans. (left) markets, while enabling the in western Europe has been “more courage for our their exposure to central and exports. But in Hungary, Roma- Hungary’s new government retail operations to promote delayed, not cancelled. Indeed, Vienna blood” referred on eastern Europe could prove their nia and parts of the western Bal- shocked industry participants in demand that they hold more cap- more sophisticated products Unicredit’s decision to appoint one hand to a popular waltz undoing. kans, the outlook is less rosy due June by unveiling a Ft200bn ital. New Basel III capital and After Österreichische Volks- Federico Ghizzoni as its new by Johann Strauss, but also The same could not be said of to a mix of political uncertainty annual levy on the financial sec- liquidity rules will place addi- banken, Austria’s fourth biggest chief executive was seen as a sig- appealed to racial preju- Hypo Group Alpe Adria, which and painful austerity. tor. So far, at least, fears that tional demands on banks, lender, incurred a €1.1bn loss in nal that it remained committed dices. In a comic strip sent had to be nationalised in Decem- “You can’t talk about ‘eastern other cash-strapped governments although Austrian institutions 2009 as a result of huge risk pro- to its eastern European opera- to all households that retold ber after running up big losses in Europe’. There’s a huge differ- in the region might follow suit insist they already meet the visions and impairments on real tions. the Ottoman siege of the Balkans. But its problems ence between Poland and Roma- have proven unfounded. “The requirements. estate, it began the search for a Following his appointment, Mr Vienna of 1683, a knight were largely specific to the bank nia or between the Czech Repub- Hungarian bank tax is hurting Markets were reassured this strategic partner. But talks with Ghizzoni – until recently the who resembles Mr Strache and its management and not con- lic and Hungary,” Andreas Tre- the whole industry terrifically,” summer when the big three rival Bawag collapsed in May, head of the group’s emerging is shown urging a boy to sidered endemic to the industry ichl, chief executive of Erste says Herbert Stepic, chief execu- banks comfortably passed Euro- leaving its future direction Europe operations – said that attack a foreigner called as a whole. Group, told the FT’s View from tive of Raiffeisen. “The tax is pean-wide stress tests, even uncertain. Bawag, owned by US moving the CEE headquarters Mustafa with a slingshot. Today’s banking environment, the Top series. simply being used to fill short- though the national bank investor Cerberus Capital Man- from Vienna was “not on the The Vienna ballot came however, is very different from In many of these markets, term budgetary holes and that imposed a tougher set of stress agement, has returned to profit agenda”. two weeks after the Free- dom Party doubled its share of the votes in provincial elections in Styria. Both results are bound to heighten the pressure on the Social Democrats and the People’s Party, which Prospects govern the country jointly in a grand coalition. In the latest opinion polls, the Freedom Party nearly caught up with the two gov- erning parties, each of considered which is seen at somewhere between 25 and 30 per cent. The unveiling of an auster- ity budget with tax increases and spending cuts brighter in could push Mr Strache’s party to the number one spot. The Social Democrats and the People’s Party have gov- more niche erned since the end of a centre-right coalition in 2006. Their leaders, Chan- cellor Werner Faymann, from the Social Democrats, and Jose Pröll, the finance markets minister, from the conserv- atives, once had a good per- sonal relationship, but they minister. “We had once have become stuck in petty Industry decided to become the rivalries. number one car parts sup- With no national or Eric Frey reports plier, but in the wake of the regional election until early on the country’s financial crisis, we realised 2013, the coalition has a that we were too dependent chance to change its style over­reliance on selling to the producers and undertake genuine on the export of of heavy, energy-intensive reforms, including the trou- cars.” bled education system, car parts Austria needs to expand expensive pension obliga- in the area of alternative tions and the multiple lay- ollowing an unprec- energy and low-carbon ers of bureaucracies. edented drop of transport, Mr Mitterlehner Unlike his former mentor, nearly 20 per cent in says. “The whole field of Mr Haider, even his own 2009 in the wake of CO2 reduction offers us supporters do not see Mr Fthe financial crisis, indus- excellent market opportuni- Strache as a future chancel- trial output has recovered ties.” lor or his party as a coali- swiftly this year and led a The country is also tion partner. In a Septem- strong economic perform- investing in biotechnology ber poll by the research ance. But experts warn that and other innovative fields. institute, Market, only 8 per industrial companies totally But in agricultural technol- cent said they would like to dependent on export mar- ogy and pharmaceuticals, see him as chancellor. kets may face another widespread opposition to But some observers decline next year. genetic engineering is hold- believe that may change. “The key question is: can ing the country back. “That “In the next general elec- we turn the export-driven attitude certainly does not Part time: suppliers are mostly selling to BMW and Mercedes plants in southern Germany rather than the strong car industry in Slovakia Bloomberg tions, Strache will not face recovery into sustained help us,” Mr Mitterlehner a formidable opponent like growth?” says Christian says. Also, the share of Michael Häupl,” says Chris- Helmenstein, chief econo- exports to non-European Backlog of work Construction sector is on track but end of the line is in sight tian Rainer, editor-in-chief mist of the Austrian associ- markets needs to rise from of Profil, a weekly maga- ation of industry (IV). 20 per cent at present to Visitors to Vienna might assume Moreover, Vienna’s railway station 27 countries, was forced to close or and the development of niche zine. “He will have a real “Given the decline in state about 30 per cent, he adds. that the construction sector, a pillar projects are part of a backlog of mothball 31 plants last year as product areas in order to generate chance to take the number spending and the renewed There has been some of the domestic economy, is in rude work, commissioned before the revenues fell by 25 per cent to growth. one spot.” strength of the euro, we growth in sales to China, health. South of the city centre, a crisis that continues to sustain the €1.8bn. Alpine, for example, has a strong Another national coali- have become more pessi- but they make up only 2 per 100 hectare plot is being excavated industry. Heimo Scheuch, chief executive, business line in sports stadiums. tion that included the Free- mistic for 2011.” cent of total exports. and remoulded to host a new main But revenues are starting to come says the restructuring effort is Before 2008 it profited from dom Party would probably Even though the bulk of Mr Helmenstein agrees railway station. under pressure because of a dearth complete but there are few signs yet Austria’s decision to co­host the cause fewer protests abroad industrial output goes to that companies need to Due to enter partial service in of project financing, low capacity of a market recovery. “The two 2008 European football than the link-up between other eurozone countries, diversify their markets if 2012, the Hauptbahnhof will allow utilisation, delayed investment major issues are unemployment and championships, building sports former People’s party leader mostly to Germany, the they want to continue to through­rail traffic, creating a decisions and constrained budgets. consumer confidence. A lot of grounds in Innsbruck, Salzburg and Wolfgang Schüssel and Mr buyers are mainly exporters grow. Over the past two transport node linking all four Meanwhile, competition is increasing people in eastern Europe also have Klagenfurt. Haider did in 2000. themselves and have begun decades, most foreign direct corners of Europe. for the remaining business, hitting difficulties getting finance.” It is building stadiums for the At that time, far-right to cut back on orders investment went into cen- For now, however, the area is a margins. Hans Peter Haselsteiner, chief 2012 championships in Poland and groups were still shunned because of the recent rise of tral and eastern Europe, jungle of cranes, containers, Output in the construction executive of Strabag, Austria’s Ukraine, including the National in other European coun- the value of the euro “but in the rest of the concrete and construction vehicles, a industry fell in real terms by 6.1 per biggest construction company with Stadium in Warsaw, seating 55,000. tries, and the EU partners against the dollar and other world, where growth is pattern repeated at Vienna’s other cent last year to about €29.7bn, an output volume last year of Meanwhile, for Strabag, imposed a short-lived freeze currencies, Mr Helmenstein much stronger, we are main railway stations, Westbahnhof according to the Austrian Institute of €13bn, says public stimulus waterways, environmental on bilateral relations. says. Public spending is fall- hardly present at all. Nine- and Wien Mitte. Both are undergoing Economic Research (Wifo). packages have sustained the engineering and railway construction But with Geert Wilders’ ing all over Europe because ty-five per cent of our redevelopment to accommodate “The current crisis is the greatest industry pretty well until now. are important areas. “We believe Freedom Party supporting a of deficit reduction, but that exports go into markets extensive shopping, restaurant and challenge faced by the construction But as governments move from that a construction company must centre-right minority gov- might be offset by that are growing at less office space. industry for decades,” Porr’s stimulating the economy to be a niche player – but one in many ernment in the Netherlands improved consumer confi- than the global average”, he These projects are of course a executive board wrote in a letter to tightening the public purse, the different niches,” Mr Haselsteiner and a similar arrangement dence, he adds. says. boon for the country’s leading shareholders in August. potential for new transport says. in Denmark, the reaction to The murky outlook for “Companies in need of construction companies – the Even as industrial output recovers, infrastructure may be constrained. Wienerberger says it is working to a coalition that included Mr industry can be gauged by commodities need to invest biggest and best­known being the next two years are likely to “The assumption is that the crisis become not just a provider of Strache might be more the low level of investment in Latin America, those Strabag, Porr, Alpine and Swietelsky remain tough as the sector tends to will really start hitting the building bricks, roof tiles and paving but also muted. spending at most compa- that are dependent on – but they are a relatively blunt lag the economic cycle. The fortunes industry over the next two years, a systems supplier. It has developed nies, which acts as another knowledge and research, gauge of the sector’s fortunes. of individual companies will depend although the decline in private a technique to glue clay blocks brake on growth. Capacity should be present in the US The country’s big on their exposure to particular sector construction at the moment together using an aerosol adhesive utilisation is running at 82 and Asia.” builders have diversified industries and countries. The is not estimated be too dramatic,” instead of mortar to speed up the Contributors per cent, which is in line But another more tradi- international recovery in central and he says. construction process. Chris Bryant with pre-crisis levels and tional market opportunity portfolios, particularly eastern Europe, for To prepare for this change, The company is also betting on Central and Eastern higher than the European is waiting next door. Aus- in central and example, is likely to be construction companies are looking more demand for energy­efficient Europe Business Union average. trian car part suppliers are eastern Europe, highly heterogeneous. at alternative ways to finance and sustainable buildings. “I think Correspondent But if companies invest at mostly selling to BMW and where there is The residential projects, including greater use of Wienerberger’s product range is a all, they replace old equip- Mercedes plants in south- demand to upgrade construction market was public private partnerships. “The good one for the future,” Mr Eric Frey ment or try to lower costs, ern Germany and not to the communist­era the first to be hit, which current intention of national Scheuch says. FT Contributor but they do not plan any strong car industry in Slo- infrastructure. had a serious impact for governments to consolidate their The coming months are set to be Kester Eddy increase in production, the vakia, which is dominated materials providers. budgets could make budget­neutral difficult for the construction sector. FT Contributor association’s data show. by Volkswagen, PSA and Hans Peter Austria’s PPP models a more attractive But when trains start pulling out of “They are worried about Kia, Mr Helmenstein says. Haselsteiner, Wienerberger, the financing option in the medium Vienna’s new main railway station in Haig Simonian next year,” Mr Helmenstein French PSA, the producer CEO of world’s biggest term,” Porr told shareholders. 2012, the contours of the new Switzerland Correspondent says. “They see strong cost of Peugeot and Citroen cars, Strabag brickmaker Austrian construction and industry will have become clear. competition and hardly any and South Korean Kia with 227 materials businesses also emphasise Stephanie Gray chance to pass on price receive only 2 per cent of plants in the importance of diversification Chris Bryant Commissioning Editor increases. Without any their supplies from Austria. Steven Bird prospect of higher earnings, “We are far away from Designer they sit still and do not exhausting our potential in invest.” Slovakia,” he says and calls energy and electronic cars, most of the profits went to innovations come from in high demand in elec- Andy Mears Regardless of next year’s for a stronger effort to enter where much larger interna- the first movers who took other parts of the world, tronic cars, and Zizala, a Picture Editor trend, industry faces a the supply chain networks Widespread tional groups compete with the best claims and the peo- Austrian companies will maker of energy-efficient period of restructuring in of non-German car makers. opposition to huge research and develop- ple who sold the miners the succeed in developing thou- automobile light systems. For advertising, contact: the coming years. Compa- The best prospects for ment budgets, Mr Helmen- shovels,” he says. “We sands of new niches.” In such specialised fields, Samantha Lhoas nies need to shed a depend- Austrian companies do not genetic engineering stein says. The focus should should not seek radical Mr Helmenstein cites small and medium-sized Phone +44 207 873 3708 ence on European markets lie in what are usually cited is ‘holding the rather be on complemen- innovations, where we can Fertinger, a little-known companies can gain global E­mail: and the German automotive as the future-oriented tary products for these and enter a global competition, maker of components for market leadership, despite [email protected] industry, says Reinhold Mit- industrial areas, such as country back’ other fields. but to look for complemen- energy-efficient air condi- limited research funds and terlehner, the economy biotechnology, alternative “During the gold rush, tary products. When basic tioning systems that will be high labour costs. FINANCIAL TIMES FRIDAY OCTOBER 22 2010 ★ 3 Doing Business in Austria Finance probes stretch limits of justice system

academy, co-sponsored by the UN, In addition to HGAA, Austria’s Corruption was last month established in Austria. media serves up an almost daily drip When Mr Haider was governor of feed of revelations about the so-called Chris Bryant reports on Carinthia for 11 years between 1989 “Buwog affair”, involving former the difficulties facing and 2008, HGAA was a dependable finance minister Karl-Heinz Grasser. partner that helped finance many of Vienna prosecutors are investigating prosecutors investigating his pet projects – including luxury Mr Grasser, once a party colleague of complex economic crimes hotels, golf courses and a football sta- Mr Haider, over his involvement in dium. But the cosy relationship blew the €961m sale in 2004 of state hous- up in spectacular fashion in December ing to Immofinanz, a real estate com- hen Jörg Haider was when the bank was nationalised after pany. killed in October 2008 running up huge losses in the Bal- Two lobbyists, one of whom was after his car veered off a kans. The group incurred a net loss of best man at Mr Grasser’s wedding, are road in Carinthia on the €1.58bn last year, thanks to problem- alleged to have received almost €10m Wway to a family party, many Austri- atic leasing and cross-border financ- for their services in securing the suc- ans quite naturally thought they had ing portfolios, and expects to make cessful bid. Michael Ramprecht, Mr heard the last of the populist, anti- provisions for losses of about €1bn in Grasser’s former colleague, claimed immigration politician. But two years 2010. subsequently that the deal had been on, Mr Haider remains an almost In response, the government pre-arranged and insider information daily talking point in the Austrian appointed two special units called exchanged. The lobbyists admitted media thanks to his alleged links to a not paying tax but Mr Grasser, who series of financial scandals, including was questioned by authorities for two the near-bankruptcy of Hypo Group It was not without a hint of consecutive days last month, has Alpe Adria (HGAA), a Carinthian irony that an international denied wrongdoing. bank. Austria has slipped in Transparency In addition to HGAA, investigators anti­corruption academy International’s corruption-perception are said to be tracking millions of was established index in recent years but enjoys a euros in secret bank accounts in better ranking than the UK and US. Liechtenstein belonging to Mr Haider, last month in Austria Nevertheless, there is a widespread including purported donations from belief in Austria that state prosecu- Saddam Hussein and Muammer Gadd- tors have lacked the resources or afi, the Libyan leader. “CSI Hypo” and “Soko Hypo” to inves- training in order to properly investi- Meanwhile, a separate inquiry is tigate possible misuse of funds. In gate complex economic crimes. “Cer- under way into the privatisation of a August, police arrested Wolfgang Kul- tainly there are capacity issues,” says Hypo Group: the investigation into the bank has shone a spotlight on Austria’s struggle to combat graft public housing company in 2004 con- terer, former chief executive, on suspi- Bettina Knoetzl, a partner with ducted by a former protégée of Mr cion of breach of trust. Mr Kulterer Vienna law firm Wolf Theiss. “These by a subsidiary of Austria’s Meinl tria’s authorities are getting a grip on Later that month, the government Haider. has denied allegations made against files are simply gigantic, it would take Bank, closely held by the family of the problem. Claudia Bandion-Ortner, announced €28m in additional fund- These and other cases – none of him in connection with the bank. a single person two years to read all Julius Meinl V, scion of the famous justice minister, in August announced ing over the next four years in order which has yet come to court – have Meanwhile, prosecutors in Germany the papers in some cases.” Austrian coffee and retail dynasty. the creation of special units to help to speed up justice in economic crime raised questions about Austria’s abil- and Croatia are also investigating the This is particularly true of cases Mr Meinl was arrested in 2009 amid improve the investigation of alleged cases. “We will not abandon the judi- ity to combat graft. Mark Pieth, chair- bank’s activities, including alleged related to financial markets, the most allegations of breach of trust, over- white collar crimes including fraud, ciary in its efforts to combat corrup- man of an Organisation for Economic attempts by an investor group to high-profile of which pertains to the charging fees and fraud in relation to breach of trust, money laundering and tion and economic crime,” says Chan- Co-operation and Development work- profit unfairly from its €1.6bn sale in decision in 2007 by Meinl European MEL and later released on record bail tax evasion. The minister assigned 40 cellor Werner Faymann. ing group on bribery in international 2007 to BayernLB. Tilo Berlin, head of Land, a quoted property group, to buy of €100m. He denies wrongdoing and of more than 300 state prosecutors to Nevertheless, until more suspects business, in August branded the coun- the group and one time chief execu- back €1.8bn in investment certificates no formal charges have been brought. these units and said the law would be are charged, tried, found guilty or try an “oasis of corruption”. It was tive of HGAA says his actions were without informing investors. The The bail money has not been changed to encourage whistleblowers acquitted, Austria’s pursuit of alleged not without a hint of irony, therefore, “correct and conforming with all shares subsequently fell sharply in returned. and greater transparency in economic white-collar criminals may itself that an international anti-corruption laws”. value. At the time, MEL was managed There are signs, however, that Aus- cases. remain under suspicion. City that hums with industry by day and sings along by night

that hums along by day and neering director and co- Graz sings along by night. (An founder of qpunkt. ample supply of inns and Demand for services has Kester Eddy visits eateries supports the latter outpaced plans; qpunkt has a centre of activity.) already opened two Engineering, particularly branches in Germany and manufacturing, the auto sector, has long taken on 30 specialists. Rev- education, tourism been the main driver of enue this year is expected wealth creation, centred on to top €3m, Mr Kussmann and commerce Magna Steyr, the Austrian says. branch of the Canadian Such news is music to the When Theresa Tessmar- Magna engineering group. ears of Andreas Morianz, Pfohl attended a business With more than a century responsible for economic seminar in Graz this month, of local operations, Magna development in the city she little thought that Steyr makes vehicles for administration. within two hours she would such leading marques as “It’s dangerous to be too be viewing the rooftops of BMW, Mercedes-Benz and dependent on one industry, her home city from a fire- Chrysler. and we are keen to diver- brigade rescue tower and Although hit hard by the sify. So in addition to the about to abseil to the global downturn, orders are auto sector cluster, we want ground 150 feet below sus- now picking up, with Peu- to support the development pended by a thin nylon geot, the French auto- of life sciences, especially in rope. maker, announcing it conjunction with the uni- But, once her name was intends to increase produc- versities, biotechnology, drawn out of the hat, Ms tion of its RCZ sports coupe, renewable energy and envi- Tessmar-Pfohl, a mother of built in Graz from the ronmental technology and three, calmly donned her beginning of this year, from creative industries. We offer protective gear, took 17,000 units this year to various support, such as instructions, and descended 22,000 in 2011. rental subsidies, to start from the night sky to The competencies nur- ups in these fields,” Mr cheers from fellow attend- tured by Magna Steyr and Morianz says. ees. “I’m not afraid of the associated educational He also emphasises that heights, but I didn’t want to institutions have in turn Graz, with an international look down. It’s good to over- spawned a series specialist airport and plans for inter- come your fears and it’s fun companies, typically offer- national school, is keen to doing something outside ing highly innovative niche attract foreign employees the norm,” she said after services. and investment. her adventure. One such is qpunkt, Yet for all its educational Organised by the local established by three local institutions, some compa- branch of the Federation of engineers in 2008, which nies struggle to find skilled Austrian Industries, this has developed unique pro- workers. “Many school kids “Bravery” seminar was grammes for modelling associate blue overalls with intended to encourage busi- thermal and acoustic char- dirty jobs, even if it’s not ness leaders to challenge acteristics in auto, rail and true today,” says Viktor limitations and “think out- aerospace vehicles. “We can Larissegger, of the local side the box”. For Ms Tess- simulate the thermal com- chamber of commerce. mar-Pfohl at least – there in fort of humans inside vehi- And despite its many support of her husband, a cles. We’ve developed our attractions, Graz loses out local businessman – it own thermo-physiological to Vienna and Salzburg in proved a practical success. models of humans with 32 Austria’s brand pecking Not that Austria’s second different body parts, which order. “We’ve got city (population 260,000, can detect if and why a per- Schwarzenegger and the plus 40,000 students and son feels uncomfortable, be largest collection of medie- 100,000 in the environs) it sun on the arm or airflow val armour in Europe,” says appears to need much on the leg. Whatever, we Max Mazelle, an assistant encouragement in forward can offer solutions,” says in the city hall – referring thinking: for the decade Christian Kussmann, engi- to the nearby birthplace of before the global crisis of the Californian governor 2008, the local economy and the local museum of expanded by 3 per cent a ancient warfare. year to hit €37,900 per But neither quite match capita – below Vienna the allure of Mozart and the but comfortably above Vienna Opera. Not that the the national average. locals seem to mind. While unemployment “Sure, Vienna has a lot of climbed to 8.4 per cent business, but Graz is a safe last year, a combina- city, with nature all around. tion of job creation I can be on my local golf schemes, retraining course within 15 minutes, and the recovery has and retire to a Buschen- seen this indicator slip schank – a traditional vine- back to 6.9 per cent – on yard tavern – afterwards. a par with the pre-crisis It’s a wonderful place to years. live,” says Herbert Located on the natural Kutschera, a busi- route from Vienna to ness consultant Slovenia, Italy and the and wine trader. northern Adriatic, Graz has for centuries been Theresa a centre of commerce, Tessmar­Pfohl manufacturing, educa- rose to the tion and tourism: one challenge 4 ★ FINANCIAL TIMES FRIDAY OCTOBER 22 2010 Doing Business in Austria In the forefront of vaccine development Trying to

avoid something like 75 to notorious MRSA, which from the state. Equating to versities worked with a complete innovation chain, Innovation 80 per cent of [otherwise have become increasingly 2.76 per cent of gross company on projects, which from basic research in avoid burden expected] cases of diar- difficult to treat. About 4m domestic product, this was fine, but after 18 ACCM to finished products Kester Eddy rhoea,” says Gerd Zettl- hospital patients are places Austria third in the months or so, typically it all in LCM. This is unique to considers the meissl, chief executive of infected each year, result- European Union-27 rank- ended. K-centres result in Austria,” Mr Schatz says. Intercell. ing in 200,000 deaths. ings, behind Finland and much broader and deeper With Austria aiming to benefits of a Sporting the slogan Intercell, which listed on Sweden, but ahead (just) of co-operation, which tends to further increase investment on business dramatic increase “Smart Vaccines”, Intercell the Vienna Stock Exchange Denmark and Germany, Mr be continued after the origi- in R&D, doubling the total was formed in 1997 by two in 2005, employs 200 people Garzik says. nal contract has expired,” spend in the next decade to in R&D spending Vienna-based professors at its Vienna headquarters Aware of the traditional says Mr Garzik. €15.8bn, the future looks est tax burdens in the EU. and three students, sup- and 100 each in subsidiaries chasm between academia One such example is in rosy. But the system has its Tax With a top individual tax For tourists to the pristine ported by a private equity in Scotland, where Ixiaro is and industry, Austria has Linz where the original critics. Nikolaus Franke, rate of 50 per cent on Alpine slopes and meadows fund and a small state produced, and the US – operation has been trans- director of the Institute for Reassuring outlook incomes exceeding €60,000 of Austria, thoughts of grant. where responsibilities formed into a fully private Entrepreneurship and Inno- has ignited the there is little scope or incli- stomach upsets are proba- Progress has been dra- include the diarrhoea vac- Researchers have concern, Linz Centre of vation at Vienna University nation for raising income bly the last thing on their matic. One of the founder’s cine research. made significant Mechatronics. “LCM has 80 of Economics and Business, political debate, taxes further. Meanwhile, minds. original ideas, to develop a “Undoubtedly, Intercell is employees and a turnover admits that much has been says Chris Bryant the corporate tax rate of 25 Yet, on the Campus vaccine against Japanese one of our flagship compa- progress with a of about €5m, meanwhile done. per cent is high relative to Vienna Biocentre, tucked in encephalitis, a deadly, pre- nies in terms of innovation. drug designed our customer base has But, he says, efforts must nearby flat-tax regimes between an urban motor- viously untreatable, mos- But Austria has been expanded from 15 when we be redoubled to realise the Austria’s economy, meas- prevalent in central and way and a motley assort- quito-borne infection increasingly supporting to combat MRSA were a K-centre to 150 full commercial potential of ured in terms of growth, eastern Europe. ment of housing and com- present in some countries R&D since the mid-1990s now,” says Gerald Schatz, scientific research. “There unemployment and public “The government knows mercial buildings in in Asia, has already pro- across a broad range of bacterial infection managing director. is still too much great debt accumulation, outper- that companies are the Vienna’s District III, the duced results; the drug, activities, including life sci- At the same time, LCM research that is not being formed many of its Euro- motors of the economy and management of what some marketed as Ixiaro, was ences, engineering, IT and placed much emphasis on has helped continue the tra- considered for commercial pean rivals during the cri- so we expect any tax term the country’s first launched last year after materials science,” says linking universities with dition, teaming up with the exploitation, or if so, too sis. reforms in this area to be modern biotechnology com- winning approval in North Ludovit Garzik, managing industry, setting up a series local Johannes Kepler Uni- late.” Now a faster than moderate and reasonable,” pany is overseeing research America and Europe. director of the Council for of jointly-funded compe- versity, plus Vatron, a sub- The younger generation expected recovery has says Herta Vanas a partner that may largely banish the Researchers have also Research and Technology tence, or “K-centres”, from sidiary of Voest-Alpine, the shows “a much more posi- boosted hopes that addi- with Taxand Austria, a tax dreaded symptoms that made significant progress Development. 1998. steel producer, to create a tive attitude towards entre- tional burdens on business adviser. strike visitors to countries with other vaccines, includ- Indeed, total spending on In K-centres, the univer- successor K-centre, known preneurial thinking”, Prof can be avoided in budget Reinhold Mitterlehner, from India to Guatemala. ing one designed to combat R&D in Austria has doubled sity and private companies as ACCM, for scientific Franke says. “People now negotiations still being the economy minister, is “We have seen in our so-called nosocomial infec- in the past decade, to an agree to co-operate on research. “The goal is to are more willing to take debated as this publication lobbying to prevent any Phase 2 study, with about tions, bacterial infections expected €7.8bn this year, research for up to 10 years, build up a one-stop shop, so risks and actively seek went to press. adjustment of Austria’s 200 subjects vaccinated acquired during hospital 60 per cent from the private in a specific area of compe- that LCM and the K-centre opportunities. However, After contracting by 3.9 prized group taxation before travelling, we could operations, such as the sector, and the remainder tencies. “Traditionally, uni- can offer services along the there is still a way to go.” per cent in 2009, the econ- regime, introduced in 2005. omy is expected to grow by The law provides an incen- 2 per cent this year and by tive to establish holding 1.9 per cent in 2011, accord- companies in the country ing to the latest projections and for corporations to base from the Austrian Institute their headquarters in the for Economic Research country – of particular use (Wifo). The better economic to companies looking to outlook – driven by an operate across markets in National expected 12 per cent growth central and eastern Europe in exports this year – is set An important advantage to have positive knock-on of the group tax is that it effects on the labour mar- allows companies to offset ket and budget. losses made by overseas Unemployment in Austria majority-owned subsidiar- passion has – already among the lowest ies. The system also makes in the European Union – is the acquisition of busi- expected to moderate from nesses more tax efficient by 4.8 per cent last year to 4.4 allowing companies to per cent by the end of 2010. deduct interest costs. Meanwhile, better than But political pressure to worldwide expected tax revenues are reform the laws arose after set to deliver a budget defi- banks and other big busi- cit of about 4.1 per cent of nesses were able to lower GDP this year – modest by their tax payments because current European stand- of losses in foreign subsidi- ards, albeit slightly larger aries. presence than last year’s 3.5 per cent. “Austria only has a small With financial markets domestic market but it acutely sensitive to signs of Winter sports branded items in which Austrian fiscal largesse, the govern- Josef Pröell companies have a global pres- ment in March committed says reforms Big brands account for ence,” says Alexander Schmied, itself to cutting the deficit are essential, director of the wood industry below the EU’s ceiling of 3 regardless of about half of world sales trade federation under which, for per cent by 2013. the economic historical reasons, ski makers are However, the relatively situation of downhill skis a year, grouped. reassuring outlook has says Haig Simonian Inevitably, however, the sector sparked a political debate in has had its difficulties. Demand is Austria about whether the functions as a hub for the highly dependent on seasonal government needs to raise region so it’s important to snow conditions and, more taxes as originally planned. keep corporate headquar- oday’s opening of the FIS broadly, the macroeconomic cli- The coalition says it ters situated here,” Mr Mit- World Cup ski champion- mate. Moreover, sales have moved wants to save about €3.4bn terlehner says. ship in Sölden is for many steadily away from purchases by in 2011 and has agreed on “We particularly don’t Austrians much more individuals to an increasing role the formula that 60 per cent want any more tax burdens Tthan just the debut of the world’s for ski rental shops. of this should come via cost on companies and will take annual ski circus. For skiing and As with the shift from vinyl to savings and 40 per cent that position into the nego- snowboarding fans, the race, regu- CD, the industry enjoyed a boom through tax increases. But tiations. [In general] tax larly held on the high glacier, is with the introduction of shorter there is confusion about rises must be kept as mod- an annual reminder of the impor- and easier to turn carving skis. what will be done with any erate as possible and if pos- tance of winter sports as a pillar Since then, however, the market additional tax revenues – sible they should be time of the economy. has been volatile: in 2006-7, global which could total €3bn this limited.” Inevitably, skis – and the com- sales fell from an estimated 5m year. Meanwhile, the SPÖ petitors who use them – generate pairs a year to 3.5m – a level that Josef Pröell, finance min- wants to align its regula- the most attention. But Austria’s has remained stable for the past ister, and leader of the con- tory and revenue-raising winter sports sector includes three years. servative Austria People’s goals by increasing taxation accessories, such as bindings, Such ups and downs explain Ups and downs: many brands that are Austrian in name are in fact foreign owned Dreamstime party (ÖVP) said last month on capital gains and specu- gloves and clothing, and a wider why many brands, though Aus- that structural reforms lative income. “We have range of items, from tools for trian in name, are actually for- Manufacturers no longer produce Allsport and Alaska are estab- ogy group, is a leading manufac- were essential regardless of one of the lowest capital maintaining skis to crowd man- eign owned, amid industry consol- for inventory, and then find them- lished skiwear brands. Eisbär is turer of the electronic control and the economic situation. gains ratios among OECD agement systems and cable cars. idation. Atomic, probably the big- selves forced to slash prices at the best known for its woolly ski hats. ticketing systems used by many “However, we should use countries. There’s room for “Skiing is Austria's national gest, is owned by Finland’s Amer end of each season to shift sur- And while Giesswein may be most ski resorts for payment and [any additional revenue] this to come up to interna- passion, from beginner to the sports group. plus stock,” says Mr Schmied. familiar in Italy and Germany for access. that the economy brings to tional levels,” says Mr advanced skier. Internationally Head and Blizzard, which vie “Above all, moving some pro- its felted slippers, the group is Meanwhile, reaching the top of avoid tax rises,” he said. Schieder. successful Austrian ski racers with Fischer for the number two duction to lower cost locations also an important maker of felted the mountain often requires the Meanwhile, the Social Given the ability to enjoy star status and act as slot, are Swedish and Italian winter clothing: 83 per cent of products of Doppelmayr, one of Democrats favour the intro- extract a large amount of ambassadors for Austrian know- owned respectively. And Elan, production is exported. the world’s biggest makers of duction of several new revenue from a small how and products,” says Gudrun while manufacturing some snow- As with the shift from Most winter sports fans are so cable cars and ski lifts. With sales taxes, but would like to number of aggrieved par- Hager, an Austrian trade repre- boards in Carinthia, is actually vinyl to CD, the industry intent on the slopes they may of €616m in the 2008-9 financial lessen spending cuts. ties, Austria has, not sur- sentative and former student ski based across the border in Slove- never notice the backroom year and more than 1,000 employ- “Of course we now need prisingly, alighted on the champion. nia. enjoyed a boom with machines in the shops where they ees in Austria, the group has fiscal consolidation after financial sector as a poten- In skiing alone, Austria’s big Despite such changes, the Aus- the introduction of buy or rent their equipment. But 14,100 systems installed in 83 the crisis in order to keep tial source of tax income. brands account for about half of trian groups proudly emphasise for those sufficiently attentive, countries. the state able to act,” says The coalition is discuss- world sales of about 3.5m pairs of their domestic origins and affilia- shorter carving skis Wintersteiger may ring a bell. Moreover, Skidata and Doppel- Andreas Schieder, SPÖ ing the imposition a €500m downhill skis a year. Cross coun- tions. And while production of The company is world market mayr have both demonstrated in state secretary in the levy on banks, with the rev- try skis, in which the Austrians some cheaper and mid-market leader in specialist machine tools recent years the potential to grow finance ministry. enues to flow in the budget. have a similar share, add a fur- models has shifted to lower cost has allowed Austrian brands to for ski repairs and servicing, with well beyond winter sports. Dop- “The important thing is Final details remain to be ther 1m. Top brands such as eastern Europe, headquarters, remain competitive in a cut-throat almost 90 per cent of output sold pelmayr provides local transit sys- to have a wise consolida- thrashed out, however. Atomic, Blizzard, Fischer, Head research and development, and business – and thus maintain abroad. tems for cities, airports and shop- tion, which minimises the It has also joined Ger- and Kneissel, are familiar on production of more expensive their operations in Austria,” he But two of the biggest Austrian ping malls. Likewise, Skidata has impact on growth and many and France in lobby- slopes around the world, as is lines has remained in Austria. says. names in the winter sports busi- transferred technology from the unemployment.” ing heavily for an EU-wide Elan in snowboards. Together, the “The business has scaled down Clothing and accessories repre- ness make neither skis nor cloth- piste to other locations, notably The tax issue is highly financial transaction tax ski makers account for 3,500 jobs. and learnt its lessons from the sent another important line – ing. Near Salzburg, Skidata, part airport and shopping centre car sensitive in Austria, which but faces opposition from “Skis are one of the few last big downturn four years ago. albeit less conspicuous than skis. of Switzerland’s Kudelski technol- parks. already has one of the larg- Britain and others. Antifreeze scandal ‘was the best thing that happened’

host vintner, who, fresh Engrossed in his wines, stage. “Many innocent tion of circumstances led to Rust, on the western shore took some samples home, two brothers began with a Wine from working on this year’s Mr Oswald does not men- winemakers and traders a broad rethink, with an of Lake Neusiedl, was one and that was my entry into mere four-hectare plot in harvest, moves among tion 1985. That year, Aus- suffered. People stopped emphasis on higher-quality young vintner embroiled in the US market,” she says. 1985. Investing furiously A new generation guests. The salutations tria was rocked by the buying at the supermarkets. production and innovation the turmoil in the wake of With picturesque Rust into all aspects of their has taken over, complete, Mr Oswald brings “antifreeze wine scandal”, But instead they started that soon became noticed. the scandal. overrun with tourists in business, and exploiting EU three glasses to our table, when some vintners were going to individual wine- “It started with individual “We had big discussions summer, Ms Schroeck sells funding to the hilt, the fam- says Kester Eddy each bearing his trademark caught illicitly sweetening makers they trusted,” says winemakers. People like about the way to go for- wine from her home, but in ily now works 115 hectares, 19th century folklore figure. their products with glycol. Josef Schuller, director of Alois Kracher, with his ward. But in Rust we have a good year, exports, chiefly employs 100 permanent It is early Saturday after- “I only have 2,500 bottles The market for Austrian the Austrian Wine Acad- very sweet wines from a history going back to the to Switzerland, Scandina- staff, and produces 900,000 noon and, under the benign of Klevner. As a business, I wine, especially the emy. [Lake] Neusiedel, in Bur- 16th century; we sold wines via, the US and UK, account bottles a year, one fifth for glow of an October sun, the should’ve dropped this ages semi-sweet styles In addition, many older genland, began to penetrate to kings and nobility, espe- for 70 per cent of sales. export. first guests are trickling ago. Only three wineries do then in favour, vintners gave up. “The the US market. Then larger cially our Ausbruch [late But while she has En route, they have into the garden of the it, and most sommeliers evaporated over- scandal was just too wineries, such as Lenz harvest, dessert wine]. We expanded from four hec- helped make Styrian Sauvi- Trapl-Schilcher Buschen- have never heard of it. But night. much for them; a whole Moser, Winzer Krems and realised we did not have to tares of vines in 1988 to 10 gnon Blanc a wine to match schank – a traditional inn my grandfather started Yet the generation of young Domaine Wachau, saw the invent anything new, just hectares today, Ms Schr- any from competitors in serving wine and cold coun- with this grape, so it’s a s c a n d a l winemakers took opportunity, upgraded and improve,” Ms Schroeck oeck shuns further expan- France or New Zealand, try fare – in St Stefan ob family tradition,” he says, initiated a over,” he followed,” Mr Schuller says. says. sion, fearing a larger opera- Erich Polz Jnr boasts from Stainz, a village of western as he pours a glass of this revolution says. The process was acceler- Putting into practice tion would leave her too the garden of the spacious Styria. Most are local, rare variety, a relative of that has T h i s ated in 1995 with Austria’s ideas learnt in Germany remote from her beloved Buschenschank at the win- though a handful have pinot blanc. p r o - combina- accession to the European and South Africa, her big vines and cellar. ery. made the trip from Vienna, Embodying a mixture of p e l l e d Union, releasing additional break came when asked to Others, such as Erich “My father and uncle 250 km to the north, and the time-honoured and A u s - Edi funds for development, par- show an American importer and Walter Polz, have taken started in the 1985 scandal,” one couple hails from dis- innovative, Mr Oswald is a t r i a n Oswald ticularly in Burgenland and the local cultural sights. “I a different route. Based he says, “Frankly, it was tant Hamburg. prime example of how Aus- wines on doesn’t parts of Styria, poor regions soon realised he wasn’t in Spielfeld, in the hills the best thing that ever All enjoy the personal trian wine has progressed to the mention at the time. interested in buildings, so I abutting the Slovene border happened to Austrian welcome of Edi Oswald, the in the past 25 years. w o r l d 1985 Heidi Schroeck, from suggested some wine. He of southern Styria, the wine.”