Effects of financial crisis on Austria Essay Example | Topics and Well Written Essays - 500 words

Effects of financial crisis on Austria - Essay Example Austria’s products are struggling to compete with the products China and India like Asian countries because of the higher prices of the Austrian products. India and China are the most heavily populated countries in the world and they don’t have the manpower shortage problems. On the other hand, Austria is facing severe manpower shortage and hence the labour cost is comparatively high in Austria. Subsequently the products of Austria are heavily priced in the global market. â€Å"Lending rates are a key element in the transmission of monetary impulses to the real economy even more so in bank-based financial systems such as the Austrian one† (Jobst). Austrian banks were more particular in safeguarding the interests of their customers rather than the interests of the country. Austrian banks were not much particular in adjusting the interest rates even at a time when the Austrian economy fluctuated a lot. Banks miscalculated that the relationships with the customers are more important even at a time when the economy was in a unstable condition. Banks took a more relaxed approach to risk assessment and risk premiums decline even when the recession struck the economy hard. The economic expansion of Austria suffered a major setback when the recession entered the world quiet unexpectedly in 2007. The slump in world trade has affected Austria also very much. Unemployment and inflation were reached all time high during the recession period in Austria. Many of the Austrian firms forced to cut down their labor force in order to escape from recession. However, Austria is currently showing signs of the great recovery. While most of their European counterparts struggling to repair the damage, Austria seems to be succeeded in finding solutions for the damages caused by recession. Compared to other Euro zone counterparts, Austria was able to recover quickly even though the recession struck their economy severely. The current growth rates of Austria are more