* Wants exit strategies for bank support
* Recommends cutting debt to below 60 pct of GDP
* Calls for curbing incentives for early retirement
* Wants shake-up of good but costly health care system
By Michael Shields
VIENNA, July 11 Austria needs to cut state debt,
curb early retirement and lay out a path for strengthening banks
to ensure its export-dependent economy prospers, the OECD club
of industrialised nations recommended on Monday.
"The authorities should seize the opportunity to strengthen
reforms and maintain high growth, which in the past has been
considerably boosted by European integration effects which are
likely to fade out in the future," its economic survey found.
The Organisation for Economic Cooperation and Development
report noted the country's financial sector was recovering from
the financial crisis, during which Austria provided a 100
billion euro safety net and nationalised two lenders.
"While the support should stay in place as long as needed,
clear exit strategies would lift uncertainty and enhance market
confidence," the OECD said.
It pointed out that Austrian banks continued to have
below-average capital adequacy that will be addressed by new
Basel III rules on how much and what kind of capital banks hold.
"The total size of newly required capital due to Basel III
and the repayment of government support is estimated at between
15 and 18 billion euros... until 2020, which might lead to a
cumulative decline in GDP growth by 0.23 percentage points over
three years..." it said, citing academic studies.
"Raising new capital might be difficult, however, given the
importance of the multi-tier decentralised sector in Austrian
banking," it said.
The weak local equity market could also be problematic given
increased risk-aversion among international investors, a
national bank tax and a strong competition for equity among
European peers, it added.
"It would be advisable to require all major banking groups
to present a clear medium-term strategy of capital
strengthening, including a gradual repayment of government
Major Austrian banks include Erste Group Bank ,
Raiffeisen Bank International , UniCredit
unit Bank Austria, and Oesterreichische Volksbanken AG
OTVVp.VI. Bank Austria got no state aid during the crisis.
Other OECD recommendations included:
* Eliminating all subsidised avenues into early retirement
* Expanding early child care and full-day schooling
* Enhancing competition in areas like rail, post and
* Bringing the debt-to-GDP ratio below 60 percent
* Moving tax hits away from labour toward less distorting
* More clearly assigning performance, financing and spending
responsibilities for health care.
(Editing by Toby Chopra)