| A strong and credible market There is nothing which demonstrates the credibility of the Austrian bond market better than the minimal spread between Austrian and German treasuries. Before the latest National Council elections in December 1995, the spread was 40 basis points. A spread of 30bp is considered normal, due to the fact that the Austrian market is not as liquid as its German counterpart. Currently the spread amounts to only a few basis points. International investors obviously consider Austria a natural participant in the coming European monetary union. The primary reason for this judgment is, of course, the fact that the Austrian schilling has been pegged to the German mark for years, which means Austria has successfully, if unofficially, participated in the former European Monetary System. There was a significant interest and yield premium paid by Austria when it began its hard currency policy in the seventies. Since that time key figures for the Austrian economy have made impressive progress, closely matching those of Germany. Low growth, inflation and interest rates Current forecasts for economic growth have again been lowered. Real GDP growth of 1% is expected this year, and growth of somewhat over 1% is expected next year. |