When from the mid-1970s the oil crisis brought an economic downturn and large increases in import prices heated up inflation (stagflation), economic policy in Austria continued to give absolute priority to the target of full employment. Whereas in most industrialized countries priority was given to controlling inflation and the money supply was reduced, in Austria the economic policy-makers opted for a macroeconomic policy mix which subsequently came to be dubbed Austro-Keynesianism. This consisted in a combination of an expansive demand-side policy to preserve the high employment rate, a co-operative incomes policy based on social partnership to restrain upward pay pressure in order to maintain balance-of-payments equilibrium, and a hard-currency policy pegged to the Deutschmark in order to check the import of inflation. This pragmatic approach attuned to a small open economy and the institutions of social partnership made it possible to maintain a high emloyment rate for longer than in most other industrialized countries.

Please note: the European industrial relations glossaries were compiled between 1991 and 2003 and are not updated. For current material see the European industrial relations dictionary.