By Michael Shields
VIENNA (Reuters) - A business leader's offhand pre-election comment that Austria is "going to the dogs" has galvanized a debate about whether the nation's enviable prosperity will wither away.
The remark by Chamber of Commerce head Christoph Leitl held up a mirror to a comfortable and slightly coddled country that sailed through five years of economic crisis with little of the misery that euro zone peers like Greece or Cyprus endured.
With the centrist, pro-Europe coalition parties counting on low unemployment and gathering economic momentum to return them to power in a September 29 parliamentary election, their reluctance to do little more than preserve the status quo has raised fears that they will jeopardize future economic growth.
The coalition of Social Democrats (SPO) and the conservative People's Party (OVP) has tweaked policy rather than press austerity, eager not to stall the export-driven economy in a push for fiscal rectitude.
Polls show the two are set to keep a combined majority despite challenges from right-wing eurosceptics and Greens.
But critics say the lack of appetite for change will over time jeopardize the standard of living that most of Austria's 8.4 million residents enjoy in a society that a United Nations study this month called the eighth-happiest in the world.
In his new book "The End of Comfort", former SPO finance minister and industrialist Hannes Androsch bemoans slipping competitiveness and urges reforms in education and pensions, reducing bureaucracy and tightening public finances.
If not, "then we will fall back further and this is highly dangerous. This has to be avoided." He said the two big parties lacked resolve to push through structural change that would upset some of their supporters.
Whether the two parties, the tax-and-spend Social Democrats and their more free-market OVP coalition partners, could agree on change is another matter.
LIFE IS GOOD
Life in Austria is mostly good. The jobless rate is the European Union's lowest at 4.8 percent, crime is low, pensions are generous and healthcare is practically free for most.
Shattered by World War Two and occupied for the decade that followed, neutral Austria has made huge strides since.
Over the past four decades its output per capita rose more quickly than other small European countries and Germany at just over 2 percent a year to one of the highest levels in the Organisation for Economic Co-operation and Development.
Wage constraints in a country with strong ties between employers and labor has boosted productivity and anchored a manufacturing sector that employs nearly 15 percent of workers, higher than most small economies in Europe, the OECD says.
"Austria is one of the star countries among OECD members," said Monika Queisser, the organization's head of social policy.
But prosperity comes at a high price that the country may have trouble affording as the population ages.
Despite efforts to rein in early retirement, less than a fifth of people aged 60-64 work. Nearly 14 percent of gross domestic product (GDP) goes to state pensions.
A quarter of GDP is redistributed as subsidies, keeping income inequality low but leading OVP Finance Minister Maria Fekter to declare Austria to be "European subsidy champion".
Government revenue accounts for nearly half of GDP, well above the OECD average of 36.6 percent, but no tax relief is in sight given the big hits taxpayers face for bailed-out banks like nationalized Hypo Alpe Adria.
SPO Chancellor Werner Faymann has called for a new wealth tax on millionaires and wants to extend indefinitely a levy on big banks' assets that has lenders up in arms.
A sheltered services sector makes Austrians pay more than their neighbors for many goods. Two out of three women work, but a lack of day care means nearly half work part-time.
Austria's famed apprenticeship schemes and job training help get young people into the labor force and keep them there, but standardised tests show the average 15-year-old's score in reading, maths and science is below the OECD average.
Austria has slid to 23rd place on the IMD business school's world competitiveness ranking - down 12 places in five years - and is 16th on the World Economic Forum's global ratings.
But labor leaders scoff.
"Competitiveness rankings are more hidden lobbying by managers than objective indicators. Austria's position is much better than some single rating would have us believe," said Werner Muhm, head of the Chamber of Labour.
Still, universities are underfunded and have high drop-out rates, data show. Fewer than a fifth of Austrians get a college education versus 31 percent on average in the OECD.
Austria lacks entrepreneurial spirit. Venture capital investment is .008 percent of GDP, a third of the EU average.
"In Austria if you light a candle, nine others come to put it out. In the United States nine others come to light their own candles as well," Telekom Austria boss Hannnes Ametsreiter said.
(Additional reporting by Georgina Prodhan, Angelika Gruber and Alexandra Schwarz-Goerlich, editing by Elizabeth Piper)