In response to the sovereign debt crisis in the euro area, many member countries apply cuts to their government finances. This will weigh on internal demand and output growth in the euro area, at a time when also the cyclical momentum of the global economy decelerates. For the year to come, economic growth in the euro area is thus expected to come to a halt, and business activity in Austria is about to slacken. Real GDP growth in Austria is forecasted to moderate from 3.2 percent to 0.4 percent in 2012. Only in 2013 will the international upturn lead to a rebound in GDP growth to an expected rate of 1.6 percent. While headline inflation should decline markedly in 2012, the cyclical downturn will take its toll on the labour market, with employment growth levelling off and unemployment heading up.