tional political level, struggle against unemployment and budget deficits also means struggle against constantly high real interest rates. The European Cen- tral Bank should be urged to pursue a balanced monetary poliey. Apart from the stability objeetive, monetary poliey must also take into aeeount the em- ployment objective. To coordinate these objeetives, a meehanism between the social partners as autonomous participants in the coUeetive bargaining proeess and the independent European Central Bank should be created. 1.11. Ineome Poliey Unit labour costs together with exchange rates are of deeisive importance for the eompetitiveness within Europe. The deterioration of eompetitiveness eaused by devaluations of important trading partners ean be compensated above aU by ensuring that produetivity grows faster and labour eosts inerease less than in the devaluating countries. The national ineome and wage poliey must, therefore, take into aeeount intemational eompetitiveness. Growing in- temational interdependence and the removal of instruments of exchange rate poliey within the EMU inerease the importanee ofwage poliey that lies within the autonomy of the participants in the eoUeetive bargaining proeess. It ean be expeeted that Austria will eontinue to be able to take advantage of the poliey of consensus between the social partners and the experienees as a hard eur- reneyeountry. The development of labour eosts deserve partieular attention in eonneetion with real wage flexibility. Though there were short-term adjustment problems due to extemal effeets (exchange rate shifts) in the first half ofthe nineties, the flexibility with whieh real wages reaet to shoeks is relatively high in Austria. Flexible wage and ineome poliey has in the past represented an important sup- port in preventing unemployment in Austria. In the Eeonomic and Monetary Union, wage formation will be of even greater importanee in securing a high level of employment. In view ofthe great income disparities between Austria and the new indus- trial loeations of Southeast Asia and Eastem Europe, an adjustment to the eonsiderably lower level is neither possible nor desirable. A highly developed national eeonomy that has reaehed European wage level, eannot retreat but must inerease its produetivity level by eonstant innovation in order to be able to maintain the high standard of Iiving. 1.12. Taxes and Fiscal Chal"2es on Labour The inereasing tiseal burden on the production faetor of labour initiates substitution effeets and thus limits the growth potential of labour intensive branehes. In Austria, the produetion faetor of labour has to carry a heavy tax burden even after the 1994 tax reform (e.g. introduetion of municipal tax es) and social seeurity contributions are signitieantly higher than the OECD aver- age. Regarding the tax load ratio, Austria lies in the upper middle tield while 18