During the economic expansion, Austria made progress with fiscal reform, notably on pensions and with respect to the spending framework, although there was also some backtracking. However, much remained to be done even before the global financial crisis, which is now compounding the challenges. With the recession, the fiscal position is set to deteriorate sharply, as in other OECD countries. Significant fiscal consolidation will therefore be needed once the economic situation improves, all the more so as the fiscal stimulus imparted to cushion the downturn has mainly involved permanent measures. Unlike in many other OECD countries, projected agerelated fiscal pressures seem to be relatively small, primarily thanks to past pension reforms. In these circumstances, the authorities should focus on changes in the spending and tax structure conducive to economic growth, alongside further reforms of the fiscal framework and improvements in the efficiency of public spending, especially on health care and education. Genuine progress in these areas, however, is difficult to achieve without fiscal federalism reforms.