Austria is toying with a curious new form of protectionism

“TO CALL it a catastrophe was a catastrophe,” says Martin Bartenstein, Austria’s economics minister. Last week Alfred Gusenbauer, Austria’s chancellor, called the bid by CVC, a British private-equity group, for Böhler-Uddeholm, an Austrian steelmaker, a catastrophe because the firm is a jewel of Austrian industry. But that is just Mr Gusenbauer’s personal opinion, says Mr Bartenstein. It is not the government’s official position. (The bid was rejected on March 28th.)

Tensions within Austria’s grand coalition of Socialists and the centre-right People’s Party are running high as the political and industrial elite, led by Hannes Androsch, a former finance minister, discusses the establishment of a private-equity fund to protect Austrian companies from foreign takeovers. The so-called Austro-fund would buy controlling stakes in firms such as Böhler (the potential sale of which triggered the debate), Wienerberger, the world’s largest maker of clay bricks, OMV, an oil and gas company, Voest, a steelmaker, and Lenzing, a maker of cellulose fibre. The fund’s start-up capital would be €1 billion ($1.3 billion), which would grow to at least €5 billion.

Leading bankers and industrialists are at loggerheads over the idea. Andreas Treichel, the boss of Erste Bank, Austria’s second-biggest bank, says he will not play ball. Nor will the head of Wiener Städtische, an insurance company, or the boss of Wienerberger. Ludwig Scharinger, the boss of Raiffeisenbank, another bank, and Christoph Leitl, the head of the Economic Chamber, a lobby group, are in favour of the plan. Veit Sorger, head of the Federation of Austrian Industry, says Austrian capital in Austrian companies is a good thing, but the Austro-fund must not get preferential treatment over other private-equity firms. Politicians are mooting a state guarantee for the fund and tax exemptions for its dividend payments. Some have even talked about a re-nationalisation of Böhler through a takeover by the ÖIAG, Austria’s state holding agency. (Böhler was fully privatised in 2003.)

Austria has a history of protectionism and strong state intervention in business. In 2004, it rebuffed Siemens of Germany for taking an interest in VA Technologie, a smaller Austrian firm, and authorised ÖIAG to take up Siemens’ intended share of a planned VA Tech capital increase instead. In the same year the government turned down a deal to sell the state’s 42% stake in Telekom Austria to Switzerland’s Swisscom, and shelved plans to sell a quarter of the state-owned postal service to Germany’s Deutsche Post.

Yet even while keeping foreigners at arm’s length, Austrian banks and companies are big investors in eastern Europe, where cultural and economic ties dating from the Habsburg empire give the Austrians a competitive edge over bigger rivals from farther afield. Some 6% of foreign direct investment in central and eastern Europe is Austrian. Telekom Austria is one of the top telecoms companies in the region. Vienna’s stock exchange bought the bourse in Budapest and is showing an interest in the stock exchanges in Bulgaria and Slovenia. Erste Bank makes almost two-thirds of its profits in eastern Europe.

“We used to say ‘Come to Austria—we are the better Germany’,” says Mr Bartenstein, who was in China this week to tout the advantages of doing business with and in Austria. Even if the Austro-fund never sees the light of day, he worries that the debate about it is damaging his country’s business-friendly reputation in London and Frankfurt—and, even more important, in Sofia, Bucharest and Belgrade.

First stop on our 10 places to visit is the Spanish Riding School in Vienna. Even if you not really into horses you’ll be amazed at how the riders get their mounts to perform. While in Vienna you must visit the Schönbrunn – Austria’s most popular tourist attraction. This massive baroque palace was originally built as a summer residence for the imperial family of the Habsburgs, but is now a museum that also features a park and a zoo.

Austria has produced some of the best ever classical composers, and in 2006 the city of Vienna celebrated the 250th anniversary of the birth of one of its most famous residents – Wolfgang Amadeus Mozart. You can still visit some of the places he frequented in the city, as well as similar for a whole host of dead composers who chose to reside in Vienna such as Beethoven, Haydn and Schubert. Getting to Vienna, the city that claims to be the capital of classical music, is now even easier thanks to the abundance of cheap flights to Austria. Once there try another bit of Viennese culture, the somewhat quirky KunstHausWien, created by noted Austrian artist Friedensreich Hundertwasser and built in 1991. The architecture is distinctly different with uneven floors and odd-shaped rooms with the interior and exterior all in garish and bright colours. You can even get married there for a wedding that no one will forget in a hurry.

Next up, not just one place but a whole selection – the Sound of Music locations in and around Salzburg – the city known as the “Rome of the North”, to which you can also buy cheap flights. If you do visit Salzburg you must see the Eisriesenwelt Caves; the world’s largest ice caves which are found just south of the city and are a truly awe-inspiring sight.

Austria with its beautiful mountainous scenery is rightly renowned for its skiing. Innsbruck, which has hosted two Winter Olympics, continues to be extremely popular and is well worth a visit even in the summer months. Here you will find the amazing Swarovski Crystal Walk Visitor Centre where you can marvel at the stunning crystal on display. For the more adventurous, jump on the aerial gondola ride up to the two-mile high Stubai glacier also just outside Innsbruck; it’s so high that while riding the gondola you will be rubbing shoulders with skiers, even in summer!

For the last in our ten places to visit you’ll have to get on the road. Either get on a bus or get behind the wheel yourself and steer your car up the Grossglockner Alpine Road. Since 1935 an estimated 50 million visitors have taken in the spectacular views on this most famous of Alpine roads, which leads to the 3,798 Grossglockner Mountain; home to the largest glacier in Austria.

Wherever you decide to go in Austria, you’ll find that as well the ten places we’ve listed there are also many other fantastic places to see. Getting there is easy and most airlines operate cheap flights to Salzburg and Vienna from major and regional airports throughout the UK.