12 December 2013

Austria agrees old-model coalition government

Austria's government will be unchanged after the incumbent Social Democrats and centre-right People's Party agreed to form a new coalition. The announcement on 12 December, after 75 days of talks, follows inconclusive elections in September.

As reported by the EUObserver and the Financial Times (subscription), Austria is set for another grand coalition government after the centre-left and centre-right parties that have dominated the country’s politics since the Second World War announced they had agreed a joint programme.

Werner Faymann, head of the Social Democrats, the largest party, will remain Chancellor. Michael Spindelegger, his counterpart at the centre-right People’s party, has given up up the foreign portfolio to replace Maria Fekter as finance minister, the Wiener Zeitung confirmed. Rising ÖVP star Sebastian Kurz, just 27, has taken over as foreign minister.

An agreement had never been in serious doubt during the eight-week-long coalition negotiations, writes Reuters, but the parties had disagreed over privatisation policy, how to plug fiscal gaps, and pension and education reform. Spindelegger said the two had now agreed on savings, including a cap on public administration costs to eliminate the structural budget deficit by 2016, as well as measures to stimulate economic growth and employment.

They did not raise the official retirement age of 65 for men and 60 for women, as some had demanded, but said they would undertake measures to ensure that the actual average retirement age rises by 1.6 years by 2018 from 58.4 now. The two parties fudged a compromise on the thorny issue of privatisation. The ÖVP had wanted the state to reduce its stakes in energy group OMV, Telekom Austria or Austrian Post to free up funds for investment. 

Critics, including the opposition Freedom Party and the Greens, had said Austria needed to reform public finances and pensions and cut a swollen bureaucracy to ensure living standards in a country with the EU's lowest jobless rate.

The grand coalition will take office with its smallest share of the vote since the second world war, with many voters frustrated at the gridlock that characterised its previous term in office. Whereas in 2002 the two big parties won 78.8 per cent of the vote between them, this time around they received 50.9 per cent. The new government will present itself and the government programme to the Nationalrat (national council) at the plenary on Tuesday, 17 December, according to an official press release. 

One of the biggest challenges the government faces is dealing with the persistent woes of three mid-sized Austrian banks that ran into difficulty during the financial crisis and are all still to varying extents owned by the state.

President Barroso congratulates Austrian Federal Chancellor Werner Faymann on his new term of office, 16.12.13

President van Rompuy congratulates Federal Chancellor Werner Faymann on the formation of the new government of Austria, 17.12.13