Austrian government collapses – snap election in September

Elections have been brought forward to early September in Austria, following a massive rift between the two coalition partners ÖVP and FPÖ. This was triggered by a compromising video that emerged from 2017, in which Heinz-Christian Strache, Vice-Chancellor and head of the FPÖ, and Johann Gudenus, FPÖ faction leader, offered an apparent niece of a Russian oligarch government contracts in return for election aid. Former Minister of the Interior, Herbert Kickl, who was General Secretary at the time, is also under pressure. The scandal could also have repercussions at federal state level and lead to a breakup of the SPÖ/FPÖ coalition in Burgenland, among other things.

Chancellor Sebastian Kurz (ÖVP) wants to continue leading the government until September; based on current information, in collaboration with the current FPÖ ministers. A grand coalition between the ÖVP and its SPÖ junior partner appears to be emerging – once again. According to the latest opinion polls, the ÖVP would take 30 to 35% of the votes and the SPÖ up to 25 to 30%. On a purely mathematical basis, the previous coalition could be continued (the FPÖ recently stood at 20 to 25%). However, these figures do not take into account the video scandal and its fallout, which is likely to have a negative impact on FPÖ votes – it will remain interesting to see to what extent. Given the events of the past few days, the ÖVP will also tend to be less willing to enter into a coalition once again with the FPÖ.

We can now expect very little momentum from Vienna ahead of the snap election in Autumn and the election campaign proceeding it. It is also very questionable whether the tax reform that was only recently unveiled – one of the main projects of the turquoise-blue government – will be implemented at all. If we see a renewal of a grand coalition again in the Autumn, the enthusiasm for reform is likely to be rather limited – at least based on historical experiences. The long-overdue pension reform in particular, which was not even launched by the current government, is therefore unlikely to be implemented for quite some time yet. Given the political vacuum that now prevails and the possibility of a grand coalition, the positive impetus for reform is expected to fizzle out again quickly.

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