Table For Three: Uncancel The Reservation
A coalition between the People's Party, Social Democratic Party and NEOS is back on provided the liberals can get the idea past party membership
For next week’s edition of The Vienna Briefing, I’d like to answer your questions about the current political situation here in Austria: about the incoming coalition government, the collapse of the negotiations between the Freedom Party (FPÖ) and People’s Party (ÖVP), the state of the economy, Austria in the world—or anything else you’re curious, concerned, or confused about. If you have a question, send me a message by clicking on the button below1.
Servus!
And they hadn’t a moment to lose. On Thursday morning, the conservative People’s Party (ÖVP) and center-left Social Democratic Party (SPÖ), having reentered coalition negotiations the previous weekend, announced—and stop me if you think that you’ve heard this one before—that they had agreed a course of budget consolidation to begin to bring Austria’s budget deficit back down below 3 percent of GDP. The parties’ plan of action is based off the work the ÖVP had already done with the far-right Freedom Party (FPÖ) during their failed coalition talks. Their common plan to save €6.4 billion in a single year was sent to Brussels in January as to avoid an excessive deficit procedure with the European Union.
Many budgetary measures in the ÖVP-SPÖ plan, therefore, have been carried over from the FPÖ-ÖVP version. The Klimabonus, an annual payout designed to offset the effects of Austria’s tax on CO2, will be cut. Government ministries face a cut in their budgets for operational costs, which could save up to €1.1 billion. Hundreds of millions of euros will be saved by cutting expenditure on climate change initiatives. Pensioners face having to make larger health insurance contributions. Bildungskarenz, leave for further training or education paid for by the AMS, the country’s employment agency, will be eliminated in its current form2.
The modifications made by the ÖVP and SPÖ, however, mean that some of the old plan’s rougher edges have been smoothed out, even if the overall effect will be a bitter pill to swallow for many. Some of the estimated €2 billion that will be saved by axing the Klimabonus, for example, will be reinvested in measures to support commuters, the theory being that those who travel to work by car may be hardest hit by the absence of a fiscal offset for the CO2 tax. For pensioners whose incomes will be squeezed by higher insurance contributions, the coalition plans to freeze prescription charges and lower caps on the price of other medications.
The two parties have been given some room to play with by virtue of the fact that the ÖVP seems to have backed down on its previous opposition to tax increases. The existing levy on banks’ profits looks set to be increased, while a similar charge on energy companies’ profits, which was due to lapse with the end of the ÖVP-Green government, will be reintroduced. The ÖVP and the Greens had also planned on getting rid of the 55 percent income tax bracket that kicks in at €1 million as part of their signature ‘eco-social’ tax reform package, a decision the ÖVP and SPÖ plan to overturn. Expect, too, new taxes on land sales and private foundations.
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The wheels are turning quickly. While the ÖVP and SPÖ were agreeing their budget consolidation plan, the NEOS were brought back into coalition negotiations. Following intensive discussions Thursday and Friday, the leaders of all three parties appeared with President Alexander Van der Bellen on Saturday to declare talks were well on the way to being completed. The three parties have overcome one of the major hurdles that tripped up the ÖVP and FPÖ: the division of government ministries and portfolios. To the ÖVP will go the chancellery as well as the interior, defense, economy, and agriculture ministries and the family, youth, and Europe portfolios. To the SPÖ: finance, justice, infrastructure, and work and social affairs plus the women portfolio.
And as for the NEOS: the foreign and education ministries, the latter being the brief most prized by the liberals, which may go to Vienna deputy mayor Christoph Wiederkehr. Coalition negotiations should conclude this week before the three parties’ plans face one final test: the NEOS party membership. Per the NEOS’s statutes, two thirds of party members have to approve the party’s participation in federal government. While there are some murmurings in the provinces about reforms and the lack thereof, for the NEOS to turn down the chance at government now would be to shoot themselves in the foot before turning their gun on the country.
Bis bald!
All questions will be anonymized and may be edited or synthesized with similar questions for publication. Deadline for responses: March 3, 2025 at 12:00 CET.
Though the social partnership of labor and industry will work on a less expensive replacement currently being framed as ‘Bildungskarenz light.’