Black, Red, Pink
All signs point towards coalition negotiations between Austria's People's Party, Social Democratic Party, and NEOS, but finding compromise won't be easy
Servus!
The coalition rondo plays on. Last week, the heads of the Freedom Party (FPÖ), People’s Party (ÖVP), and Social Democratic Party (SPÖ) met in a series of one-on-one meetings commissioned by President Alexander Van der Bellen. The purpose was to establish who is willing to govern with whom before Van der Bellen granted one party a mandate to begin formal coalition negotiations. ÖVP leader Karl Nehammer maintained his line that the ÖVP would not govern with the FPÖ if it meant making its leader Herbert Kickl chancellor. For this reason, on Tuesday, Van der Bellen gave Nehammer the chance to form a government and make a three-party coalition with the SPÖ and the liberal NEOS work.
Given the ideological canyon that divides the ÖVP from the SPÖ, and that they will likely involve three parties instead of two, these coalition talks are expected to be protracted and complicated. The timing of all this is, as I indicated in last week’s newsletter, unfortunate due to the depressed state of the Austrian economy. Real GDP is expected to fall by 0.6 percent this year, the Austrian Traded Index has grown by only 2.25 percent in six months, and the budget deficit has crept above the 3 percent target set down by the European Union’s Maastricht criteria. This is no time for the country is be left in limbo.
“We will have to bring in a few unpopular measures in order to set Austria back on course towards economic growth,” Gabriel Felbermayr, head of the Austrian Institute of Economic Research, said Sunday in an interview with the ORF. Those measures, he continued, may include property tax reform, an increase in fuel duty, and revisiting the ‘diesel privilege’ by which diesel is taxed at a lower rate to petrol. Felbermayr also advocated for a gradual raising of the pension age to 67 by 2044.
A “major remodel” of the pension system was something Thomas Salzer, former president of the Confederation of Austrian Industry in Lower Austria, himself advocated for an interview published over the weekend by the Standard. As well as healthcare and education reform, Salzer called for tax cuts to make full-time work or overtime more attractive and for the European Union to finalize free trade agreements so that the Austrian economy was not so dependent on the German, whose under-performance is dragging Austria down at the present time.
Such interviews must, of course, be treated with caution. The Confederation of Austrian Industry to which Salzer is connected exists to go to bat for the interests of industry, which always seem to mean tax cuts and deregulation whatever the conditions. Felbermayr’s name, meanwhile, has been bandied about as a possible finance minister in the next government. Nonetheless, the latter’s remarks contain a kernel of truth: that the next government will have to do something in the short term to stimulate the moribund economy, in the medium term to bring down the deficit, and in the long term to reform Austria’s pension, healthcare, and education systems.
An ÖVP-SPÖ-NEOS government offers the possibility of finding conciliatory solutions to Austria’s problems that have the buy in of both labor and industry to boot. There is, too, the danger of fudge and mush. Take pensions, for example. The current retirement age is 65 at a time when life expectancy in Austria is 82. The NEOS are for substantial, market-oriented pension reform, implicit in which is an increase in the retirement age. The SPÖ—along with the unions and the Chamber of Labor—are strictly opposed to either pension cuts or raising the retirement age. It would be easier to pass a camel through the eye of a needle that find the middle ground between these two stances, and yet that is what will have to be done if this never-before-tried coalition is going to come together.
Bis bald!
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