Key reasons for Austria’s budget deficit and forming coalition with Far right?
Introduction
The key reasons for Austria’s budget deficit and the chancellor’s inability to work with the far-right group to form a coalition government are interrelated and stem from both economic and political factors:
Budget Deficit
Austria’s budget deficit is projected to exceed the European Union’s 3% limit in the coming years:
Inflation-linked Expenditure
Pensions, social benefits, and public sector personnel costs are linked to inflation, causing a significant rise in government spending.
Tax Reform
The ongoing tax reform has reduced public revenue, aiming to support economic growth but currently offsetting income tax bracket creep and reducing corporate tax revenue.
Economic Recession
Austria has been in recession for the past two years, grappling with increasing unemployment.
Energy Subsidies
Although the electricity price cap will expire at the end of 2024, its impact on reducing the deficit will be minimal.
Chancellor’s Inability to Form Coalition with Far-Right
The chancellor cannot work with the second-largest far-right group (Freedom Party or FPÖ) to form a coalition government due to several factors:
Political Isolation
Other parties have refused to work with the FPÖ and its leader Herbert Kickl, despite the party winning 29.2% of the vote in the last election.
Presidential Stance
President Alexander Van der Bellen has expressed reservations about swearing in Kickl as chancellor.
EU Concerns
There are serious concerns about internal and external problems that may arise if the FPÖ comes to power, including questions about Austria’s commitment to the EU under Kickl’s leadership.
Centrist Coalition Attempt
The chancellor had been attempting to form a centrist coalition to exclude the far-right, but these talks collapsed when the liberal NEOS party withdrew.
Ideological Differences
The chancellor’s People’s Party (ÖVP) has significant ideological differences with the FPÖ, particularly regarding economic policies and EU relations.
Conclusion
The combination of these economic challenges and political constraints has created a complex situation where addressing the budget deficit while forming a stable government has become increasingly difficult for the Austrian chancellor.
