Global Insight Perspective

Significance

The main opposition Social Democratic Party (SPÖ) has overtaken the conservative People's Party (ÖVP) to win the 1 October elections.

Implications

The result was partly due to lost government votes and a lower turnout, as well as the "socially just" campaign of the Social Democrats—a trend that has proved popular in several European countries.

Outlook

The vote, however, was close and the most obvious way forward at this stage is a "grand coalition" of the two main parties, although the remaining overseas votes may bring more options for SPÖ leader Alfred Gusenbauer to pursue a coalition with the Greens.

The ruling conservative People's Party (ÖVP) has suffered a narrow election defeat at the hands of the opposition Social Democratic Party (SPÖ) that could bring a new Red-Green coalition to power under SPÖ leader Alfred Gusenbauer, or another example of a "grand coalition" with ÖVP. SPÖ has led ratings over the last term, but suffered a dip in poll ratings earlier this year over a scandal at the trade union bank BAWAG. Ahead of the vote, Chancellor Wolfgang Schüssel had been expected to pip the opposition to a victory. Despite the competent economic management of the conservative government, its decision to share power with a far-right party since the 1999 elections has proved unpopular with some, even after the initial shock had worn off.

In the event, ÖVP fell to second place after shedding eight percentage points from its 42% 2002 victory, with five parties overall making the 4% parliamentary threshold. In third place, the radical far-right Freedom Party (FPÖ) increased its share of the vote to 11.21. The Greens saw a historic result with more than 10%, increasing their parliamentary representation to 20 seats. Just scraping into parliament is the Alliance for Austria's Future (BZÖ), the rump of FPÖ that split from the party in March 2005, but remained in the governing coalition. The far-right vote remained strong then, possibly owing to the lower turnout and the likely higher levels of core voting. However, when the results of overseas votes are counted, BZÖ may be pushed under the threshold and fail to make parliament. Polls ahead of the vote indicated that up to one-third of the electorate was undecided about whom to back, and some may have decided not to bother—with turnout down to around 74%, a post-war low.

The last-minute promise by the SPÖ to look at pension levels may have won over a few voters. The party complained that the government’s planned purchase of 18 Eurofighter jets was a costly and wasteful expense, and that the public money should instead be diverted into the pension system. Austria is not experiencing the same threat from international terrorism as some other European countries, and also has a post-war tradition of neutrality, which Schüssel has gone some way towards challenging, with limited success. Austrians do, however, feel pressure over immigration, an issue that was well manipulated by the far-right parties in their election campaigns.

In addition, core voters will have been encouraged to vote by the SPÖ decision to stand by the unions earlier this year, amid the banking scandal. The party could have pulled away, but secured the backing of the core union voters through its own loyalty. This will pay off in dividends with future social pact negotiations. The party's decision to concentrate on core vote-winning social issues, including pensions, unemployment and health, as well as promises for more education spending, has paid off. The ÖVP campaign focused on the party's record in office, which, although it has provided good economic results, clearly lacked the appeal that it hoped. The party, which has been a friend to the middle classes, probably lost out in the lower income groups that expect protection from the SPÖ.

The results spell the end of the far right in government, following the split of the bloc into two groups and the militant nature of the new leader of the most successful of those groups, the original FPÖ, which first was invited to govern with the ÖVP in 1999. Heinz Christian Strache took the party further to the right over the last year, and is unlikely to join the government at the risk of his hard-core credibility. Strache also remains the most well known of that party, leaving few potential government members in its ranks. The fact that the departure of the far right from government was indicated ahead of the vote may have contributed to the lower turnout, with some voters convinced that the mainstream parties would be guaranteed success.

Outlook and Implications

Austria is the latest European electorate to become disenchanted with the endless pursuit of economic progress, and has backed the party that promised to concentrate on social justice. Policies such as halting the sale of state stakes in key strategic companies, such as Telekom Austria and Oesterreichische Post, won more votes than the rather vague ÖVP promises to concentrate on job creation. The results give a potential SPÖ and Green coalition 88 seats, short of the 92 they need to form a governing majority. Co-operation with the far-right parties has been ruled out, but they could aide SPÖ if overseas votes put BZÖ out of the picture and the vote redistribution allocates more than 92 seats to the Greens and SPÖ. If not, this leaves the way open for a grand coalition, with a strong tradition of consensualism likely to make this an easier prospect than in neighbouring Germany following its 2005 elections. President Heinz Fischer will ask Gusenbauer to form a government, with coalition talks to begin today. The two main parties are closer in reality than might be apparent, with SPÖ having been a relatively supportive opposition party over much of the term. SPÖ also had all the ideas in the election campaign, leaving it with more scope to head reforms as it leads the coalition.

Contact

Raul Dary

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Lexington, MA 02421, USA
Tel: 781.301.9314
Cel: 857.222.0556
Fax: 781.301.9416
raul.dary@globalinsight.com

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