AUSTRIA: Reports-ÖVP and SPÖ Reach Budget Agreement, Could Set Stage For GroKo

Reports in Austrian media suggest that the conservative Austrian People's Party (ÖVP) and the centre-left Social Democrats (SPÖ) have come to an agreement on a budget, and are set to inform President Alexander van der Bellen of their progress later today before public statements are made on Friday 21 Feb. Der Standard reports as part of the budget agreement the "EU deficit procedure will be dispensed with,[...] . New debt for this year is expected to be EUR6.4 billion, for next year EUR8.4 billion. Banks and energy companies are expected to contribute to the budget consolidation with taxes."

• These talks follow the collapse of negotiations between the far-right Freedom Party (FPÖ) and ÖVP earlier in February.
• It remains unclear if the parties will seek to govern as a 'grand coalition' (GroKo) or look to bring in either the liberal NEOS or environmentalist Greens. The ÖVP and SPÖ alone would hold a single-seat majority in the National Council, making such an administration vulnerable to collapse.
• ÖVP-SPÖ-NEOS talks broke down late in 2024. A confidence-and-supply agreement would make for easier coalition talks but may hinder policy-making as each piece of legislation must be negotiated with a third party.
• Forming an ÖVP-SPÖ gov't would lead to short-term relief in Brussels that the far-right has been shut out of power. Over the longer term, the rise of the FPÖ shows no sign of ending (it is polling better now than in the 2024 election) and if a new gov't falls any snap election could put the FPÖ in an even stronger position.