In Germany’s shadow, Austria also prepares for late September election

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In central Europe, another German-speaking nation is heading to the polls next month in a race that will likely also result in a broad left/right ‘grand coalition.’austria flag

Austria’s parliamentary elections on September 29 will affect a population that’s just two-thirds that of the German state of Bavaria, but the campaign features many of the same dynamics as Germany’s federal elections that will be held exactly one week prior — a broad centrist consensus on economic policy, the likelihood of yet another ‘grand coalition,’ flush economic conditions relative to the rest of Europe and static polls all year long indicating a narrow center-left win.

But there are key differences as well — unlike in Germany, where Christian democratic chancellor Angela Merkel is favored for reelection, it’s Austria’s social democratic chancellor Werner Faymann who will likely return as chancellor.  Moreover, there’s a far-right component to Austrian politics that simply doesn’t exist in Germany.  While the far-right remains divided among three competing parties (and that makes it unlikely that they will form a government), the far-right parties could cumulative outpoll the center-left and the center-right.

Let’s start with the fundamentals — Austria’s economy grew by an estimated 0.6% last year and 2.7% in 2011, and though its growth this year has been virtually negligible, it dipped into negative growth (-0.1%) for just one quarter (Q4 2012), so it’s difficult to say that Austria has even suffered a recession, at least in technical terms.  Although the European Union’s unemployment rate, as of June 2013, remains 10.9% and the eurozone’s unemployment rate an even higher 12.3%, Austria has the absolute lowest unemployment of all 27 EU nations: at 4.6%, Austria’s unemployment is nearly a percentage point lower than the second-lowest, Germany, which has a 5.4% unemployment rate.

That means that the anti-incumbent moods that pushed out French president Nicolas Sarkozy last year and has already weakened his leftist successor, François Hollande, and that upended governments in Greece, Italy, Romania, Bulgaria and elsewhere over the past year, doesn’t have the same punch in Austria.

The latest Gallup poll from Austria dated August 22, is representative — it shows that Faymann’s center-left Sozialdemokratische Partei Österreichs (SPÖ, Social Democratic Party of Austria) holds a narrow lead over its current coalition partner, the center-right Österreichische Volkspartei (ÖVP, Austrian People’s Party):

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The three far-right parties, taken together, however, attract the support of 29% of all Austrian voters — the largest, the Freiheitliche Partei Österreichs (FPÖ, the Freedom Party of Austria), is the longstanding anti-immigrant, anti-EU, extreme-right conservative party in Austria, and it was the party that the late Jörg Haider led controversially into a government coalition in 2000 with the ÖVP.

But Austro-Canadian businessman Frank Stronach, who returned to his homeland last year after decades as chief executive officer of his Ontario-based auto parts company, is leading an alternative populist, eurosceptic right-wing party — Team Stronach — that’s attracting between 8% and 10% of the vote.

Finally, the Bündnis Zukunft Österreich (BZÖ, Alliance for the Future of Austria), which Haider founded in 2005 when he left the FPÖ, is in danger of losing all of its seats in Austria’s parliament following Haider’s sensational November 2008 death and Stronach’s recent rise.

But most recently, Stronach and the FPÖ leader Heinz-Christian Strache have made more headlines over shirtless photos than policy matters.   Furthermore, in March’s local elections in the southernmost state of Carinthia, where Haider had served as governor for nearly a decade, the Freedom Party’s share of the vote dropped from about 45% to just 17%, and the Social Democrats swept to power under its leader Peter Kaiser in alliance with the Die Grünen – Die Grüne Alternative (Green Party).  Nationally, the Greens are polling at around 15%, which would mark a 40% increase from their 2008 result.

Austrian voters also widely prefer Faymann to continue as chancellor over ÖVP leader and foreign minister Michael Spindelegger — Faymann took over just weeks after the global financial crisis in 2008, and he has pursued one of the most successful center-left policy agendas in Europe.  Like in Germany, Austria pursued work-sharing policies (e.g., shorter working hours for everyone) in the immediate aftermath of the crisis to avoid massive layoffs.  Faymann’s government has also enacted some of the world’s most successful job training legislation and other forward measures to assist workers remain competitive through Austria’s Arbeitsmarktservice (AMS, Austrian Employment Service):

With a budget of some 1 billion euros … the AMS is able to offer individual counseling and monitoring on a weekly basis for job seekers as well as usually two extended training courses in appropriate skill areas, including technology and languages, to improve job prospects. So though the unemployment rate overall is up slightly from last year (from 4 percent to 4.4 percent), there are also 45,000 more people working, meaning more people have entered the workforce, which is generally seen as a sign of confidence in the economy.

And perhaps most dramatic is the AMS guarantee of a guaranteed paid training internship (Lehrstelle) for all youth. Thus any young person who doesn’t find an internship on his or her own or through the AMS is able to do the equivalent training. “We invest massive support into these education and training issues,” says Kopf. “We have managed it, that after a year, half of these young people have already switched to the private sector where they can do a second training year.” Expensive, he says, but worth it. And similar support is available for the long-term unemployed.

Although you might think that’s easier in a country that’s just 8 million people than, say, 47 million (Spain) or 316 million (the United States), there’s no reason why the Austrian model shouldn’t become a case study for job training policy on a wider scale.

Faymann also took advantage of the fact that Austria’s public debt burden is smaller than that of most major western European countries, including Germany and France, which meant a raft of stimulus measures in 2009 and 2010, including direct spending and loans to shore up Austrian banks.  Public debt has soared from a little above 60% in 2008 to around 75% today, but the results speak for themselves — an economy that’s among the healthiest in Europe.  That’s despite the fact that Austria’s second-largest trading partner (after Germany) is Italy, where the economic and political climate remains much more challenging.

His government also spearheaded a joint public-private strategy to stabilize global lending to the Central European and South Eastern European (CESEE) region, working with EU and International Monetary Fund leaders to provide sufficient funds of over €125 billion to cover loans to the entire region, thereby reassuring global investors and preventing a massive capital run in the region.  By convincing the world not to retreat from the region, Austria’s aggressive intervention not only stabilized banks in Vienna, but likely prevented a potential default in Hungary and other neighboring countries.

Besides Faymann’s economic stewardship, the ÖVP and FPÖ have been subdued by the slow drip of scandalous revelations resulting from their joint government coalition from 2000 to 2007.  While Stronach is waging a spirited campaign, there’s a sense that his moment is slipping — the worst of the eurozone crisis appears to have passed, and Team Stronach has failed to score any truly breakout performance in this year’s state elections.  For example, in March state elections in Lower Austria (the second-most populous state after Vienna), the People’s Party won nearly 51% and the SPÖ 21.5% to just 10% for Stronach and 8% for the FPÖ.

Austrian voters on September 29 will elect all 183 members of the unicameral Nationalrat (National Council) on a proportional representation basis, with a 4% threshold for entering the parliament.  One party to keep an eye on is the Das Neue Österreich (NEOs, The New Austria), which aims to return a free-market liberal voice to the Nationalrat, formed late last year.

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