Budget split could upset EMU chances

Date: 19/10/1995

By Thomas Karabaczek

AUSTRIA'S chances of being in the first wave of countries to qualify for economic and monetary union could be jeopardised by the collapse of Chancellor Franz Vranitzky's coalition government.

The Austrian electorate will go to the polls on 17 December following the fall of the Vranitzky government last week as the coalition which held power for 14 months split over ways to cut the country's sizeable deficit in next year's budget.

The date of the snap general election indicates how little the EU timetable is being taken into account. It will be held just hours after the European summit in Madrid on 15 and 16 December is due to decide on the future of the single European currency.

Vranitzky and outgoing Foreign Minister Wolfgang Schüssel, the leader of the conservative People's Party (ÖVP) may have a hard time explaining to voters why they are in Spain during the last two days of the campaign. But, given that the thought of exchanging the schilling for a single currency is not a popular prospect in Austria, they may be strongly tempted to stay away from the summit altogether.

The budget dispute not only broke up the coalition between Vranitzky's Social Democrats (SPÖ) and the ÖVP, which together or separately have held power since the end of World War Two, but could also endanger the country's participation in EMU.

Austria's public debt remains over the 60&percent; threshold allowed in the convergence criteria and the 1995 deficit will be well over 3&percent;. Without a restrictive budget, next year's figures may look even worse, leaving Austria with just 12 months to meet the convergence criteria by the end of 1997.

One immediate result of the government's collapse is the cancellation of examination of Austria's convergence programme, which was scheduled to take place at an EU finance ministers meeting on Monday (23 October).

As campaigning gets under way, the leaders of the outgoing coalition government will face strong competition from the main opposition party, the Freedom Party under its right-wing populist leader Jörg Haider.

Haider sparked off international protests in 1991 by praising Nazi employment policies and was the only party leader to oppose EU membership during the referendum held in June 1994. He recently claimed that Austria's 4-billion-ecu contribution to the Union was about the equivalent of the shortfall now restricting its 1996 budget.

But the 45-year-old Haider's anti-EU stance will not be the biggest hurdle between him and government.

Haider's controversial right-wing statements have made him an embarrassing ally. Just two weeks ago, he suggested that an Austrian's right to a “heimat” was stronger than a foreigner's right to family life and that the country should leave the European Convention on Human Rights rather than accept its immigration provisions.

Many Austrians fear his participation in government would harm international ties, repeating the isolation experienced during Kurt Waldheim's presidency between 1986 and 1992.

Vranitzky has already ruled out any coalition with Haider. Schüssel has declined to speculate on the future government, but faces strong opposition within his party against any cooperation with Haider. Austrian Agriculture Commissioner Franz Fischler, an ÖVP heavyweight, has warned: “Europe wouldn't understand it if Haider joined the government”.

But after the election, choice will be limited. According to the polls, the SPÖ, the Freedom Party and the ÖVP are both likely to win between 25 and 30&percent; . The Greens can expect 11&percent; and the Liberal Forum 6&percent;.

The outgoing coalition will find it difficult to work together again and Austrians, unappreciative of having to go to the polls after the shortest legislative period since 1945, would not take kindly to the reappearance of the same government.

Haider claims he will stay in opposition and ostensibly is aiming to become chancellor in 1998. But there are signs of compromise. He has put up a list of independent specialists, who could enter the government instead of him or his party members.