Austria's Kurz Offers Assurance to Europe After Right-Wing Pact

(Bloomberg) -- Austria’s new right-wing government sought to dispel concerns over its future in Europe, pledging to remain an “integral part” of the European Union and the euro currency and ruling out a Brexit-like vote for the public.

Chancellor-designate Sebastian Kurz, 31, of the conservative People’s Party, told journalists in Vienna on Saturday that he’d like to “remove worries” abroad about the course of his coalition with the nationalist Freedom Party, which in the past has toyed with the idea of a referendum on Austria’s EU membership.

“This is a coalition of two parties who want to actively shape European policy,” Kurz said in a hotel on a hill overlooking the capital. “EU law is in force 100 percent, we’ll fight for our interests, for our views, in the EU but we will respect decisions.”

Kurz is set to be sworn in as chancellor by President Alexander Van der Bellen on Monday after forming a government with the help of the Freedom Party. Two months ago, he won an election amid public discontent about immigration and border control. The new administration vows to harden immigration policy, give Austrian voters more say on policy through referendums, cut taxes and provide greater incentives to businesses.

Austria's Kurz Offers Assurance to Europe After Right-Wing Pact

Freedom Party leader Heinz-Christian Strache, who will be vice chancellor after leading his populist movement into government after 12 years as the opposition, said that he agreed to exclude EU membership from possible referendums even as his group was aggressively pushing to make it easier to let the public vote on laws, bypassing parliament.

“It was a very important demand of the People’s Party that the exit from the EU should be exempted, and we agreed to that,” Strache said standing alongside Kurz. “We could have imagined to keep it broader but that’s something one has to accept in a partnership.”

Austria’s drift to the right is part of Europe’s shifting politics after a year of populist challenges at the polls, including an anti-immigration party that drew voters away from Angela Merkel. The German chancellor called the Freedom Party’s strong showing in October a “major challenge” after the election in neighboring Austria.

Immigration, Taxes

The Freedom Party’s return into government will lead Austria to further tighten immigration policy and heralds tax cuts, looser labor laws and more conservative social policies. Even without going on a path to leave the EU or abandon the euro, the new government will try to restrict the EU to fewer policy areas, Kurz said.

“We want a stronger EU in the areas where cooperation is needed -- protection of the outer borders, currency and economic policy -- but also an EU that retreats in areas where national rules exist,” he said.

The government’s program presentation took place at the Kahlenberg, a hill that was the scene of the 1683 Battle of Vienna that helped end the second Turkish siege, a historical event still very present in Austria’s national mythology. Kurz said he hadn’t picked the location and mostly liked it because of its formidable views.

Commitment to EU

The European commitment had been a key request of Van der Bellen, who defeated a Freedom Party candidate in a runoff last year.

Kurz and Strache presented highlights from a 182-page work program titled “Together: For our Austria,” which lists policies for the government’s five-year term, including:

  • Looser labor laws, including the possibility of working up to 12 hours a day, an issue that’s potentially divisive for the Freedom Party with its working-class base.
  • Scrapping a smoking ban in restaurants and bars that was due to take full effect next year. It’s a nod to Strache, who’s a smoker.
  • Cutting the share of income and social-security taxes to 40 percent of economic output from 43 percent, while keeping the budget balanced. The program still didn’t list many detailed measures except saying that low and middle incomes should see the most relief
  • Austria plans to hold an EU summit to “solve the migration problem” during the Austrian EU presidency in the second half of next year
  • The government plans to combine financial watchdog FMA with the Austrian central bank
  • The government plans new measures against “political Islam,” including stricter enforcement of rules that ban foreign support for religious associations

Kurz’s party, one of two that governed Austria for most of the time since World War II, is retaining the finance and economy ministries as well as control of EU policy which will be assigned directly to Kurz. Uniqa Insurance Group AG manager Hartwig Loeger will become finance minister, Kurz said, while a former manager of Telekom Austria AG will be economy minister.

The Freedom Party will name academic Karin Kneissl as foreign minister, Herbert Kickl as interior minister and Mario Kunasek as defense minister, taking control of all arms-carrying forces in the country and of key departments for domestic security and border control, Strache said.

©2017 Bloomberg L.P.