Kurz Graft Probe Leaves Austria on the Brink: What Happens Next

(Bloomberg) -- Austria’s political class is scrambling to find a way forward after Chancellor Sebastian Kurz was named as a suspect in a corruption probe leaving his government on the ropes. 

Kurz and nine others are suspected of funneling public money to a newspaper publisher from 2016 to help with his rapid rise to power. Prosecutors raided the offices of several Chancellery staff on Wednesday. Kurz has denied any wrongdoing.

Can Kurz hang on?

Kurz’s People’s Party is the largest bloc in the Austrian Parliament and the political turmoil has united the group behind its leader. State leaders have come out in support and ministers have said they won’t serve in a cabinet without him.

But the People’s Party needs the backing of the Greens to govern and they are ready to abandon Kurz. 

Vice-Chancellor Werner Kogler, leader of the Greens, said the government can’t continue with business as usual and Sigrid Maurer, head of the party’s parliamentary caucus, on Friday called on the People’s Party to find an “impeccable person” to take over from Kurz. 

If the Greens side with the main opposition parties in Tuesday’s no-confidence vote then Kurz is toast. 

Would that mean a snap elections?

After speaking to party leaders, President Alexander Van der Bellen -- whose day-to-day role is largely ceremonial -- late Friday called on parliament to decide the fate of the government.

The president has the power to dissolve the government and could ultimately call a third election in five years. But he may try to engineer a new coalition or appoint a caretaker government. 

One key factor in this will be that the cash-strapped opposition is desperate to avoid another showdown with Kurz, who bounced back from one scandal involving his previous coalition partner two years ago and was leading opinion polls by about 10 percentage points before the raids this week.

What would an alternative coalition look like?

The math is tricky because the nationalist Freedom Party, which previously supported Kurz, has 30 seats in the legislature. 

So either the Greens and the center-left would need to find common ground with the Freedom Party. Or the People’s Party would need to back an alternative chancellor. 

Neither option looks straightforward. 

And what’s the election outlook?

The People’s Party has always done well under Kurz and a vote now would catch the opposition unprepared. 

But Kurz would most likely still need a coalition partner in order to govern and that could leave the political class back where they started. 

Even if the 35-year-old leader does cling on, he may face a steady drip of new allegations as prosecutors systematically haul in the political elite for questioning. Kurz himself has said he also expects to face charges for giving false testimony to parliament.

Is there more dirt to come?

The corruption probe is part of a wide-ranging investigation into a lurid video shot on the Spanish island of Ibiza that showed Kurz’s former coalition partner offering government contracts to a woman posing as a Russian oligarch’s niece.

Prosecutors have obtained thousands of text messages relating to the case, including some between Kurz and his closest allies. The head of the state holding company, an associate of the chancellor, was forced to resign earlier this year as a result of the probe.

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