How a Secret Video Felled Austria’s Wunderkind Leader

(Bloomberg) -- When he took power in 2017, Austria’s Sebastian Kurz became the European Union’s youngest head of government. Now he’s also the shortest-serving chancellor in Austrian history and the first to be thrown out of office since the country was reconstituted after World War II. The rise and fall of Kurz is intertwined with Austria’s right-wing nationalists, whom the 32-year-old invited into his administration. What began as an attempt to show that conservatives can work with nationalists has turned into a cautionary tale for other EU leaders flirting with parties on the fringes of politics.

1. How did this happen?

Austria’s parliament ousted Kurz on May 27 in a no-confidence motion brought by the opposition Social Democrats. Their move to dismiss the chancellor was supported by the nationalist Freedom Party, which only 10 days earlier had been part of the coalition government formed by Kurz. It was the appearance of a video on May 17 that set events in motion.

2. What’s in that video?

The seven-hour recording was made in 2017 at a villa on the Spanish resort island of Ibiza and released by two German publications, Der Spiegel and Sueddeutsche Zeitung. It showed Austria’s vice-chancellor, Heinz-Christian Strache of the far-right Freedom Party, promising state contracts for cash to a woman claiming to be a Russian oligarch’s niece and plotting the takeover of Austria’s largest newspaper. Johann Gudenus, the Freedom Party’s parliamentary leader, translates the conversation.

3. What was the fallout?

Less than 24 hours after the video appeared, Austria’s government began its descent into limbo. First, Strache resigned at a press conference that veered between contrition and defiance, apologizing for the “dumb” and “embarrassing” footage while claiming he was the victim of a “targeted political assassination.” Not long after that, Kurz called snap parliamentary elections to try to stanch the damage.

4. How did Kurz respond?

After consultations with his party and Austrian President Alexander Van der Bellen, the chancellor made the critical decision that the Freedom Party could no longer be trusted to run the Interior Ministry. The subsequent dismissal of Herbert Kickl -- a luminary among nationalists who’s no stranger to controversy -- riled the Freedom Party and triggered additional resignations, including the heads of the ministries of defense, infrastructure and labor. It also turned Kurz’s erstwhile partner into a rival with the potential to take him down.

5. How did that imperil the Austrian leader?

Although Kurz is in no way implicated by the Ibiza footage, the embarrassing episode could reflect badly on his judgment in partnering with a far-right party -- one founded by a former SS officer following World War II. Far-right parties such as Vox in Spain to the AfD in Germany have enjoyed growing popularity throughout Europe, but Kurz broke ground in inviting one into a ruling government coalition.

6. What’s he doing now?

After being removed from office, Kurz immediately entered campaign mode and met with throngs of supporters from his conservative People’s Party in Vienna. He remains one of the country’s most-popular politicians among voters: His party rose four percentage points in the first poll after the scandal broke and gained ground to finish first in the latest EU parliamentary vote, with record 35% support. Still, he’ll need to boost that appeal further between now an September’s election to build a lead that allows him rule alone.

7. Who are the potential winners and losers?

Kurz has the most to gain -- and to lose. He’s banking on rattled voters to help his party consolidate power and drive through more reforms. The Freedom Party, which has tried to blame international conspiracies for the video set-up, saw its support slip in the European election, as did the Social Democrats, who have struggled to profit from the crisis.

8. Should investors be worried?

There’s little chance of economic disruption in the short-to-medium term. Austria had a budget surplus for the first time since 1974 last year as brisk tax revenue growth outpaced expenses. Many analysts ascribe more risk to potential international trade disruptions than internal political strife. Austria’s export-dependent economy relies heavily on automobile manufacturing -- a point Kurz made to U.S. President Donald Trump during a visit in February. S&P Global Ratings has warned that the government collapse and Kurz’s “unorthodox” style have undermined Austria’s long-term predictability.

The Reference Shelf

• Kurz vows to win back Austrian chancellery after losing vote
• European right takes a hit in Austria, writes Bloomberg Opinion’s Leonid Bershidsky, but Kurz will be back.
• Years of cultivating Russia links helped ensnare Austrian nationalists.
• Bloomberg QuickTake: The Rise of Populism.
• Der Spiegel’s video of Strache in Ibiza (coverage in English).

--With assistance from Paul Geitner.

To contact the reporter on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Andy Reinhardt, Boris Groendahl

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