Austrian mainstream parties edge towards coalition after attempt of pro-Putin party fails

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The centre-right People’s Party (OVP) and the centre-left Social Democrats (SPO) are working behind closed doors on a coalition deal that would exclude the far-right, pro-Russia Freedom Party (FPO) from government, after the latter party failed to form a ruling coalition, party officials said on Thursday, 20 February.

Austria’s two biggest mainstream parties have reportedly reached a preliminary agreement, with the backing of the liberal, centrist NEOs, after two unsuccessful coalition negotiations earlier this year. Talks are advancing quickly, and an official announcement could come as soon as next week, sources speaking on condition of anonymity told Reuters.

“I am very confident that in the common ground that we have found, we will manage to finalise a coalition government agreement,” OVP leader Christian Stocker said.

Stocker was speaking at President Alexander Van der Bellen’s office with SPO party head Andreas Babler and NEOs leader Beate Meinl-Reisinger after they briefed the president.

Babler said the three were entering the final stages of talks, which was echoed by Meinl-Reisinger, who said: “we’re on the home stretch”. The FPO responded by calling the parties a “coalition of losers”.

FPO now Austria’s biggest party

The deadlock follows the FPO’s failure to secure external support after emerging as the largest party in the September 2024 general election with almost 29% of the vote.

Despite its strong showing, the FPO struggled to find a coalition partner, as both the SPO and OVP rejected cooperation with the party, citing its pro-Russian stance and controversial policy positions.

The FPO, led by Herbert Kickl and historically rooted in Nazism, has advocated for stricter immigration controls, including the deportation of asylum seekers and limitations on social benefits for non-citizens. The far-right party has also questioned Austria’s support for Ukraine, calling for an end to military aid and pushing for closer economic ties with Russia. On EU policy, the FPO has campaigned against deeper European integration, opposing policies such as the EU Green Deal and calling for greater national sovereignty over economic and migration matters.

Domestically, it has backed tougher law-and-order policies, including expanded police powers and surveillance measures. The party’s rhetoric on Islam and multiculturalism has sparked accusations of xenophobia, with its leaders frequently linking migration to crime and security concerns.

Since the September 2024 parliamentary elections, the FPO has risen in support to 34-35% in mid-February 2025. The OVP, which garnered 26.3% of the votes in the autumn, has declined to 18-20%. The Social Democratic Party of Austria (SPO) has maintained steady support, of around 2 percentage points above or below its 21% support in September.

Head of state mulls possible scenarios

Van der Bellen, 81, outlined four potential paths for resolving Austria’s ongoing political crisis after the FPO’s coalition talks failed: minority government, another attempt at a majority coalition, a technocratic cabinet, or a snap election, which could take place after three months or longer.

He wrote on Facebook “In recent years, the world seems to be rearranging – upheaval, crises and threats are increasing. The international community is facing new challenges. We need to try to steer and shape these changes together. For this we need close partnerships and strong multilateralism – the EU, the United Nations, the OSCE and many others.

“We intensely realise the concerns and interests of Austrians in the EU and beyond. This requires a lot of effort and I thank the Federal Chancellor Alexander Schallenberg for his commitment,” Van der Bellen added, referring to the acting chancellor since January.

Parties draw up possible budget plan to meet EU guidelines

Meanwhile, coalition negotiators have agreed on measures to cut Austria’s budget deficit to within 3% of GDP, in line with the EU’s Stability and Growth Pact. The country posted a deficit of 3.2% of GDP in 2024, driven by increased social spending, fuel subsidies and slowing economic growth, in part due to fiscal stimuli that addressed the energy crisis and the effects of the COVID:19 pandemic.

Austria’s debt-to-GDP ratio was 77.8% in 2024, above the EU’s 60% reference value but below some other eurozone economies. The government faces pressure from Brussels to ensure long-term fiscal sustainability while avoiding austerity dampening economic growth.

Austria’s economy grew 0.5% in 2024, weighed down by weak export demand and tighter monetary policy from the European Central Bank. The European Commission expects growth to rebound modestly in 2025, though risks remain from inflationary pressures and geopolitical instability.

The political deadlock has contributed to market uncertainty, with Austrian government bond yields rising slightly in recent weeks. However, investor confidence has remained relatively stable, with Austria’s strong credit rating a buffer against financial instability.

Austria’s unprecedented interregnum

This is the longest period Austria has gone without a new administration since World War II, Reuters reported. This would also be Austria’s first three-party government since 1949.

If coalition talks collapse and a snap election is called, the FPO is expected to increase its voter share. Polling suggests that its nationalist rhetoric, anti-immigration policies, and Eurosceptic stance continue to resonate with a significant portion of the electorate.

The political limbo has hit Austria after two years of negative economic growth. “The coming years will be difficult,” said Van der Bellen, a former leader of Austria’s Greens. “Not only because of the economic situation but also the geopolitical situation. Decades-long certainties about the relationship between the US and Europe have become fragile in weeks. Europe needs to be active, Europe needs to stand together,” Van der Bellen added.