After four month of negotiations, a new centre-right coalition government took office in Austria in February 2000, despite severe international criticism. The government has presented its coalition agreement, which will have significant effects on economic and social policy.
A new coalition government of the populist Freedom Party (Freiheitliche Partei Österreichs, FPÖ) and the conservative People's Party (Österreichische Volkspartei, ÖVP) was formed on 4 February 2000. The participation of the populist FPÖ has caused unprecedented severe tensions in Austrian politics. Harsh criticism from Austria's international partners resulted in an interruption of foreign relations, most importantly with EU Member States. The other 14 Member States announced a restriction of bilateral and diplomatic ties with Austria - a reaction which is unique in the EU's history. The new government also faces protests in Austria.
Article text
Reform package
The government has announced a variety of reform measures and initiatives, covering a wide range of economic and social policy issues. The rising public deficit of the federal government and the increasing federal contribution to the pension scheme are among the most important problems. On 9 February 2000, the new chancellor Wolfgang Schüssel, presented his initial policy statement in parliament. The reform package includes the following measures in the social and employment fields.
- Large-scale privatisation of companies or shares held by the federal government. Proceeds from this measure should be used for liquidation of the pubic debt and reduction of the budget deficit.
- A reduction of total non-wage labour costs of ATS 15 billion is planned in the period up until 2003. This includes a cut in holiday payments and reduced employers' contributions to public unemployment, accident and insolvency insurance. These measures are aimed at strengthening the competitiveness of the Austrian economy.
- Sickness payments for white- and blue-collar workers should be equalised, as has been promoted by the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB). However, in order to avoid additional costs, this step is connected with a reduction of holiday payments for both employee groups. The former government had already discussed this proposal, without reaching a definite agreement (AT9910202N).
- Pension reform proposals contain a variety of changes and adjustments in the pension system, where expenditure cuts should amount to ATS 15 billion. Most importantly, an increase by 18 months in the retirement age in the private sector is planned (currently 55 years for women, 60 years for men). Parallel to this measure, the retirement age of civil servants, railway and postal service workers and other groups related to the public sector will also be increased. In addition, early retirement will be made less attractive, with reduced pensions. Despite these and other initiatives in this field, further measures are likely to come in the future, since the coalition agreed to establish an expert commission to review the pension system and make proposals for change.
- Expenditure cuts in the public administration should be achieved through staff reductions and administrative reforms.
- Childcare is a prominent issue for the ÖVP-FPÖ coalition, as both parties favoured more financial support for children in the election campaign. The duration of child benefit payments will in future be three years, while one parent may claim it for two years, and the other subsequently for one year. Furthermore, child benefits will be raised for the first 18 months.
Reactions
Although the new coalition's proposals have not been fully publicised and the announced initiatives are still rather unspecific, many of proposals have been met with substantive criticism from the parliamentary opposition as well as the ÖGB. The trade unions severely criticise the proposed pension reforms, which are in a way analogous to those of the earlier failed coalition between the Social Democratic Party (Sozialdemokratische Partei Österreichs, SPÖ) and theÖVP (AT0002211N). ÖGB further rejects the planned welfare reforms as socially unfair, since companies, employers and farmers are seen as being favoured by the new coalition's plans. These groups could gain an additional ATS 19 billion- something whichÖGB regards as a redistribution measure to the disadvantage of employees and socially disadvantaged groups, who will face expenditure cuts in the pension scheme and lower public support in the event of unemployment, sickness and accidents. Several proposals are being discussed by the new coalition which could have a considerable effect on large groups of people. Among these are expenditure cuts in the health system and the education sector and the cancellation of youth employment programmes. Additionally, tax increases have recently been announced (on energy and cigarettes).
The employers' associations have concentrated on coping with the international problems that emerged in connection with the formation of the new government. The international criticism may translate into economic problems for Austria, as even boycott threats have been raised abroad. The most important employers' organisation, the Chamber of the Economy (Wirtschaftskammer Österreichs, WKÖ) has launched measures aimed at supporting Austria's export industry and promoting international contacts, as well as public relations activities - in Austria and abroad. These activities are being implemented in joint cooperation with the ministries of foreign and economic affairs, the Austrian Business Agency (ABA) and the Federation of Austrian Industry (Österreichische Industriellenvereinigung, IV).
Commentary
Since many of the new government's reform proposals have still not been specified, it is rather difficult at this time to foresee the consequences of the planned reforms. One key question concerns the future of Austria's system of social partnership. Although social partnership has been heavily criticised by the FPÖ, the coalition agreements state that they want the social partners to negotiate certain reforms. According to the latest statements from the social partners, ÖGB and other employee representatives tend to reject the government's proposals much more than the other social partners. Indeed, influential labour representatives have not ruled out the possibility of strikes in response to announced government policies. Generally, organised labour might now find it more difficult to advance its interests, since the Social Democratic Party is no longer in government. Another key issue concerns the future tasks and responsibilities of the state. The government seems inclined to cut back state activities, reducing state services to its core functions, without having explained so far what this means in detail. Probably, this implies large-scale privatisation and outsourcing of services. The reform package is likely to meet severe opposition from the minority in parliament, as well as a number of interest groups (Angelika Stueckler, Universität Wien).