Austrian vote nudges Europe to the right as nationalists gain

(Bloomberg) Europe’s political balance is tilting to the right after Austrian voters paved the way for the nationalist Freedom Party to enter government, suggesting the country will be a more difficult ally for key partners such as Germany.

After a campaign focused on immigration, the People’s Party of Foreign Minister Sebastian Kurz, 31, is set to form a new coalition with the Freedom Party as likely junior partner. Kurz, who sought to outflank the nationalists with a hard-line stance on refugees, was the biggest winner in Sunday’s election and is poised to become the world’s youngest head of government.

While the Freedom Party has been part of Austrian governments before, the election shows how Europe’s nationalist agenda is still gaining ground after Germans three weeks ago elected a far-right party to parliament for the first time since immediately after World War II.

"I’m feeling somewhat vindicated by the fact that way more than 55 percent have voted for the Freedom Party’s platform, because big parts of our program were copied by other parties," party head Heinz-Christian Strache, 48, said on a television panel. "We’re now the mainstream of society and are leading the debate."

Chancellor Christian Kern, whose Social Democrats could theoretically renew their coalition with the People’s Party, said he expects Kurz and Strache to agree a coalition pact soon.

"The overlap of their platforms is enormous and anything other than that they find a very quick agreement would be a major surprise," he told Austrian public radio.

With the Freedom Party poised to return to government for the first time since 2005, congratulations poured in from European nationalists including France’s Marine Le Pen and Geert Wilders in the Netherlands, while the World Jewish Congress expressed concern. For German Chancellor Angela Merkel, the result may chip away at a key ally’s pro-European stance in the years ahead.

What happens next after Austria’s election?

Monday: Mail ballots are counted from 9am Results may take until late Monday or Tuesday.

Tuesday: Government offers President Alexander Van der Bellen its resignation and is immediately reappointed as caretaker government

Thursday: Final official result to be announced after ballots cast in precincts away from home are counted

After Thursday: President gives one party a mandate to form government. While he’s not obliged by law, the task usually goes to the biggest party

4 weeks later: Deadline to challenge election result

Strache, whose party’s last stint in government under Joerg Haider led to EU diplomatic sanctions against Austria, sought to ease the way to power by backing off strident anti-EU rhetoric, including threats to try to exit the bloc.

Sunday’s result also marked a voter revolt against Austria’s tradition of government by the two biggest parties, who have run the country together for 44 of the 72 years since World War II, including the last decade.

While Kurz and Strache might shake up that cozy political order, they broadly agree in pledging business-friendly policies, notably to scrap corporate taxes on retained profits. They’ll also stay in the German-led camp favoring fiscal austerity in the euro area.

New Alliances

"There won’t be a debate to leave the EU, but the Freedom Party is strong enough to demand significant concessions" and may lead Austria to align more often with eastern European countries that have challenged Merkel on issues including migration, said Thomas Hofer, a political consultant in Vienna. "Austria has mostly been an ally of Germany for decades, but that picture could change more often now."

Where Merkel and French President Emmanuel Macron may face increased resistance is on proposals to deepen European integration, maintaining economic sanctions on Russia and chastising eastern EU member countries seen as crimping democratic freedoms. Austria’s next government may also try to toughen EU policy toward Turkey.

The swell of anxiety over immigration to Austria began building 2015, when almost 70,000 mostly-Muslim refugees sought asylum from war-torn countries such as Syria, Afghanistan and Iraq. Schools and hospitals in the nation of 8.7 million struggled to accommodate the newcomers, and disagreements over whether it was fair to give immigrants generous welfare support became a key campaign theme.

"This is a strong mandate for us to bring about change in this country," Kurz, the likely next chancellor, told cheering supporters in Vienna. "It’s about establishing a new political style, a new culture."