Austria swears in three-party coalition after five-month deadlock

Austria has a new government. President Alexander van der Bellen swore in a three-party coalition on Monday, 3 March 2025, bringing to an end five months of political paralysis that began when the far-right Freedom Party (FPÖ) won the most votes in the September 2024 general election but failed to translate that plurality into governing power.

The election that changed nothing

The September election produced a fragmented parliament in which the FPÖ secured roughly 29 per cent of the vote, its best result since the party's post-war reformation. The conservative Austrian People's Party (ÖVP) fell to second place with about 26 per cent, while the Social Democrats (SPÖ) trailed at 21 per cent and the liberal Neos took 9 per cent. Under Austria's proportional system, no party came close to a majority, and the FPÖ's ideological profile made it a difficult partner for the mainstream parties.

The result mirrored a pattern visible across Central Europe: a populist, Eurosceptic force winning pluralities but hitting a ceiling when it comes to coalition-building. The FPÖ's platform combines anti-immigration rhetoric, opposition to sanctions on Russia, and demands for radical tax cuts financed by higher deficits, positions that sit uncomfortably with Austria's EU commitments and the fiscal rules enforced by the European Commission.

First attempt: the three-party talks collapse

Van der Bellen initially tasked the ÖVP, SPÖ and Neos with forming a government. The logic was straightforward: together they commanded a parliamentary majority and shared a pro-European orientation. But the talks foundered in early January over fiscal policy. The SPÖ wanted higher spending on social housing, healthcare and pensions. The ÖVP, traditionally the guardian of balanced budgets, resisted. Neos, positioning itself as the fiscally responsible liberal voice, sided with the conservatives on deficit limits but pushed for structural reforms the others rejected.

The breakdown was not merely about numbers. It reflected a deeper tension in Austrian politics: the SPÖ's traditional working-class base has eroded, pushing the party leftward on redistribution, while the ÖVP has struggled to define itself after the Kurz era. Neos, meanwhile, remains a junior partner with limited leverage. By January, the three parties had exhausted the goodwill that might have papered over these differences.

The Kickl experiment

With the centrist path blocked, Van der Bellen took the unusual step of giving FPÖ leader Herbert Kickl a mandate to form a government. Kickl sought a coalition with the ÖVP, which would have given the far right its first chancellery since 2000. The negotiations lasted barely three weeks. Kickl's demands, sweeping tax cuts, an expansion of public debt, and a confrontational stance toward EU fiscal rules, clashed fundamentally with the ÖVP's self-image as a party of stability and European integration.

The ÖVP's reluctance was also personal. Kickl, a long-time FPÖ strategist, has been a polarising figure even by Austrian standards. His tenure as interior minister (2017, 2019) ended in the Ibiza scandal that brought down the previous FPÖ, ÖVP coalition. Many in the ÖVP remembered the reputational damage of that episode. By mid-February, the talks had collapsed, and Stocker, who had succeeded Karl Nehammer as ÖVP leader, returned to the three-party formula.

The compromise that held

The revived negotiations moved faster the second time. The coalition agreement, presented alongside the swearing-in, centres on a budget compromise that attempts to balance fiscal consolidation with investment in social welfare and economic growth. Details remain sparse, the full text runs to roughly 200 pages and had not been published in full at the time of writing, but the outline suggests a package of targeted spending increases funded by efficiency savings and modest tax adjustments rather than broad-based hikes.

For the SPÖ, the deal delivers increased funding for long-term care, a cap on energy prices for vulnerable households, and a commitment to expand public housing. For the ÖVP, it preserves the debt brake embedded in Austria's constitution and keeps the deficit within the EU's 3 per cent of GDP limit. Neos secured a pledge to reduce bureaucratic hurdles for businesses and a review of subsidy programmes. Each party can claim victories; none got everything.

A chancellor from the second row

Christian Stocker, 64, is not a familiar face to most Austrians. A lawyer and long-time party functionary, he served as ÖVP general secretary before being elevated to the leadership in January after Nehammer's resignation. His selection reflects the ÖVP's desire for a steady hand rather than a charismatic front-runner. Stocker's inaugural remarks emphasised stability, European solidarity and the need to "govern from the centre", a phrase calibrated to reassure both domestic voters and European Council partners.

His deputy chancellors will be Andreas Babler (SPÖ) and Beate Meinl-Reisinger (Neos). Babler, a former trade unionist, represents the SPÖ's left flank. Meinl-Reisinger has led Neos since 2018 and is the most prominent liberal voice in the cabinet. The distribution of ministries follows the traditional Austrian Proporz logic: the ÖVP takes finance, interior, defence and agriculture; the SPÖ gets labour, health, education and housing; Neos receives justice, digitalisation and European affairs.

Why the FPÖ stayed out

The FPÖ's exclusion is the story's most consequential element. Kickl's party won the election, yet it will sit in opposition for the next five years. This outcome was not inevitable. In 2000 and 2017, the ÖVP governed with the FPÖ. The difference this time was the ÖVP's calculation that another coalition with the far right would damage Austria's standing in Brussels, complicate access to EU recovery funds, and alienate the centrist voters the ÖVP needs to survive long-term.

The FPÖ's pro-Russian stance was a specific irritant. Kickl has opposed sanctions on Moscow, questioned military aid to Ukraine, and echoed Kremlin talking points on energy policy. With Austria holding the EU presidency in the second half of 2025, a government containing the FPÖ would have created acute embarrassment for the bloc. Van der Bellen, a former Green Party leader with deep EU connections, is understood to have made clear his preference for a pro-European coalition.

The European dimension

Austria's political stability matters beyond its borders. The country is a net contributor to the EU budget, a key transit route for Russian gas (though dependency has fallen sharply since 2022), and a voice in the European Central Bank's governing council through its central bank governor, Robert Holzmann. A government paralysed by far-right demands or destabilised by constant crisis would have weakened the EU's cohesion at a moment when the bloc faces pressure on trade, defence and enlargement.

The new coalition's pro-European credentials are solid on paper. All three parties support Ukraine, back the EU's green transition (with caveats on pace and cost), and accept the fiscal framework negotiated in 2024. But the agreement's silence on deeper integration, eurozone reform, common defence, migration policy, suggests a government focused on domestic management rather than European leadership.

Risks ahead

Three-party coalitions in Austria have a mixed record. The 2013, 2017 SPÖ, ÖVP grand coalition governed competently but lost support to the FPÖ. The 2020, 2024 ÖVP, Green coalition collapsed over climate policy and corruption allegations. The current arrangement adds a third party with distinct priorities, increasing the veto points. Neos, in particular, may find itself squeezed between the SPÖ's spending demands and the ÖVP's fiscal discipline.

The opposition will not be quiet. Kickl has already framed the coalition as a "coalition of losers" that ignores the voters' first choice. The FPÖ leads in most opinion polls, often above 30 per cent. If the government stumbles, on inflation, migration, or a scandal, the far right will be positioned to capitalise. The next scheduled election is 2029, but Austrian governments rarely serve full terms.