Hybrid Austria: is Vienna setting a new trend?

In the Austrian general elections of October 2017, the Christian Democrats(ÖVP) won a plurality of 31% votes and 62 of the 182 seats in the National Council. Their recently confirmed leader Sebastian Kurz proceeded to negotiate a 180 page coalition contract with the FPÖ, the national liberal party, led by Heinz Christian Strache.

The Freedom Party has long been part of Austria’s political landscape. Founded by former Nazis in the 1950s, it first entered government 17 years ago.

At the time, Paris, London and Berlin were all run by social democratic parties, the EU 15 open borders policy was largely in place, and the organization was embarking on its flagship policy of monetary union, and enlargement to the east. A confident EU immediately imposed sanctions on Austria.

Ex-Nazis, the argument ran, had no place in the new Europe. Fifteen years on, things looked very different.

The EU 28 was now armed with a Treaty-Constitution; Euroland was plagued by low growth, and sky-high unemployment levels in southern Europe; non-European immigration since 2000 had more than doubled. In 2015, 1.3 million non-Europeans sought asylum status in Europe.

When Chancellor Merkel in August 2015 declared her open door policy to refugees fleeing war zones in the Mid-East, the Austrian grand coalition of ÖVP and SPÖ was highly supportive. Austrian voters were much more reserved. Out of a population of just under 8 million, 18.5% of the population was foreign born.

The fastest growing section were Muslims, who made up 0.3% of the population in 1971, 4.2% in 2000, and 6.8% by 2015. They were heavily concentrated in cities, notably Vienna, where Muslim children in primary schools outnumbered Catholic children.

Austria has a long history of accommodating Islam. The first mosque in Vienna was built in 1889, and the law of 1912 recognising Islam as a “faith community”, was updated in 1979 and again ten years later. Liberties were granted to faith schools, imams and koranic teaching.

But as in the rest of Europe, opinions became more reserved as Islam-inspired terror spread. Three hundred Austrian-born Muslims went to join ISIS; imams were discovered distributing radical texts in prions; 70% of adult Turkish population in Austria were reported as supporting Turkey’s strongman, Recep Tayyip Erdogan; one third of Austrians recorded that they preferred not to have Muslims as neighbours.

When a new wave of migrants sought to relocate to Europe in response to Merkel’s “Willkommenspolitik”, Austrian voters’ anxiety over unchecked immigration surged. The FPÖ’s popularity in the polls shot up as the party long identified with the slogan,  “Hamm statt Islam”(home not Islam).

Sebastian Kurz takes over.

Kurz as Europe’s youngest foreign minister, immediately recognized what was at stake for his own prospects, for the ÖVP and for the country, and moved to pre-empt the liberal nationals. He called for tougher external border policing, better integration and stringent control of “political Islam” funded from abroad. He also organized the shutdown of the popular overland route through the West Balkans.

It was a close call. In the elections to the Austrian Presidency in April and May 2016, both candidates from the Grand Coalition partners were eliminated in the first round of voting. Alexander van der Bellen, from the left of the Austrian political spectrum, went head to head with Norbert Hofer from the FPÖ in the second round. Van der Bellen scraped home with a narrow lead of 50.3% of the votes, but irregularities in the count led to a re-run in December, when he won 53.8% of the vote.

Kurz was patently right to make his successful bid for leadership in May 2017. At one point, the FPÖ led by as much as 10 to 15% in the polls. As soon as Kurz took the helm of the ÖVP on a platform of “change”, the FPÖ lead wilted. There was thus a convergence of policy between the two parties emerging from the October 2017 vote to form a coalition.

The new Austrian government’s program includes pledges to stop illegal immigration and slash taxes, as well as oppose further EU political and economic integration. In a coalition statement following their agreement on Friday, the new government said it wanted to “steer the EU back in the right direction towards its fundamental ideas,” meaning less centralized decision making.

It also plans a clampdown on asylum seekers, offering only temporary protection.”Immigration into the Austrian social welfare state…must be stopped,” the coalition says. The coalition is prepared to close Islamic schools to prevent what it described as “the creation of parallel societies.”

The FPÖ has the Minister of the Interior, Defense and Foreign Affairs. But European matters run through the Chancellor’s office. Kurz has also provided reinsurance to the EU that Vienna remains firmly in the union. Van der Bellen in the Presidency is a convinced federalist. Little, it seems, has changed.

The media take on Austria’s coalition.

That is not the way much of the media greeted the Kurz-Strache coalition. The coalition was marching Austria out of core Europe, the headlines ran;  Vienna was joining Warsaw, Budapest, Bratislava and Prague in opposition to Brussels, Berlin and Paris; by seeking to steal the clothes of the nativist national liberals, Kurz had seized a temporary advantage, but condemned Austria’s centre-right to long term redundancy.

There is some truth in this negative take on the Austrian political situation. Kurz has expressed sympathy for rejection by the Visegrad 4- the Czeck Republic, Hungary, Poland, Slovakia-of Brussels’ and Berlin’s policy to impose immigrant  quotas on member states. Vienna has been critical of the EU’s triggering of Article 7 of the Lisbon Treaty to impose sanctions on Poland for allegedly infringing the EU’s norms with regard to the internal battles in Poland over nominations to the Supreme Court.

What Kurz has suggested is that the EU would benefit by being less ham-handed in dealing with Poland, which still has a huge unsettled agenda from the past-the dual tyrannies of national socialism and communism, the last of which came to an end in 1990, 45 years after the end of the world war. In offering Austria’s mediation as a bridge, between western and central eastern Europe, Kurz is doing no more than updating Austrian neutrality in international affairs. As an example, he has met also with representatives of Teheran and Moscow.

His coalition platform is also said to have set the standard for tougher policies on immigration across EU member states. This is true to the extent that the FPÖ is in the government, but otherwise Austria is following the example of France and The Netherlands in edicting a ban on face veils. Strache and Viktor Orban from Hungary are on the same wave length, as they are with the leaders of the CSU in Bavaria. As anyone living on or near the Austrian-German border can observe, the EU’s “open door” policy exists now with the help of vigorous border checks.

“Leave more to the national level” is one of Kurz’ preferred phrases. Austrian voters have not turned against the EU, as they have to a large extent in France and the UK. But as a small federal state, where considerable powers are devolved to the regions, they would like to see the EU live up to its commitment to the principle of subsidiarity, allowing decisions affecting local people to be taken locally.

No subsidiarity for Brussels.

The trend however has been in the opposite direction. Trade, money, industrial regulation, law, now budgets, immigration and constitutional matters have fallen into the purview of Brussels. Defense is being discussed.

What the crisis of 2015-16 revealed is that member states faced direct demands from their voters to curb immigration, while Brussels and Berlin kept saying that such matters had to be dealt with via the EU institutions. The difference is that national politicians are answerable to national electorates, but the EU bureaucracies are in large part a democracy free zone.

As powers have flowed from member states so have national political parties found their support at home ebbing away. Austria is no exception. The cartel coalition of two parties, the ÖVP and the SPÖ, which governed Austria almost uninterruptedly from 1945 to 2017 saw their share of the vote shrink from near 100% to well under two thirds. Unlike in Germany, where voters veered away from the Grand Coalition parties to left and to right, in Austria the sole beneficiary was the FPÖ. In Germany, the beneficiaries were Die Linke, the communist successor party, The Greens (green outside, red inside) and the AfD, the Alternative for Germany, which together picked up over 30% of the vote. Since then, their share of the vote has risen to just under 35% of the vote.

The problem for German politics is that Bavaria is very similar to its Alpine neighbor. The voters of Bavaria’s CSU deserted in droves for the AfD, Germany’s upstart version of the FPÖ, and that definitely does represent German nationalism. Its members opposed the introduction of the Euro; are decidedly unhappy about French and Italian efforts to get German taxpayers to fund their debts; and excoriate Chancellor Merkel for opening the doors wide to immigration from the rest of the world.

There are roughly two types of nationality within Europe: France and the UK define nationality in terms of citizenship. The expectation is that you sign up as a national, remain loyal to its institutions, but can be of any colour, race or creed. Not so in Germany. Nationality is nativist and inherited, like culture, blood and soil. Merkel foolishly challenged this article of faith in the name of a post-historical definition of Europe beyond nations. She is paying the price politically, and her attempt to cobble together a grand coalition of the Christian and Social Democrats, supported by under 50% of the electorate, can only play into the hands of the German nationalists.

That is why the Kurz-Strache coalition drew so much attention. It is seen as setting a precedent to Germany. 

Populism in Europe.

Indeed, Tony Blair’s Institute has published a paper arguing much along these lines. In European Populism: Trends, Threats and Future Prospects, the authors see populist movements lapping around Germany, to north, east, west and south. “If populist parties continue, they write,  to gain in strength as rapidly in the next ten years as they have in the last ten years, countries like Sweden or Germany might then find themselves more vulnerable to disruption than the past seven decades of relative stability might suggest.” https://institute.global/insight/renewing-centre/european-populism-trends-threats-and-future-prospects.

Why is this happening now, one may ask? My answer is that we are watching the inevitable backlash to decades of propaganda, followed by action, to convert Europe into what it is not. The effort is to make Europe into a single country, with a single government, whereas the reality of Europe is that it is a diverse mosaic of peoples and states, closely interdependent one with another, but unprepared and unwilling to be merged into a super-state.

In the Blair Institute’s formulation the spread of different kinds of populism around Europe is already influencing domestic policy, as well as inter-European relations and Europe’s standing in the rest of the world. I would formulate it the other way round: the attempt to forge Europe into what it is not is unhinging domestic politics, souring inter-European relations and gravely weakening Europe’s combined ability to have its voice heard in the councils of the world.

As the Blair Institute authors point out, the rise of populism is directly related to the twin challenges of the Euro crisis and immigration. Both of these have been driven by EU policy. Both were conceived as incomplete steps to further union, with the unresolved difficulties of both accords parked sometime in the future on the expectation that the next steps would be taken in line with previous decisions.

The iron law of unintended consequences.

One of the problems about future oriented projects with open ended outcomes is that the unexpected tends to happen. Take monetary union, from which Austria has prospered. Its Mittelstand firms no longer face the threat of being undercut by exports out of an Italy with a regular propensity to devaluation; they can now outsource along with their Bavarian neighbours to benefit by lower cost suppliers to their east and to their south; they have access to the EU’s internal market, and the Euro’s value on the foreign exchanges is kept low by having the likes of Italy and Greece on board.

But there have been one or two downsides. One is that inequality of income or consumption among individuals and households (the Gini index)-which improved markedly in the first ten years of the Euro’s existence- shot upwards during the brunt of the recession years, and is still not back to the level of 2000. The other is that Austria’s national debt has moved steadily upward since the late 1980s to be near 90% of gdp now-reflecting the difficulty that successive governments have had in balancing the books in a high tax, and generous welfare system.

With the sharp rise in immigration from the Balkans, and then from the Middle East and beyond, resources available to indigenous Austrians have become that much scarcer. The FPÖ has been the beneficiary: its voters are at the lower end of the income and educational scale, and clearly open to arguments in favour of “welfare chauvinism”.

Unemployment in Austria has trended upwards since the 1980s, to hover around 8 to 10% now-nowhere near the levels of post-2008 southern Europe, where regional unemployment in parts of Spain, France, Italy, all of Greece, and Belgium, are much higher. In other words, available resources-as economists would argue-are greatly underutilized in Euroland. The cure, previous German governments have maintained, is for governments to be responsible for their own debts, and for adjustments to be made via labour market institutions. The government of Kurz-Strache signs up to this preference.

But this is the neuralgic point in discussions between Merkel’s Christian Democrats and Schulz Social Democrats. Merkel made her reputation as the Iron Chancellor of Europe, insisting on the EU’s  Fiscal Pact of 2012, whereby signatory states signed up to a policy of balanced budgets and national responsibility for debts. Schulz’ Social Democrats have campaigned on a Keynesian platform for the whole of the EU. It is very difficult to see how these positions can be reconciled in a coherent coalition accord.

My bet is on some form of “federal-lite” solution that allows the much diminished parties of Germany’s “Grand Coalition” to reach agreement someway towards an EU Transferunion, that can be backed by President Macron, whose counterparty to the inner-German deal, is and will be further market-oriented reforms in France.

Where will Austria’s coalition go in this eventuality? Austria is already a net contributor to the EU: Austria contributes 2.2% of the EU budget, and receives in return 1.2% in payments. One clue is in Sebastian Kurz statements, when he was Foreign Minister,  on who picks up the tab for Brexit. Not Austria, he made clear. “Net contributions will not go up,” he insisted. “There will have to be savings.”

If federal-lite is the prospective German coalition’s direction of travel, then it goes without saying that the more Schulz’s SPD insists on a Transferunion, the more the advantage to the AfD,  and indeed to the FDP-which has already turned down the Chancellor’s initial offer to talk about a coalition in Berlin. The FPÖ, as a key partner in the Vienna coalition, is on the same wavelength.

So the difference between Vienna and Berlin is that the opposition in Austria is a much weakened SPÖ, which can no longer credibly claim to be the workers party, while the opposition in Germany would be divided-in the event of a Grand Coalition-between the FDP, Die Linke and the rising force of German politics, the AfD. The AfD is rising because it appeals directly, and without reservation, to German culture and nation. The appeal travels far beyond the existing voter base of the party.

Kultur and Heimat.

That is where the Schengen open border policy comes in to play. When it was launched in 1985, it was widely accepted as a complement to the internal market. That internal market was limited to the 9 soon to be the 12 member states that also signed up to the “1992” programme, then to the step-by-step move to capital mobility, and onwards to the single currency.

What was not expected was the speed of German unification in 1980-90, the collapse of the Soviet Union, and of its empire in central eastern Europe, the opening of China and India onto world markets, and the rise in global migration patterns over the coming twenty five years. Had this expectation been incorporated into the planning of Schengen, then it would have been reasonable to put in place a very extensive, well funded and manned border policy. For many reasons, including very divergent views on European security, this was not done, leaving the open borders policy as the nominal responsibility of Brussels, but in the de facto hands of national governments, responsible to national electorates, warts and all.

At the time that Schengen was put in place, concerns were voiced that an opening of the borders would be a Godsend to criminals of all stripes, including people traffickers, drug smugglers and money launderers. The response, logically enough, was much tighter co-operation between police forces and national jurisdictions, not least regarding the process of extradition. Less talked about at the time was immigration, though it was already on the European radar.

Since then, demographic trends have continued as Europe ages, and the countries to its south procreate. Given the huge disparity in income levels, life expectations and standards of governance, it is scarcely surprising that Europe has become a target of immigration. All countries have become more “multi-cultural”. By 2016, according to Eurostat, the Commission’s statistical agency, there were “35.1 million people born outside of the EU-28 living in an EU Member State on 1 January 2016, while there were 19.3 million persons who had been born in a different EU Member State from the one where they were resident. Only in Hungary, Ireland, Luxembourg, Slovakia and Cyprus was the number of persons born in other EU Member States higher than the number born outside of the EU-28.”

It should be no surprise that local populations should have registered, some with concern and others with less, that the countries they had grown up in were changing fast. Populist political entrepreneurs tapped into this reservoir of voters, among the earlier success stories being Georg Haider, the FPÖ leader of the turn of the century. The words that he deployed included “Entfremdung” or “Umvolkung”, indicating that “we” are become strangers in our own land and are being subjected to political experiments to change our composite genes.

His challenge was absorbed into the Austrian political system, but similar movements cropped up in The Netherlands, France, and Italy. As I have pointed out in the article on my blog: Brexit, https://storybookreview.wordpress.com/2017/10/29/brexist-a-certain-idea-of-europe/ immigration was a major factor in tilting the vote towards Brexit. And it was arguably not so much the existence of immigration which did so, as the speed and volume of immigration. In France, it is worth pointing out in this regard that the pro-EU President Macron was voted in to office on a vote, in a key presidential election, of only 43% of the electorate. Thirty four per cent of the vote went to Marine Le Pen, in effect a huge vote for what a short seventeen years ago was merely a marginal political movement.

These last two examples are from the European countries with the most open possible definition of citizenship, not ones as in Germany and in central eastern Europe, predicated on culture, religion, Blut und Boden. Yet Brussels and Berlin were on the same wavelength in having Europe’s ageing population replenished by peoples from significantly different political cultures, traditions or religion. People are people the world over, the argument, runs, from which it seems to follow that Europe is just one location where people from the world over can come to live. As Douglas Murray has pointed out, this assumption is utopian. https://storybookreview.wordpress.com/2017/12/30/berlin-rules-why-what-how-and-is-that-so/

Utopianism is dangerous. In politics, it is dynamite. Take the countries of the former COMECON area. The Blair Institute report makes clear, what we have always known, that definitions of nationality in that region of the world are by descent, in other words by parentage, and hence by language, culture and religion. Yet the definition of “populism” in the report includes those who seek to defend culture and religion, in other words Christianity. That makes half of Europe a zone accommodating to populism, involving appeals to Rousseau’s “general will”, and apparently to authoritarianism.

How come then that the governments of Poland, Hungary, Slovakia and the Czeck lands experience the attempt to impose quotas of immigrants on them by Brussels and Berlin as authoritarian? Because their official priorities and sensitivities are distant. Viktor Orban is forthright in declaring that he stands for a Christian Europe, in other words a Europe that has problems with Islam. Brussels stands for a humanistic Europe, that is open to all religions and hostile to racialism.

Religion though is not race, and opposition to Islam may be racial in inspiration, it may be phobic, but it may also be grounded in deeply held attitudes about the equality of the sexes, marriage, inheritance, politics and music.


The Austrian case is hybrid, part central, part eastern, part southern Europe, part German, and part Italian. It is special, as are all other European countries. The assumptions that Mitterrand made when pushing through his single currency were that France would be co-equal to Germany in a European System of Central Banks. The reality is that France has to dance to Berlin’s tune on economic policy, and on much else. The assumptions behind Schengen were that it was a necessary supplement to the “1992” programme. But it has morphed into having Europe replace its native populations via immigration, most visibly from parts of the world with very different traditions. As the immigrant flow speeded up, the backlashes came. Because politics in Europe is rooted nationally, that backlash occurs in each one of the European countries.

In Austria it took the shape of an ÖVP-FPÖ coalition. If that alliance were duplicated in Germany, the coalition would be CDU-CSU-FDP, AfD. It would no longer be possible to call Germany the reluctant hegemon, as Willy Paterson has cogently argued. [1] Nor would it be possible to deny that Germany was not pursing what it considered to be its national interest.

For the moment, Austria’s coalition is not a precedent for Germany. But if the present trend in policy is pursued in the EU towards a one size fits all USE, it may well become so.

1.   Wiliam E. Paterson,  The Reluctant Hegemon? Germany Moves Centre Stage in the European Union JCMS, 2011, Vol.49, Annual Review. pp.57-75.


About Jonathan Story, Professor Emeritus, INSEAD

Jonathan Story is Emeritus Professor of International Political Economy at INSEAD. Prior to joining INSEAD in 1974, he worked in Brussels and Washington, where he obtained his PhD from Johns Hopkins School of Advanced International Studies. He has held the Marusi Chair of Global Business at Rensselaer Polytechnic Institute, and is currently Distinguished Visiting Professor at the Graduate Schoold of Business, Fordham University, New York. He is preparing a monograph on China’s impact on the world political economy, and another on a proposal for a contextual approach to business studies. He has a chapter forthcoming on the Euro crisis. His latest book is China UnCovered: What you need to know to do business in China, (FT/ Pearson’s, 2010) (www.chinauncovered.net) His previous books include “China: The Race to Market” (FT/Pearsons, 2003), The Frontiers of Fortune, (Pitman’s, 1999); and The Political Economy of Financial Integration in Europe : The Battle of the Systems,(MIT Press, 1998) on monetary union and financial markets in the EU, and co-authored with Ingo Walter of NYU. His books have been translated into French, Italian, German, Spanish, Chinese, Korean and Arabic. He is also a co-author in the Oxford Handbook on Business and Government(2010), and has contributed numerous chapters in books and articles in professional journals. He is a regular contributor to newspapers, and has been four times winner of the European Case Clearing House “Best Case of the Year” award. His latest cases detail hotel investments in Egypt and Argentina, as well as a women’s garment manufacturer in Sri Lanka and a Chinese auto parts producer. He teaches courses on international business and the global political economy. At the INSEAD campus, in Fontainebleau and Singapore, he has taught European and world politics, markets, and business in the MBA, and PhD programs. He has taught on INSEAD’s flagship Advanced Management Programme for the last three decades, as well as on other Executive Development and Company Specific courses. Jonathan Story works with governments, international organisations and multinational corporations. He is married with four children, and, now, thirteen grandchildren. Besides English, he is fluent in French, German, Spanish, Italian, reads Portuguese and is learning Russian. He has a bass voice, and gives concerts, including Afro-American spirituals, Russian folk, classical opera and oratorio.
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