AUSTRIAN ELECTION FOLLOW-UP: GREENS NOW NUMBER

UNCLAS SECTION 01 OF 03 VIENNA 003022

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EUR/AGS - SAINT-ANDRE

E.O. 12958: N/A
TAGS: PGOV PREL ECON MASS AU
SUBJECT: AUSTRIAN ELECTION FOLLOW-UP: GREENS NOW NUMBER
THREE -- SOCIAL DEMOCRATS BEGIN TALKS TOWARD GRAND COALITION

REF: A. VIENNA 2941


B. VIENNA 2924

C. VIENNA 2787


1. (SBU) Summary: The results of Austria's October 1
elections shifted somewhat with the announcement of the tally
of absentee votes on October 9. In the final count, the
Greens emerged for the first time as Austria's third
strongest party. On October 11, Austrian President Heinz
Fischer gave Social Democratic Party chairman Alfred
Gusenbauer the mandate to form a governing coalition. The
SPO and the People's Party (OVP) will now begin talks toward
a Grand Coalition. The issues at stake include the
continuation of the Eurofighter contract, university fees,
and economic reforms, with the latter being by far the most
important on the table. There is unlikely to be a new
government before mid-November, while some observers caution
that the public's patience will wear thin if there is no new
government by Christmas. In the meantime, the current
government under Chancellor Wolfgang Schuessel continues in a
caretaker mode, with only a provisional budget. Schuessel
will lead the OVP's coalition negotiations, but will probably
leave public life (at least for now) after that. Early
subjects of speculation as the OVP's Vice Chancellor include
Agriculture Minsiter Josef Proell and parliamentary caucus
leader Wilhelm Molterer. Rumors of governments other than a
Grand Coalition -- such as an OVP-FPO-BZO coalition -- meet
with firm denials on all sides, but serve as markers in the
negotiations toward a new government. End summary.

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FINAL TALLY: GREENS BUMP FREEDOM PARTY FOR THIRD PLACE
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2. (SBU) On October 9, Austrian election authorities
announced the final results of the October 1 election. The
addition of almost 260,000 absentee ballots -- about five
percent of the total votes -- made a difference. Over 20
percent of absentee ballots went to the Green party. This
has pushed the Greens to third place in the vote total,
edging ahead of the Freedom Party (FPO). It has also shifted
one parliamentary seat from the "Alliance-Future-Austria"
(BZO) party to the Greens, putting the latter on a par with
the FPO with 21 seats. As a result, the Greens now have a
right to expect that they, and not the FPO, will receive the
position of Third Parliamentary President -- one of the
triumvirate that serves as the formal parliamentary
leadership.


3. (U) The final numbers are as follows (2006 "provisional"
figures refer to the count we reported on October 2):

Party -- Vote Percentage 2006 2006 2002
(final)(provisional)

Social Democratic Party (SPO) 35.3 35.7 36.51
People's Party (OVP) 34.3 34.2 42.3
Greens 11.1 10.5 9.47
Freedom Party (FPO) 11.0 11.2 10.01
Alliance-Future-Austria (BZO) 4.1 4.2 n/a
Hans-Peter Martin 2.8 2.8 n/a
Communist Party (KPO) 1.0 1.0 0.56
Other 0.4 0.4

Party -- Seats 2006 2006 2002
(final)(provisional)

Social Democratic Party (SPO) 68 68 69
People's Party (OVP) 66 66 79
Greens 21 20 17
Freedom Party (FPO) 21 21 (see note)
Alliance-Future-Austria (BZO) 7 8 (see note)
Hans-Peter Martin 0 0 n/a
Communist Party (KPO) 0 0 0
Other 0 0 0

(Note: The FPO won 18 seats in 2002. When the BZO split
away from the FPO, it took 16 parliamentarians with it. End
note.)

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Coalition Talks Set
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4. (SBU) On October 11, Austrian President Heinz Fischer
formally commissioned SPO leader Alfred Gusenbauer with the
task of forming a government. The SPO party leadership had
already authorized Gusenbauer to seek to form a coalition
with the OVP. For its part, on October 10, the OVP

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authorized party leader (and lame duck Chancellor) Wolfgang
Schuessel to seek agreement with the SPO. Schuessel heads a
9-member negotiating team that consists of most of the
party's leading lights.


5. (SBU) Most observers believe Schuessel intends to
"redeem" himself after his election defeat by driving as hard
a bargain as possible in the coalition talks, and then bowing
out of public life (at least, for now). The sparring has
already begun, and many long-time observers have told us that
the atmosphere at this point is as confrontational as they
have ever seen it.


6. (SBU) The parties have laid down markers on a few hot
topics. The most visible issue is the debate over whether
the next government should cancel Austria's contract to
purchase 18 Eurofighters. The SPO has raised questions about
the nature of the contract, with Gusenbauer reiterating at
his meeting with Fischer that he has not even seen the
contract yet. (Comment: The Eurofighter issue is probably a
red herring -- the SPO can use it as a lever on the OVP, and
then simply say that the deal the OVP government had cut is
such that it would be disadvantageous for Austria to
withdraw. To cancel the contract would incur significant
penalties in return for no hardware. The next option for
Austria to meet its fighter aircraft requirements would be to
maintain its existing "interim" solution of leased Swiss
F-5's. The prospects of reopening the fighter tender to new
bidders are close to nil. End Comment.) Another issue --
this time, one the OVP can use as trade bait -- is the
question of university fees. The OVP government had imposed
fees of approximately 400 dollars per semester for university
studies. The SPO (and the Greens) made this a cause celebre.
It would be easy enough for the OVP to give in on
eliminating what is really a symbolic fee.


7. (SBU) What really matters to the two sides concerns
economic reforms. The OVP will fall on its sword to keep the
tax and pension reforms it implemented during the Schuessel
government. The SPO might make a run at undoing the reforms,
but it will probably settle for a halt to further drastic
measures and a halt to privatizations of remaining
state-owned companies. In fact, Schuessel's reform program
is largely complete anyway. The SPO will therefore come in
much as Tony Blair's Labour Party did in the United Kingdom:
not really able to turn back the clock on economic reforms,
and in a position to benefit from the economic expansion they
have helped generate.

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In for the Long Haul
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8. (SBU) The first regular opportunity to install a
government would take place on October 30, when the new
parliament sits for the first time. However, no one expects
the coalition talks to finish by then. On election night,
Gusenbauer said the process would take "about six weeks,"
while Schuessel said it should take as long as necessary.
The press and political analysts have set a rather artificial
deadline by claiming that the public would start to get
impatient if the talks went on into the Christmas break, or
past December 22.


9. (SBU) In the meantime, Schuessel and his cabinet remain
in place as caretakers. They all formally submitted their
resignations to Fischer after the elections, and they all
received "temporary" commissions to continue working for as
long as necessary. In this context, the main problem is the
budget. The old government has no authority to propose a
budget, and under the Austrian version of a continuing
resolution, monthly expenditures cannot exceed one-twelfth of
the previous year's budget. Naturally, funds go first into
non-discretionary expenditures. That means we cannot expect
any extraordinary expenditures for contingencies, such as new
assistance missions abroad. Less formally, but equally
important, the caretaker government will probably not
undertake any new political initiatives.

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Who Leads the Junior Partner?
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10. (SBU) Assuming that the SPO and OVP can form a
government (not a done deal, but by far the most likely
scenario),Alfred Gusenbauer would be the next Chancellor of
Austria. What remains unclear is whom the OVP would choose
to serve as Vice Chancellor. Betting now is that Schuessel
will bow out rather than return to the jobs he held seven

VIENNA 00003022 003 OF 003


years ago as Vice Chancellor and Foreign Minister.
Agriculture Minister Josef Proell, long a power in the OVP,
may have the inside track to assume the Vice Chancellorship.
Under another scenario, Wilhelm Molterer, the OVP
parliamentary caucus chief, would get the Vice Chancellorship
now, and Proell would serve as a minister in preparation for
a run at the Chancellorship in the next election.

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Outside Chances
--------------


11. (SBU) Political analysts still point to the fact that a
coalition among the OVP, the FPO and the BZO remains a
mathematical possibility. Schuessel and the rest of the OVP
leadership continue to declare that they would not form a
government with the FPO. FPO leader Heinz-Christian Strache
is equally vehement that he intends to go into opposition.
However, it probably suits Schuessel that rumors continue to
circulate that the SPO is not the OVP's only choice -- if
only to enable Schuessel to gain leverage in coalition talks
with the SPO. In what may be a negotiating tit-for-tat, we
have now also started to hear rumors that the SPO would
consider forming a coalition with the Greens and the BZO. It
is inconceivable that the SPO and Greens would consider
cooperating with the BZO, but this is more likely yet another
marker on the table.
McCaw