FT: Austrian finance minister quits in dispute over tax reform

26/8/2014

By James Shotter

Austria’s finance minister has unexpectedly resigned after just eight months in the post, following a disagreement within his party over tax reform.

At a hastily arranged press conference in Vienna on Tuesday morning, Michael Spindelegger, who also stepped down as deputy chancellor and head of the centre-right People’s party (ÖVP), blamed criticism from colleagues for his decision.

“A party has to stick together. If that is no longer the case, then the moment has come to hand over the tiller,” Mr Spindelegger said.

Austria’s grand coalition, composed of the centre-left Social Democrats and the ÖVP, is discussing the overhaul of the country’s tax system. The Social Democrat chancellor, Werner Faymann, is pushing for cuts to income taxes in an effort to boost the Austrian economy, which grew just 0.3 per cent last year.

The two parties cannot agree on how to fund the cuts, however, and Mr Spindelegger’s caution on the issue – he was not prepared to accept tax cuts that needed to be funded by either new levies or higher debts – has also come in for increasing criticism from other figures in the traditionally business-friendly ÖVP.

This week, Erwin Zangerl, head of the Tirolean Chamber of Labour, called for his resignation, saying to the newspaper Österreich that Mr Spindelegger had “more than proved that he does not understand the people any more. He is deaf in both ears.”

Thomas Hofer, a political analyst at H&P Public Affairs in Vienna, said that although the timing of Mr Spindelegger’s departure had caught many people off-guard, including within the ÖVP, it had been clear for a while that his days were numbered, given his inability to make headway on tax reform.

“In pretty much every country in the western world, the centre right is for lower taxes, and the centre left wants to raise them. But Mr Spindelegger let the Social Democrats take the issue of tax cuts and make it their own. That has really hurt the ÖVP,” he said.

The turmoil within the ÖVP raises the chances that the coalition may not see out its five-year term, which began last year and runs until 2018. Mr Hofer said that he thought early elections were unlikely, however.

“If they held elections now, just nine months after the last election, it would be a disaster: they would risk putting the [far-right] Freedom party in first place, and both coalition parties want to avoid that,” he said.

The ÖVP is due to meet this evening to decide who will replace Mr Spindelegger as finance minister and head of the party.

The favourite to take over as finance minister is Reinhold Mitterlehner, current minister for the economy. Sebastian Kurz, the 27-year-old foreign minister, and rising star of the centre right, is another possibility.

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