Federal reforms in Austria: is now the time to overcome gridlock?

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The promise of ‘change’ was key for the Austrian Christian Democrats’ landslide victory in last year’s general elections. Recent sub-state polls, however, have perpetuated the influence of incumbent governors – and their power to veto the new government’s plans to reform Austria’s federal system. Patrick Utz analyses the links between current electoral dynamics, the country’s corporatist heritage and the potential for federal reforms in Austria.

When in October 2017 the Christian Democrat ÖVP and their 31-year-old leader, Sebastian Kurz, won their first federal elections in 15 years, they did so based on the promise of profound ‘change’. This vaguely defined agenda first materialised when Kurz formed a coalition with the far-right Freedom Party (FPÖ), which brought the long-standing ‘Grand Coalition’ between Social Democrats (SPÖ) and Christian Democrats to an end.

A central element of the new coalition agreement is an administrative reform, which may have far-reaching implications for the country’s federal structure. Unsurprisingly for a state that has been described as a ‘federation without federalism’, the promised reforms will most probably lead to further centralisation at the expense of the nine constituent Länder. Rather than the direction of change, the puzzling question about Kurz’s plans is whether they will occur in the first place.

Deadlock through informal vetoes

Austria’s peculiar system of cooperative federalism, along with the country’s strong corporatist tradition has long been immune to noteworthy changes. In spite of the Länder’s very limited self-rule and quasi-negligible formal mechanisms of shared-rule at the centre, regional political elites have long been able to have their say in federal decision-making. The most visible mechanism of these informal forms of regional interference is the ‘Conference of Governors’: a regular gathering of the nine Länder’s heads of government with no legal status but with very effective veto powers concerning federal legislation. Subtler forms of political influence, particularly through party-internal channels, might have been an even more powerful tool in the hands of regional elites.

Similarly, Austria’s ‘social partnership’ that brings together labour and employers’ representatives along corporatist lines has gained a reputation as the country’s de facto government, due to its intense involvement in policy-making and its interconnection with the parties of the former Grand Coalition, known as Proporz.

Against this backdrop, a constitutional convention that had set out to innovate the country’s federal and administrative structure concluded its work unsuccessfully in 2005. Since then, attempts to overcome the inefficiencies created by numerous overlaps of competences between the federation and the Länder have at best resulted in lukewarm compromises.

Ideological convergence as a driver for reforms

A new window of opportunity, however, might have opened up for Chancellor Kurz’s ambitious reform plans. Finding compromises within the new ÖVP-FPÖ government may be less painstaking than at the time of the Grand Coalition. Following the ÖVP’s recent shift to the right, the ideological gap between the new coalition partners seems to be considerably smaller than the one between the ÖVP and the SPÖ.

This is particularly true for a number of social policies. Austria’s needs-based minimum income scheme is a case in point. It entitles job seekers and other individuals who face social hardship to a minimum income of approximately €860 per month. Some Länder, however, delimit payments made under this scheme to refugees and persons under subsidiary protection. The previous government failed to harmonise these provisions throughout Austria, in part due to the sensitivities of the two former coalition partners vis-à-vis their respective party colleagues at the Länder level. Now, the ÖVP-FPÖ coalition has declared its determination to reform the minimum income scheme regardless of the Länder’s preferences. The announced plans reflect the government’s goal to make Austria a less attractive destination for immigrants, and will thus make the unequal treatment of EU/EEA citizens on the one hand, and refugees on the other the nationwide norm.

Streamlining organisations during a period of transition

Another factor that is likely to facilitate Kurz’s ambitions is the fact that he has effectively side-lined many veto points within his own party. Unlike his predecessors, he has been able to choose a team of ministers without the interference of the ÖVP’s influential sub-organisations, not least those in the Länder. Lacking the explicit support of any of the ÖVP’s regional sub-divisions or corporatist ‘Leagues’, the new ministers’ careers depend almost exclusively on the Chancellor’s goodwill. This helps him preclude interventions into federal decision-making on part of the constituent units and gives him considerable leeway over the cabinet’s collective decisions.

What is more, Kurz has come to power at a time when the most important federal-corporatist powerhouses are undergoing a generational change. Most prominently, the governor of Austria’s largest Land, Lower Austria, and head of the most powerful ÖVP sub-organisation, Erwin Pröll, retired in 2017 after 25 years in office. Pröll was known for continuously intervening in the business of his party at the federal level, and into federal politics more generally. His successor has yet to establish herself in a remotely comparable situation.

By the same token, the main pillars of the ‘social partnership’ are also in a phase of leadership transition. The new generation of leaders in the Chamber of Commerce, the Trade Union Federation and the Chamber of Labour are unlikely to exercise their (veto) powers in a similar fashion to their predecessors. This is particularly true for the employees’ representatives who have lost their traditional access points to the federal government since the Social Democrats’ loss of office.

The resulting weakening of federal-corporatist structures will most probably yield a far-reaching reform of Austria’s social insurance system. Currently, insurance carriers are fragmented into 21 different organisations – nine for each Land, and the remaining twelve divided along the lines of functions (pensions, accident insurance) or professional groups (farmers, self-employed, etc.). Last week, Kurz and his Vice-Chancellor, Heinz-Christian Strache, announced their plans to amalgamate the existing insurance carriers into only five different organisations, which would diminish the influence of both the Länder and the ‘social partners’ over the insurance system. The latter have already voiced fierce opposition to the new plans but in light of their current organisational reshuffling, the efficacy of their resistance remains somewhat spurious.

A vote for change or continuity?

These favourable conditions notwithstanding, the scope of forthcoming institutional reforms in Austria might still be underwhelming. In October 2017, both the ÖVP and the FPÖ promised ‘change’ and a ‘new style in politics’ as part of their general election campaign. They secured 37.5% and 26% of the vote respectively, and now have a comfortable majority to implement the proposed reforms (though they lack the two-thirds majority necessary for passing constitutional amendments).

However, in recent sub-state elections in four different Länder, voters seemed to be reluctant to endorse a similarly reformist agenda. Even in those constituent units where the recent polls resulted in victory for the ÖVP, the party’s respective regional branches only half-heartedly embraced Kurz’s rhetoric of ‘change’.

In Lower Austria, the incumbent ÖVP was eager to symbolise continuity after the retirement of their highly popular leader Pröll (see above). This strategy paid off in an absolute majority in the regional parliament. In another ÖVP-stronghold, Tyrol, the party’s regional elites hesitated to exchange their traditional conservativism for an overly progressive agenda. This, too, resulted in unexpectedly high gains for the incumbent. Moreover, in the aftermath of February’s election, Tyrol’s governor renewed his coalition with the Greens – indicating to his fellow party members at the federal level that the right-of-centre coalition with the FPÖ is not the only game in town. Yet the most frank critique from Kurz’s own ranks has been voiced by Salzburg’s recently re-elected ÖVP-governor Wilfried Haslauer, who described Kurz’s rhetoric of ‘change’ as a mere ‘publicity stunt’.

Reconciling voters’ contradictory messages

In short, recent sub-state elections have strengthened Kurz’s ÖVP, but they have also strengthened the respective party elites in the Länder and their hesitant endorsement for Kurz’s reform plans. Against the backdrop of these electoral dynamics, voters’ preferences regarding the country’s federal structure need to be disentangled along the lines of the multi-level nature of these processes.

The 2017 general election took place in an environment of widespread dissatisfaction with the federal government’s performance. This may be surprising, given Austria’s booming economy and recent drops in unemployment rates. Yet, the former Grand Coalition has frequently transmitted an image of deep internal divisions, which nurtured popular beliefs regarding its inability to tackle major policy issues, particularly concerning migration. The centre-right’s landslide victory at the federal election can thus be interpreted as a message to overcome the alleged gridlock created by the old SPÖ-ÖVP coalition.

At the same time, survey data shows that Austrian voters strongly identify themselves with their respective regions, particularly in the West. These identity patterns are by no means exclusive (identification with the federal level is mostly even stronger); yet up to 42% would welcome an increase of policy competences at the Länder level. This level of governance is most visibly embodied by the incumbent governors who tend to pose as defenders of their regions’ particular interests. This peculiar position might explain the incumbent’s gains in recent sub-state polls.

In this context, policy-makers in Austria will have to reconcile the somewhat contradictory demands of their constituents. They will have to bring about the much-desired change and, simultaneously, respect deep-rooted patterns of identity and anchors of political stability in a time of uncertainty. Paradoxically, finding this balance will most likely succeed if it is negotiated within the channels of the country’s federal-corporatist machinery.

This post is an expanded version of a piece that first appeared on the website of the Centre for Constitutional Change. 

About the author

Patrick Utz is a research fellow at the Centre on Constitutional Change.

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