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OO RUEHAG RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
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O 120853Z OCT 06
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5205
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY

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. 
 
--------------------------------------------- ---------- 
FINAL TALLY:  GREENS BUMP FREEDOM PARTY FOR THIRD PLACE 
--------------------------------------------- ---------- 
 
¶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.) 
 
------------------- 
Coalition Talks Set 
------------------- 
 
¶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 
 
VIENNA 00003022  002 OF 003 
 
 
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. 
 
-------------------- 
In for the Long Haul 
-------------------- 
 
¶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. 
 
----------------------------- 
Who Leads the Junior Partner? 
----------------------------- 
 
¶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. 
 
--------------- 
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