VZCZCXRO3072
OO RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHVI #0045/01 0091411
ZNR UUUUU ZZH
O 091411Z JAN 07
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5912
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 VIENNA 000045 
 
SIPDIS 
 
SIPDIS, SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV PREL AU
SUBJECT: Austria's New Government a Grand Coalition 
 
REFS: A) 06 Vienna 3583  B) 06 Vienna 3354  C) 06 Vienna 3202  D) 06 
 
Vienna 3022  E) 06 Vienna 2941 
 
THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT 
ACCORDINGLY.  NOT FOR INTERNET DISTRIBUTION. 
 
 
Summary 
-------- 
 
¶1.  (SBU) Following the January 8 announcement that the Social 
Democratic (SPO) Chairman Alfred Gusenbauer would lead a Grand 
Coalition with the People's Party (OVP), the OVP presented its 
ministerial team on January 9.  Wilhelm Molterer, the OVP's 
Parliamentary Leader, will become Vice-Chancellor and Finance 
Minister.  The OVP will have seven out of 13 ministerial portfolios, 
with incumbents in the Foreign Ministry (Ursula Plassnik), Economy 
and Labor Ministry (Martin Bartenstein), and Agriculture and 
Environment Ministry (Josef Proell).  In addition, the current 
Defense Minister, Guenther Platter, will move over to head the 
Interior Ministry.  Outgoing Chancellor Wolfgang Schuessel, in a 
surprise move, will take over Molterer's position as OVP Leader in 
Parliament.  The SPO will announce its personnel decisions on 
January 10, but there is already significant criticism from within 
the SPO ranks that the party "gave away" too many key ministries. 
Moreover, on the two main substantive issues in the coalition 
negotiations - abolishing student fees and canceling the Eurofighter 
order - the SPO backed down significantly from its initial position. 
 The new GOA's economic program emphasizes further budget reductions 
before any loosening of fiscal policy.   Reaction from the financial 
community on the government's constellation and economic objectives 
has been overwhelmingly positive.  The retention of Ursula Plassnik 
at the Foreign Ministry augurs for continuity in Austrian foreign 
policy generally, and cooperation with the United States 
specifically.  End Summary. 
 
 
Gusenbauer Chancellor, Molterer Vice-Chancellor 
--------------------------------------------- -- 
 
¶2. (U) Ninety-nine days after national elections on October 1, 2006, 
Austria's two main parties, the Social Democratic Party (SPO) and 
People's Party (OVP) reached agreement on January 8 to form a Grand 
Coalition.  SPO Chairman Alfred Gusenbauer, as expected, will become 
Chancellor.  In addition to the Chancellery, the SPO will control 
the following six ministries: 
 
--Womens' Affairs 
--Transportation and Infrastructure 
--Education, Art, and Culture 
--Social Affairs 
--Justice 
--Defense 
 
The OVP, which polled 34.3% compared to the SPO's 35.3%, will 
receive the following seven ministries: 
 
--Foreign Affairs (Ursula Plassnik, incumbent) 
--Finance (Wilhelm Molterer, former OVP Parliamentary Leader) 
--Interior (Guenther Platter, former Defense Minister) 
--Economy and Labor (Martin Bartenstein, incumbent) 
--Agriculture and Environment (Josef Proell, incumbent) 
--Science and Research (Johannes Hahn, former OVP Vienna Chairman) 
--Health, Family, and Youth (Andrea Kdolsky, former Lower Austrian 
Hospitals Administrator) 
 
In a surprise move, Chancellor Schuessel announced that he would 
replace Molterer as the OVP's Floor Leader in Parliament.  The SPO 
Executive Committee is meeting on January 9 to discuss ministerial 
portfolios and will announce its personnel decisions on January 10. 
 
 
 
New Government's Program 
------------------------ 
 
¶3.  (U) During a January 8 joint press conference, Gusenbauer and 
Schuessel outlined major initiatives the new government plans to 
take on.  Gusenbauer characterized the goal to reduce unemployment 
as the coalition's "big project."  The GoA will strive to reduce the 
budget further, with the goal of achieving a budget surplus by 2010. 
 This, in turn, will permit a tax cut.  On-again, off-again 
privatizations in the telecom and postal sectors are now off.  The 
new government will also extend the legislative term from 4 to 5 
years, beginning after the next elections (2010).  The new GoA also 
plans to lower the voting age from 18 to 16. 
 
 
SPO Gave Away Too Much? 
----------------------- 
 
¶4.  (SBU) There has already been significant criticism from within 
the SPO's ranks that the party "gave away" too many key ministries 
 
VIENNA 00000045  002 OF 002 
 
 
to the OVP in the coalition negotiations.  The SPO's former 
Vice-Chancellor in the 1970s and 1980s, Hannes Androsch, 
characterized the government as "an OVP government with an SPO 
Chancellor underneath it."  The SPO-near trade union agreed to the 
coalition, but "with reservations."  Josef Cap, the SPO's 
Parliamentary Leader, admitted that the party had made difficult 
compromises, but defended the SPO portfolios as key to promote 
economic and social development in Austria. 
 
¶5.  (SBU) On the two most difficult issues in the coalition 
negotiations - abolishing university student fees and canceling the 
GoA's Eurofighter order - the SPO appears to have backed down 
substantially from its initial position.  The fees, supported by the 
OVP, will remain in place, but students will henceforth be able to 
do 60 hours of community service in lieu of paying the fees, if they 
so choose.  The new Defense Minister will review the decision to 
purchase 18 Eurofighter jets, following the conclusion of the 
current parliamentary hearings on the issue. 
 
 
Comment 
------- 
 
¶6. (SBU) The SPO has clearly made major concessions to the OVP in 
the portfolio distributions, with the junior partner holding Foreign 
Affairs, Interior, Finance, Economy, and Agriculture.  In addition, 
the SPO Defense Minister will have the thankless task of trying to 
renegotiate the Eurofighter deal with EADS.  On economic policy, the 
OVP controls all the key ministries.  The emphasis appears to be on 
fiscal discipline, rather than on fulfilling the SPO's campaign 
promises for increased social spending and higher taxes on business 
and upper- and middle-income Austrians.  Comments from the financial 
sector on the new government's constellation and program have been 
uniformly positive. 
 
¶7.  (SBU) In foreign policy, there is some potential for 
disagreement between an SPO Chancellor and OVP Foreign Minister. 
Nevertheless, the broad outline for Austria's foreign policy will 
remain constant, as will its cooperation with the USG.  An SPO 
Defense Minister will continue to favor Austria's strong engagement 
in the Balkans, though he/she will be even more reluctant than the 
current OVP Defense Minister to commit Austrian forces to 
Afghanistan or Iraq. 
 
McCAW