Austria's Political Economy: Capitalist Or Socialist?

Austria is a democratic republic with a federal semi-presidential system. The country's politics are characterised by competition among multiple parties, with the conservative Austrian People's Party (ÖVP) and the centre-left Social Democratic Party of Austria (SPÖ) dominating post-World War II politics until newer parties like the Greens and NEOS rose to prominence. The current government, formed in 2020, is a coalition between the ÖVP and the Greens, marking the first time the Greens have gained power. While Austria's robust welfare state and social-welfare policies reflect socialistic tendencies, the country operates within a capitalist framework, as evidenced by its well-developed social market economy and instances of private companies exploiting labour laws during the COVID-19 crisis.

Austria's democratic political system

Austria is a democratic republic with a federal semi-presidential system. The country is made up of nine federal states, with Vienna as the federal capital. The Austrian constitution allows for popular initiatives, which means that 200,000 vote-eligible citizens or half the populations of three states can petition parliament for approval of any bill.

Austria's head of state is the Federal President, who is elected by popular vote for a term of six years and is limited to two consecutive terms. The Federal Chancellor is appointed by the Federal President and, while they are the head of government, they have no power to direct other members of the government. The Federal Chancellor and a number of ministers appointed by the president on the recommendation of the chancellor make up the federal cabinet, which answers to the National Council and can be forced to resign through a motion of no confidence.

The Austrian Parliament is the bicameral federal legislature, consisting of the National Council and the Federal Council. The National Council is the predominant chamber, with 183 members elected for a five-year term by proportional representation. To be represented in the National Council, a party needs to either win at least four percent of votes across the nation or win a seat in one of the 43 regional constituencies. The Federal Council has 62 members, who are selected by the state legislatures, and its powers are more limited.

Austria's legal system distinguishes between three different instruments of direct democracy: referendums, popular initiatives, and national opinion polls. A referendum on a bill can be held if a majority of the National Council's members demand it or by a resolution of the President, which has to be counter-signed by all members of the government. Substantial changes to the constitution always require a referendum, while changes to parts of the constitution only require a referendum if at least one-third of the members of the National Council or the Federal Council demands it. The result of a referendum is binding and the bill in question is not passed into law if a majority votes against it.

Austria's political system reflects the dynamics of competition among multiple political parties. The Austrian People's Party (ÖVP) and the centre-left Social Democratic Party of Austria (SPÖ) dominated politics and public life for decades after World War II, with only the Freedom Party of Austria (FPÖ) playing a significant role at the national level. More recently, newer parties such as the Greens and the NEOS have risen to prominence.

The Austrian People's Party (ÖVP)

The ÖVP has been described as a catch-all party of the centre-right, with a platform that combines conservative forces and a mix of social and economic groups, including workers, farmers, employers, tradespeople, feminists, and senior citizens. The party has traditionally been anti-socialist and Catholic, with the ideals of subsidiarity and decentralisation.

In the first Austrian legislative election after World War II, the ÖVP won a landslide victory, taking almost half of the popular vote and an absolute majority in the legislature. It remained the senior partner in a coalition with the SPÖ until 1966 and governed alone from 1966 to 1970. The party has consistently been the strongest or second-strongest party in Federal Assembly seats and has led or been a partner in most of Austria's federal cabinets.

In the late 1990s, the ÖVP formed a coalition with the right-wing populist Freedom Party of Austria (FPÖ), which caused widespread outrage in Europe and led to informal diplomatic sanctions being imposed on Austria by the European Union. The coalition collapsed in 2003, and the ÖVP then formed a coalition with the FPÖ splinter group, the Alliance for the Future of Austria (BZÖ).

In 2017, under the leadership of Sebastian Kurz, the ÖVP shifted further to the right, adopting policies similar to the FPÖ, including a crackdown on illegal immigration and a fight against political Islam. The party changed its colour from traditional black to turquoise and rebranded as The New People's Party. The ÖVP became the largest party after the 2017 election and formed a coalition government with the FPÖ. However, this coalition collapsed after eighteen months, leading to the 2019 election, after which the ÖVP formed a new coalition with The Greens.

In December 2021, Karl Nehammer became the provisional leader of the ÖVP, which is currently the largest party in the National Council, holding 71 of the 183 seats, and won 37.5% of the votes cast in the 2019 legislative election. The ÖVP holds seats in all nine state legislatures and is part of the government in seven of them, leading in six. It is the second-largest party in Europe by membership and sits with the EPP group in the European Parliament.

The Social Democratic Party of Austria (SPÖ)

The SPÖ has played a significant role in Austrian politics and public life for decades. It was reconstituted as the Socialist Party of Austria in 1945 and governed as a junior partner of the ÖVP until 1966. In 1970, the SPÖ became the largest party for the first time in post-war history, and Bruno Kreisky became Chancellor, winning three consecutive majorities (1971, 1975, and 1979). From 1987 to 2000, the SPÖ led a grand coalition with the ÖVP before returning to opposition for the first time in 30 years. The party governed again from 2007 to 2017. Since 2017, the SPÖ has been the primary opposition to the ÖVP governments.

The SPÖ is currently the second-largest of five parties in the National Council, with 40 out of 183 seats, and won 21.2% of the votes cast in the 2019 legislative election. It holds seats in the legislatures of all nine states and is the largest party in three: Burgenland, Carinthia, and Vienna. The party has close ties to the Austrian Trade Union Federation (ÖGB) and the Austrian Chamber of Labour (AK).

In terms of ideology, the SPÖ has supported Austria's membership in the European Union and is a member of the Progressive Alliance and Party of European Socialists. It sits with the Progressive Alliance of Socialists and Democrats in the European Parliament, with five of Austria's 19 MEPs being members of the SPÖ.

The SPÖ has a history of advocating for workers' rights and social reforms. During the First Republic, the party, led by Karl Renner, introduced an eight-hour workday and paid holidays. In recent years, the party has advocated for a global transaction tax following the 2008 financial crisis.

The Austrian Freedom Party (FPÖ)

Under the leadership of Norbert Steger in the early 1980s, the FPÖ sought to style itself as a moderate centrist liberal party in the mould of Germany's Free Democratic Party (FDP). However, when Jörg Haider became leader in 1986, the party began an ideological turn towards right-wing populism, resulting in a surge of electoral support but also leading the centre-left Social Democratic Party of Austria (SPÖ) to break ties. The FPÖ's platform became nationalist, anti-immigration, and anti-EU.

In the 1999 election, the FPÖ won 26.9% of the vote, becoming the second-most popular party. They formed a coalition government with the conservative Austrian People's Party (ÖVP), with the FPÖ as the junior partner. This was the first time a party with Nazi origins had become part of a European government since World War II, and it triggered an unprecedented response from the European Union.

The FPÖ soon lost popularity, falling to 10% in the 2002 election, and internal tensions led Haider and much of the party leadership to leave in 2005, forming the Alliance for the Future of Austria (BZÖ). Heinz-Christian Strache then became leader, and the party gradually regained its popularity, peaking at 26.0% in the 2017 election. They once again formed a coalition with the ÖVP, but this government collapsed in May 2019 due to the "Ibiza affair", in which Strache was caught on video soliciting funds from a purported Russian national.

In the 2019 election, the FPÖ's support fell to 16.2%. Herbert Kickl has led the party since 2021, and in the 2024 election, their support increased to 29.2%, placing first for the first time.

The Greens

The basic values of the party, according to their charter in 2001, are "direct democracy, nonviolence, ecology, solidarity, feminism and self-determination". The Greens are Pro-European and, in addition to ecological issues such as environmental protection, they campaign for the rights of minorities and advocate a socio-ecological (ökosozial) tax reform.

In 2002, the Greens entered into negotiations about a possible coalition government with the conservative Austrian People's Party (ÖVP). However, these negotiations were called off and the Greens became the largest opposition party while the SPÖ and ÖVP formed a grand coalition government.

In 2017, the party suffered from internal struggles, losing its Youth wing and later experiencing a split of Peter Pilz's faction. In the 2017 legislative election, the Greens scored only 3.8% and lost their representation in the Nationalrat for the first time since 1986.

However, the party experienced a revival in the 2019 European election, scoring 14.1% and electing 2 MEPs. In the 2019 snap legislative election, the Greens made a strong recovery, scoring 13.9% and electing 26 MPs, their best result in a legislative election.

In 2020, the Greens formed a coalition government with the Austrian People's Party (ÖVP), marking the first time the Greens have gained power in Austria. The new government is led by Federal Chancellor Karl Nehammer, with Green Party head Werner Kogler as Vice-Chancellor. This is the first time there has been a Conservative-Green coalition government in Austria, and the first time women are a majority among cabinet ministers.

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