Dec. 12 (Bloomberg) -- Austrians who abandoned their governing parties in record numbers at elections in September will get another taste of their policies after their rulers agreed to form a new government.
The Social Democrats and the pro-business People’s Party said today they’d reached an accord after 75 days of talks to form a new coalition to run the country of 8.4 million people. Support for both parties fell to post-World War II lows in the Sept. 29 election.
“One doesn’t have to reinvent Austrian success,” the Social Democrats’ Werner Faymann, who will lead the government alongside Vice-Chancellor Michael Spindelegger of the People’s Party, told reporters in Vienna. The government will try to become more efficient, cut costs and seek to invest in education, he said.
A so-called grand coalition of the two traditionally largest parties has ruled Austria for 42 of the last 68 years. While the two still managed to eke out 50.7 percent of the vote in September, they were rebuffed by voters who switched their backing to anti-immigrant groups or newly-created protest parties.
“Faymann and Spindelegger don’t have anything to offer but lip service,” Heinz-Christian Strache, whose euroskeptic Freedom Party got the most votes since 1999, said in a statement. “Their announcement today already sounds like an obituary.”
Among its first moves, the governing coalition is expected to raise taxes on cigarettes, sparkling wines and new cars, state television reported Dec. 9. The government has been searching for extra sources of revenue to finance the bailout of Hypo Alpe-Adria-Bank International AG, the nationalized lender with 19 billion euros ($26 billion) of assets, that needs to be wound down.
The state may also reduce its holdings in Telekom Austria AG, Oesterreichische Post AG and OMV AG, Der Standard newspaper reported this week. Today’s announcement didn’t provide details, nor have the new cabinet members been named.
Austrian 10-year bonds fell along with German debt today. The spread over German 10-year bonds rose to 32 basis points, or 0.32 percentage point, at 1:20 p.m. London time.
“This will be the absolute last chance for the two big traditional parties,” Peter Hajek, a Vienna-based polling and public-opinion analyst, said in a telephone interview. “It will be bad news for them if significant reforms aren’t enacted by the end of their term in 2018.”
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