By Boris Groendahl
VIENNA, Nov 23 (Reuters) - The realisation that Austria's economy faces the hardest two years in half a century swept aside all possible alternatives to a renewal, agreed on Sunday, of the left-right coalition that ended prematurely this summer.
The most prominent conservative opponents to the tie-up with the Social Democrats, who undermined the last government from the beginning, have been removed along with luckless outgoing Social Democrat chancellor Alfred Gusenbauer and his allies.
This means the incoming government has a good chance of surviving longer than the previous administration's 18 months. Here are the main factors:
* The previous government failed less because of unsurmountable policy differences but rather because personal feuds and political intrigues spiralled out of control. New Social Democrat leader Werner Faymann and new People's Party head Josef Proell have a good personal rapport and do not bear the same grudges as key figures in the previous administration.
* Faymann had favoured a left-right alliance from the start, but among conservatives -- defeated in elections for the second time in as many years on Sept. 28 -- support for a renewed pact was not universal. Some argued for a tie-up with the far right, while others said the party should rebuld in opposition.
* Proell's appointment as new conservative leader a day after the election was a first sign that the party was veering towards another coalition with the Social Democrats.
* But it needed two unexpected events for Proell to sideline internal opposition. The accelerating economic crisis and the death of rightist Joerg Haider in a car accident last month -- which threw Haider's party into turmoil and removed a more acceptable rightist figure from the political scene -- made the alternatives appear as a gamble.
* The economic crisis also allowed conservatives to save face while compromising on policies that were deal-breakers just months ago -- such as bringing forward tax cuts by a year and increasing spending before the budget is balanced. In turn, the Social Democrats had to agree to a tax reform that is less favourable for low earners than they had wished.
* Faymann defused one of the main Social Democrat policy changes that has angered the conservatives -- his demand for a referendum on any new European Union treaty. By effectively giving the conservatives a veto, he can still use the demand to score points with eurosceptics but does not have to worry about what to do with a negative referendum result.
* Ursula Plassnik, who resigned as foreign minister on Sunday, would have been the last remnant of the conservative circle around former chancellor Wolfgang Schuessel -- a faction that never came to terms with election defeat and never really wanted a coalition with the Social Democrats.
* The much faster, smoother and less acrimonious talks that led to the new government have already boosted approval ratings for the left-right coalition, which had been at rock bottom when the coalition collapsed in July.
* The main risk for the government appears to be the economic crisis proving worse than expected. If unemployment and the budget deficit rise even faster than anticipated, so might tensions between the coalition partners.
(Reporting by Boris Groendahl; Editing by Kevin Liffey)) ($1=.7987 Euro) Keywords: AUSTRIA GOVERNMENT/FACTORS (boris.groendahl@reuters.com; +43 1 53112-258; Reuters Messaging: boris.groendahl.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
VIENNA, Nov 23 (Reuters) - The realisation that Austria's economy faces the hardest two years in half a century swept aside all possible alternatives to a renewal, agreed on Sunday, of the left-right coalition that ended prematurely this summer.
The most prominent conservative opponents to the tie-up with the Social Democrats, who undermined the last government from the beginning, have been removed along with luckless outgoing Social Democrat chancellor Alfred Gusenbauer and his allies.
This means the incoming government has a good chance of surviving longer than the previous administration's 18 months. Here are the main factors:
* The previous government failed less because of unsurmountable policy differences but rather because personal feuds and political intrigues spiralled out of control. New Social Democrat leader Werner Faymann and new People's Party head Josef Proell have a good personal rapport and do not bear the same grudges as key figures in the previous administration.
* Faymann had favoured a left-right alliance from the start, but among conservatives -- defeated in elections for the second time in as many years on Sept. 28 -- support for a renewed pact was not universal. Some argued for a tie-up with the far right, while others said the party should rebuld in opposition.
* Proell's appointment as new conservative leader a day after the election was a first sign that the party was veering towards another coalition with the Social Democrats.
* But it needed two unexpected events for Proell to sideline internal opposition. The accelerating economic crisis and the death of rightist Joerg Haider in a car accident last month -- which threw Haider's party into turmoil and removed a more acceptable rightist figure from the political scene -- made the alternatives appear as a gamble.
* The economic crisis also allowed conservatives to save face while compromising on policies that were deal-breakers just months ago -- such as bringing forward tax cuts by a year and increasing spending before the budget is balanced. In turn, the Social Democrats had to agree to a tax reform that is less favourable for low earners than they had wished.
* Faymann defused one of the main Social Democrat policy changes that has angered the conservatives -- his demand for a referendum on any new European Union treaty. By effectively giving the conservatives a veto, he can still use the demand to score points with eurosceptics but does not have to worry about what to do with a negative referendum result.
* Ursula Plassnik, who resigned as foreign minister on Sunday, would have been the last remnant of the conservative circle around former chancellor Wolfgang Schuessel -- a faction that never came to terms with election defeat and never really wanted a coalition with the Social Democrats.
* The much faster, smoother and less acrimonious talks that led to the new government have already boosted approval ratings for the left-right coalition, which had been at rock bottom when the coalition collapsed in July.
* The main risk for the government appears to be the economic crisis proving worse than expected. If unemployment and the budget deficit rise even faster than anticipated, so might tensions between the coalition partners.
(Reporting by Boris Groendahl; Editing by Kevin Liffey)) ($1=.7987 Euro) Keywords: AUSTRIA GOVERNMENT/FACTORS (boris.groendahl@reuters.com; +43 1 53112-258; Reuters Messaging: boris.groendahl.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.