(Bloomberg) -- Efforts broke down on Friday to form a three-way coalition government among Austria’s centrist parties aimed at blocking right-wing nationalists from taking power.
The liberal Neos party, the smallest of the potential coalition partners, pulled the plug 46 days after being invited by the conservative People’s Party and Social Democrats to discuss forming a government.
There “wasn’t just no progress, but there was backsliding” over recent days, Neos leader Beate Meinl-Reisinger said on public television. Disagreements over the government’s proposed budget and pension reforms were among the sticking points that led to her decision, she said.
The nationalist Freedom Party — which won the highest number of seats of any party in September’s federal election but fell short of the majority needed to form a government — quickly called on Chancellor Karl Nehammer to resign, potentially opening a path for his party to rethink a right-wing alliance.
The four other parties represented in Austria’s parliament have until now dismissed the possibility of joining forces with the Freedom Party and its leader, Herbert Kickl, a former interior minister.
While the People’s Party and Social Democrats have the bare minimum of seats needed to scrape together a two-party majority, that possibility may also be fading.
“The behavior among some Social Democrats has led to the current situation,” the People’s Party said in a statement which accused the socialists of resisting reform proposals related to employment and pensions.
Friday’s collapse of talks in Vienna adds to the perception of growing political risk across Europe. Neighboring Germany — Austria’s biggest trading partner — is holding snap elections in February after its own three-way coalition between the Social Democrats, Greens and liberal FDP fell apart over budget disagreements.
Meanwhile, the European Commission is set to decide whether to place Austria in its so-called excessive-deficit procedure in January. The Central European nation’s economy is in danger of shrinking for a third consecutive year in 2025 if it opts for sharp budget consolidation, according to the state-funded Wifo research institute.
Austria is no stranger to drawn-out coalition talks; it’s taken an average of about two months to form a government following elections in recent decades.
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