PRIMER: Austrian legislative election October 15th 2017

Background

- This Sunday will see the results of the latest Austrian legislative election, whereby (typically) the party that commands the highest share of votes choses the Chancellor.

- As it stands, the current Chancellor Christian Kern is set to exit government and instead enter opposition in Parliament with his Social Democrats Party. This comes with the Austrian electorate unsympathetic towards economic achievements by the current regime and instead more concerned about open-bored policies. Additionally, allegations of smear campaigns carried out by the Social Democrats Party on Kurz has dirtied their campaign.

- Despite a large percentage (27% according to Oesterreich) of voters currently being undecided, it appears that Sebastian Kurz’s Conservative People’s Party is touted to command the largest share of votes (33% according to Kurier).

- Additionally, the right-wing Freedom Party is expected to place third with around 25% of the vote, according to Kurier.

Sebastian Kurz

With Kurz touted as the most likely victor it is worth considering his credentials and potential ramifications of his leadership.

- One of Kurz’s key views is on immigration and holds the view that Austria should limit the number of asylum seekers the nation accepts.  

- Crucially, if Kurz is to be appointed, Austria will assume the EU’s Presidency in H2 2018 which could have a bearing on Brexit negotiations with Kurz likely to pursue an agenda of reform based on the above views on immigration whilst supporting economic austerity.

Coalition building process

- Given the recent polling data, it is likely that the election will lead to the need for a coalition building process.

- The most likely outcome would be for Kurz’s Conservative People’s Party to team up with the right-wing Freedom Party which would most likely be able to mathematically secure a government despite some of the potential political unrest that this could lead to.

- Aside from this tie-up options are relatively limited with the Social Democrats and Freedom party having little in the way of commonality in policies. Additionally, a grand coalition between the Conservative People’s Party and Social Democrats is also seen as unlikely.

Economic impact

- The introduction of the right-wing Freedom Party would likely lead to some jitters among Austrian investors. However, any economic impact for Austria is unlikely to be seen over the medium/long-term; a view shared by Berenberg. Furthermore, any concern within the market would likely be isolated to Austrian assets and not broader European assets, particularly with the Freedom Party no longer advocating abandoning the shared-currency.

13 Oct 2017 - 09:14- - Source: RANsquawk

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