Austrian Chancellor Sebastian Kurz resigns amid corruption probe

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VIENNA (BLOOMBERG) - Sebastian Kurz resigned on Saturday (Oct 9) as Austria's chancellor in the face of corruption allegations.

The resignation is a setback for Kurz, 35, a rising star of European conservative politics, who became the nation's foreign minister at 27 and leader at 31.

Days ago, Kurz appeared to have the support of his Cabinet to hang on as chancellor.

He will remain chair of the People's Party, with influence over government policy.

In televised comments, Kurz said he had asked Austrian President Alexander Van der Bellen to name a new chancellor.

Kurz said the government had reached a "stalemate" with the opposition arrayed against him.

Kurz said he had proposed that Foreign Minister Alexander Schallenberg, be chosen as his successor. Schallenberg, 52, who is known to be a close ally of Kurz, has worked in Austria's foreign ministry for most of his career.

Austria matters to the European political climate because it straddles east and west and has been a bellwether of anti-immigration populism and a thorn in the side of greater spending by the European Union.

Kurz has often aligned himself with the fiscal hawks in the Netherlands while giving space to the likes of President Viktor Orban in neighbouring Hungary to test limits of the EU.

Kurz and nine others are suspected of funneling federal funds to a newspaper publisher to orchestrate his rapid rise in government.

Prosecutors raided the offices of several Chancellery staff this week.

Kurz has denied wrongdoing. On Saturday, he called the allegations false.

Kurz's move is aimed at salvaging the government of his People's Party as the Greens, the junior partner in the coalition, negotiated with opposition lawmakers to form an alternative bloc in case Kurz did not resign.

"I want to resolve the stalemate by making room, in order to avoid chaos and ensure stability," he said.

It's now up to Green Party leadership to decide whether they accept the new setup, with Schallenberg potentially at the helm. For the Greens, it offers a convenient way to pass key policy measures they had agreed on with Kurz's party, while avoiding a four-way coalition with the opposition.

Creating a majority would have needed some support from the far-right Freedom Party, a potentially unpalatable option.

"This has been crafted in a smart way. The greens have their main claim of having a chancellor who is not in court, but he's still there," said Thomas Hofer, a political analyst and consultant in Vienna.

Kurz "wants to come back. He's in a waiting position," Hofer said.

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