New leader steps in after bribery probe fells Austria's Chancellor Kurz

Foreign Minister Alexander Schallenberg (left) is expected to be Austria's next chancellor after Mr Sebastian Kurz resigned on Oct 9, 2021. PHOTOS: AFP, NYTIMES

VIENNA (BLOOMBERG) - Foreign Minister Alexander Schallenberg, who is expected to become Austria's next chancellor, has begun the work of salvaging the nation's ruling coalition.

Mr Sebastian Kurz resigned as chancellor on Saturday (Oct 9) night in the face of corruption allegations, a stunning blow for a rising star of European conservative politics.

Mr Schallenberg may be sworn in on Monday. He spoke of a surprise and an "enormously challenging task" on Sunday as he headed to a meeting with Austrian President Alexander Van der Bellen.

By departing largely on his own terms, Mr Kurz avoided an embarrassing no-confidence vote that had been set for Tuesday. He will now lead his party's group in Austria's Parliament.

The Green Party welcomed Mr Kurz's decision to step down, and said Mr Schallenberg's appointment would open the way to save the People's Party/Green coalition in place since last year.

Mr Schallenberg, 52, is the son of a diplomat who has worked in Austria's foreign ministry for most of his career. He held key positions in a caretaker government appointed while Mr Kurz sought re-election in 2019.

Austria is an important cog in Europe's political machine 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.

Mr Kurz often aligned himself with Europe's fiscal hawks, including the Netherlands, while giving space to the likes of President Viktor Orban in neighbouring Hungary to test the limits of the EU.

Even at 35, Mr Kurz is known as a political survivor. By casting his departure as a patriotic act, and by putting forth a close ally as his successor, he seems poised to exert considerable influence while plotting a possible comeback.

"It shouldn't be about personal interests, party interests or political tactics," Mr Kurz said on Saturday. "My country is more important to me than my person."

His future prospects will hinge, though, on the outcome of multiple criminal investigations, and he'll need to convince his party that he can maintain public support.

Ms Sigrid Maurer, the Greens' parliamentary whip, ruled out a return to power for Mr Kurz in the current legislative period ending 2024. While commending Mr Kurz's decision, the People's Party governor of Upper Austria, Mr Thomas Stelzer, said influential state leaders had played an active role in a debate over Mr Kurz's future, according to the ORF public broadcaster.

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Opinion polls showed Mr Kurz losing support in Vienna, Austria's left-leaning capital and largest metropolis, even before the raids, underscoring his divisiveness among voters.

The People's Party, whose support nationwide has been capped below 40 per cent, needs at least one of the country's four other parties to form a government, but their choices have diminished amid the persistent taint of scandal.

"Austria is becoming a country with a shrinking number of realistic government scenarios, and this is a reason for concern," said Mr Christoph Hofinger, director of the SORA Institute, a public-opinion researcher.

"The People's Party, who historically would negotiate and form coalitions with all other parties, is starting to run out of options," he said.

Mr Kurz became Austria's foreign minister at 27 and its youngest-ever leader at 31. His first government collapsed in 2019 after a scandal involving his coalition partners, the far-right Freedom Party.

Mr Kurz and nine others are suspected of funnelling federal funds to a newspaper publisher in return for favourable coverage that helped fuel his meteoric rise.

Prosecutors raided the offices of several Chancellery staff last week to trigger the crisis that culminated on Saturday. Mr Kurz has called the allegations false.

For the Green Party, staying in the coalition offers a way to push key policy measures and avoid a potential four-way coalition. Creating a majority in Austria's 183-seat parliament would have needed some support from the far right, a potentially unpalatable option for the Greens.

"The People's Party's message is still to frame the party of Kurz as an anchor of stability and continuity, saving Austria from risky political constellations," said Mr Hofinger.

Speculation has already started about what Mr Kurz's next chapter might be. As party chairman, he will have continued strong influence over policy.

As a lawmaker, Mr Kurz will give up any immunity, allowing the authorities to continue their investigation, the APA news service reported on Saturday, citing his party.

"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 political analyst and consultant Thomas Hofer.

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

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