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Sep 14, 2016 | 09:00 GMT

The Limits to Austria's Euroskepticism

(ALEXANDER KLEIN/AFP/Getty Images)
Forecast Highlights

  • Growing Euroskepticism in Austria will make Vienna more actively resist EU efforts to centralize power.
  • Austria is unlikely to leave the European Union anytime soon, but Vienna will likely ally itself with regional groups trying to influence the direction of the bloc.
  • The country will look to its traditional sphere of influence in Central Europe for political backers, but this strategy will only get it so far.

Austria is at a political crossroads. For the first time since World War II, none of the country's main political parties reached the second round of the presidential election. Instead, Norbert Hofer, a candidate from the right-wing Freedom Party of Austria (FPO), and an independent, Alexander van der Bellen, are neck and neck heading into a rerun of the runoff vote, set to take place Dec. 4. (The first runoff, held in May, was recalled when a court found irregularities in the way votes were tallied; the rerun, originally scheduled for October, has already been postponed once over concerns of faulty mail-in ballots.) Despite the fact that presidents serve a largely ceremonial function in the Austrian government, they have the power to dissolve the legislature and to call early parliamentary elections, something Hofer has said he might do if elected. In addition, as president, Hofer or van der Bellen will be able to veto legislation, which could make policymaking difficult for the current government, which is a coalition of center-right and center-left forces.

Even if van der Bellen, a former member of the Green Party who favors the European Union's federalist vision, again narrowly edges out Hofer, as he did in the failed May runoff, the FPO could still have considerable influence in Vienna. Mainstream parties have accepted the FPO as a junior coalition partner in the past, and it stands a good chance of becoming a senior coalition member after the country's next parliamentary elections, set for 2018. Besides this, the party's rising popularity — up 10 points in the past year to 35 percent — has been enough to sway the Austrian government. The government, for example, has opposed EU concessions to Turkey in exchange for Ankara's cooperation in preventing migrants from reaching the Continental bloc. The government also closed Austria's borders and introduced a quota for asylum requests, but the measures were not enough to improve its popularity. Facing a sluggish economy, rising unemployment and hundreds of thousands of asylum seekers who have passed through or settled along the border over the past year, many Austrian voters are fed up with mainstream politics. Still, there are limits to the country's burgeoning Euroskepticism.

Austria's Enduring Influence

No matter what happens with its domestic politics, Austria's position in Europe will dictate its actions. Austria has traditionally been a Central European power, its main areas of influence reaching from the North European Plain to the Carpathians in the east and the Balkans in the south. Between the 13th and early 20th centuries, the Habsburg monarchy was one of the main political and military players in Europe. During the Cold War, Austria played a similarly strategic role. After World War II, the country, like Germany, was divided into U.S., British, French and Russian zones occupied and governed by the Allies. But Austria regained its independence in 1955 by declaring its permanent neutrality and promising not to join any military alliances. This enabled Vienna to position itself as a bridge between the Soviet bloc and the West during the Cold War. At the same time, Austria's neutrality, unlike that of nearby Switzerland, allowed it the flexibility to join the European Union and NATO's Partnership for Peace Program in 1995.

Though Vienna's influence on European affairs has diminished since the end of Habsburg rule, Austria still considers itself a link between Western and Eastern Europe, as well as between Europe and Russia, which supplies around half of the natural gas it consumes. The country remains an important meeting point for world leaders to this day: International organizations as diverse as the Organization for Security and Co-operation in Europe (OSCE) and the Organization of the Petroleum Exporting Countries (OPEC) are headquartered in Vienna. Since the fall of the Soviet Union, Austria has also tried to restore its influence over the territories in Central Europe and over the Balkans, which were once part of the Austro-Hungarian Empire. Austrian companies — most notably banks — expanded their business into those areas after the Soviet bloc and Yugoslavia crumbled.

A Trade-Off

As an export-oriented country, Austria supports the European Union as long as it creates opportunities for trade and investment. Having backed the European Union's expansion toward Central and Eastern Europe in the mid-2000s, Austria continues to advocate accession for countries in the Western Balkans, which would create new business for its firms. But the country is not a founding member of the European project, and it does not share the dreams of a federal Europe still prevalent among the political and intellectual establishment in Germany, France and Italy. Its view is closer to those of fellow Central European countries such as Poland and Hungary, which support free trade but are reluctant to relinquish sovereignty to technocrats in Brussels. Many of Austria's politicians — not only in the FPO, but also in more moderate parties — think the Continental bloc should be an economic and not a political union.

[sidebar title="Europe Rethinks the Schengen Agreement" imgurl="https://www.stratfor.com/sites/default/files/styles/stratfor_large__s_/public/main/images/Schengen-treaty-membership.png?itok=NM1axkrJ"] Support is eroding for relaxed border controls. Read more… [/sidebar]

Nonetheless, Austria is neither willing nor prepared to leave the European Union, regardless of the FPO's growing popularity. Opinion polls show that roughly two-thirds of Austrians want to remain in the bloc, almost the same percentage that voted in a 1994 referendum to join the European Union. In light of that figure, even the FPO, which campaigned against EU accession and, until recently, had promised to hold a referendum on Austria's eurozone membership, has toned down its Euroskepticism of late. Hofer recently asserted that Austria should hold a referendum on its EU membership only if Turkey joins the bloc (which will not happen anytime soon) or if more sovereignty is transferred to Brussels (which seems unlikely in the current political environment). His suggestion reveals that the FPO is trying to court moderate voters without abandoning the strong anti-EU platform that endeared it to independents.

But politics are not the only thing keeping Austria in the European Union. Economically, the country has a lot at stake in the bloc. Cross-border trade accounts for six of every 10 euros that the country generates, making exports its primary means of wealth creation. Austria depends heavily on the European Union to buy the goods it exports, and it cannot afford to lose access to large markets such as Germany and Italy. Even the end of the Schengen Agreement, which eliminates border controls in Europe, could hurt trade along the busy Alpine routes connecting the Austrian, Italian and German markets.

A Limited Solution

Austria, therefore, is unlikely to be among the vanguard of countries threatening to leave the European Union. However, Vienna could increase its say over political developments in the bloc by joining forces with its neighboring member states. Hofer recently called for greater cooperation with Slovenia, Croatia, the Czech Republic and Hungary — all former subjects of the Austro-Hungarian Empire — to better influence EU policy. But there are limits to this strategy. Because Slovenia and Croatia are small, weak countries that depend on EU funds and investment, they will be reluctant to confront Brussels. Meanwhile, the Czech Republic and Hungary are already members of another bloc, the Visegrad Group, and are more likely to cooperate with Austria as members of that group than to align behind Vienna's leadership individually. However, the countries' individual interests may complicate their efforts at collaboration. Austria's neutrality, for instance, would curb Vienna's participation in the plan to create a defense union in Europe, an idea Visegrad members support.

On its own, Austria cannot shape EU policy. But as opposition to the European Union grows among the country's electorate, Vienna may side with countries pushing for a more decentralized bloc based on intergovernmental cooperation rather than on supranational integration. Since the Brexit vote, EU member states have been looking to form new alliances to influence the direction of the bloc. With few other viable options at its disposal, Austria is becoming more interested in joining forces with like-minded countries to make its voice heard.

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