The result is a budget compromise in the coalition agreement that attempts to balance fiscal consolidation with investment in social welfare and economic growth.
At the heart of the 211-page agreement is a seven-year budget consolidation plan designed to bring Austria back in line with EU fiscal rules and avoid an excessive deficit procedure. The new government has committed to cutting spending by over €6.3 billion in 2025 and €8.7 billion in 2026, while implementing targeted tax relief for middle-income earners and businesses.
However, not all parties got what they wanted. The SPÖ had pushed for higher corporate taxes and a financial transactions levy, which the ÖVP and Neos rejected. In turn, the ÖVP’s proposal for stricter spending caps and a faster return to a balanced budget was watered down to accommodate the SPÖ’s demands for increased social spending.
The coalition’s migration policy reflects a shift away from the FPÖ’s attempt to secure a hard-line agenda in earlier coalition talks, in which it had called for a drastic reduction in asylum applications, an end to automatic citizenship for second-generation immigrants, and expanded border controls. Instead, the new government will maintain strict deportation procedures while expanding integration programs.
This marks a notable break from the ÖVP’s recent rhetoric. During its short-lived negotiations with the FPÖ, the conservatives had signaled openness to more hard-line migration restrictions, including stricter welfare access for asylum seekers. That pivot has now been abandoned in favor of a compromise approach that combines security with integration.
On the international stage, the new government has reaffirmed Austria’s commitment to Ukraine, its backing for EU-wide sanctions against Russia, and the provision of financial and logistical support for Kyiv’s reconstruction efforts.
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