The centre-right ÖVP and centre-left SPÖ have reportedly worked out a deal on Austria’s budget, a major step toward forming a government together, Austrian media reported.
While they haven’t officially sealed a coalition agreement yet, agreeing on financial policies suggests they are on that path.
Austria faces an €18 billion budget shortfall over the next seven years, making financial policy one of the biggest sticking points in negotiations. According to ORF, the parties have decided to avoid an EU deficit procedure, introduce new levies on banks and energy companies, and make spending cuts across different ministries.
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What’s in the ÖVP-SPÖ budget deal
The plan includes spending cuts, new taxes, and policy changes to balance Austria’s finances.
Reports from Kleine Zeitung and Der Standard say the deal includes a higher bank levy, which will increase by €350 million per year for 2025 and 2026 before settling at €50 million annually. The excess profits tax on energy companies, which was about to expire, will be extended to generate another €200 million.
Other measures include cutting €1 billion in government spending, scrapping the Klimabonus social payment, and raising pensioners' health insurance contributions from 5.1 percent to 6 percent.
A new tax on rezoning land sales is expected to bring in €200 million annually, and the 55 percent top tax rate for incomes above €1 million will remain in place beyond 2025.
Changes to Austria’s educational leave system are also included. The existing program, which allowed employees to take extended leave for further education with financial support, will be replaced with a stricter version that costs the government significantly less.
The current system has been costing nearly €500 million per year, but under the new plan, this will be reduced to around €150 million annually. The previous negotiation between ÖVP and the far-right FPÖ had resulted in an end to the system.
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Why this deal matters
This budget deal makes an ÖVP-SPÖ coalition more likely.
Financial policy was a major sticking point, with the ÖVP resisting higher taxes and the SPÖ pushing for more revenue from banks and corporations. The agreement on a stability levy for banks and an extended excess profits tax shows both sides have made concessions.
According to Kleine Zeitung, the parties have also negotiated the division of ministerial positions, suggesting that the talks have moved beyond financial policies.
What’s still in the way of a coalition
Even with a budget deal, several hurdles remain before an official coalition agreement is reached. The ÖVP and SPÖ have a history of political distrust, and some within the SPÖ, particularly in Burgenland and Styria, are not convinced this partnership is the right move.
A coalition between the two would only have a one-seat majority in the National Council, raising concerns about whether it would be stable enough to govern effectively.
They may need to negotiate support from NEOS or the Greens to get key policies through Parliament.
While agreeing on financial policies is a big step, negotiations on leadership roles and broader policies are still ongoing. Party leaders Christian Stocker and Andreas Babler are set to brief President Alexander Van der Bellen on Thursday, but it’s unclear when they will announce the deal publicly.
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What happens next
If the ÖVP and SPÖ reach a final agreement soon, Austria could have a new government by early March. However, ORF reported that negotiations are still happening behind closed doors, with both parties keeping details under wraps until everything is settled.
If they fail to agree, Austria could face new elections, adding to the political uncertainty that has dragged on since the September 2024 election. For now, the budget deal signals that Austria may be on track for another grand coalition, bringing the country’s two main parties back into power together.
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