Austria is one of the hidden gems of the international financial world. With its strategic location, first-class banking system, political stability, and one of the world’s strongest bank secrecy laws, keeping a portion of your assets in Austria makes a great deal of sense in uncertain times.
However, Austria is undergoing an identity crisis. Inflation is at a 15-year high. An aging population has forced the government has scaled back social spending. And, an explosion of immigrants from Turkey and Eastern Europe has led to a backlash against the newcomers.
Austria’s electorate has reacted to these developments by rejecting “politics as usual.” In yesterday’s national election, Austria's Social Democrats (SPÖ) won the most votes, but the two right-wing parties made large gains, winning 29% of the vote. That’s the largest voting block they’ve attracted since the end of World War II.
Now, the SPÖ, led by Werner Faymann, must form a government. It won’t be easy. Two years ago, after the last election, the SPÖ and Austria’s Conservative Party (ÖVP) formed a coalition government. But since then, the SPÖ and ÖVP spent most of their time spewing vitriol at each other. It’s no surprise that voters reacted by electing politicians that promised change.
In theory, the SPÖ and ÖVP could revive their coalition, as together the parties occupy more than 50% of the seats in the Austrian Parliament. But given the failure of the last coalition, the SPÖ may need to enlist the right wing to form a government.
One possible coalition partner is the Freedom Party (FPÖ), which garnered 18% of yesterday’s vote. Its leader, former dental technician Heinz-Christian Strache, demands a halt to immigration, an end to globalization, a ministry for repatriating foreigners to their native countries, and the return of powers conceded to the EU. Strache also wants to ban Islamic dress and legalize the display of Nazi symbols such as the swastika.
Another possible partner is the Alliance for the Future of Austria (BZÖ), which gathered 11% of the votes. Its head Jörg Haider formerly led the FPÖ, but in 2005 Haider and several other party leaders left to form the BZÖ. The split left Haider and Strache bitter rivals.
However Faymann decides to form a government, if he includes either one or both of the right-wing parties, he’ll risk EU retaliation. In 2000, when Haider and the FPÖ won 28% of the vote and gained a place in the coalition government with the ÖVP, the EU imposed sanctions against Austria. Yet, if Faymann fails to take the right wing into the government, he will find it difficult if not impossible to form a governing coalition.
The good news, though, is that no matter which parties Faymann includes in a coalition, Austria’s future as an international financial center remains bright. For instance, one of the few things that all of Austria’s badly splintered political parties (with the exception of the Green Party) agree on is the need to protect bank secrecy. They clearly understand that giving foreign tax collectors access to information about Austrian accounts would not only sacrifice Austrian sovereignty, but would massively damage the country’s financial status. And that’s a reassuring thought to anyone concerned about our eroding financial privacy.
The Austrian bank secrecy law is only one of dozens of "Austrian money secrets" I reveal in my book, Austria Money Secrets. To learn how you can obtain your own copy of this book, click here.
Copyright © 2008 by Mark Nestmann
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