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Gusenbauer unexpectedly wins Austrian election

Austria's opposition Social Democrats, led by Alfred Gusenbauer, unexpectedly won yesterday's national election, beating Chancellor Wolfgang Schuessel's People's Party after promising to reduce unemployment, to cut taxes for middle-income families and spend more on education. The Social Democrats took 35.7% of the vote, or 68 seats in the lower house of Parliament, to 34.2%, or 66 seats, for the People's Party, according to provisional results. Opinion polls during the campaign had shown the People's Party consistently ahead by between 2 and 5 percentage points. „The Social Democrats mobilized their own supporters en masse in the past week by saying Schuessel should cancel the purchase of Eurofighter jets and increase pension payments instead,” said Klaus Poier, a political scientist at the University of Graz. „Many People's Party voters stayed at home as they were expecting their party to win anyway.” Gusenbauer will now have the chance to form a coalition that will end Schuessel's 6 1/2 years in power. His most straightforward possibility is a „grand coalition” with the People's Party, along the lines of that formed in Germany last year by Angela Merkel.

The Social Democrat, who needs at least 92 seats for a majority in the 183-seat lower house, doesn't have enough seats to form a coalition with the Greens alone and has excluded alliances with the anti-immigrant Freedom Party or Joerg Haider's Alliance for Austria's Future. The Freedom Party took 11.2% of the vote or 21 seats, the Greens 10.5% or 20 seats and the Alliance, Schuessel's current coalition partner, 4.2% or 8 seats. „A grand coalition led by Gusenbauer is the most realistic option,” said Peter Hajek, an analyst at the OGM polling institute in Vienna. „It looks as if they will even be forced to form a coalition as they lack alternatives.” The distribution of seats may change if the Alliance falls below 4%, the threshold for getting into Parliament, after all 420,000 postal votes are counted by October 10, though analysts say the Social Democrats' lead is too big for the People's Party to overcome. Should the Alliance fail to win any seats, that might open the way for a coalition between Gusenbauer and the Greens. „The result is a very deep disappointment,” Schuessel who's been in power since February 2000, said on national television in Vienna tonight. „We'll have to thoroughly analyze what went wrong here.”

The result was the closest in an Austrian election since 1962. Turnout, at 74.2%, was the lowest since World War II and 10.1 percentage points lower than at the last election four years ago. The government's planned purchase of 18 Eurofighters, made by European Aeronautic, Defence and Space Co., will cost €1.96 billion ($2.48 billion), according to the Defense Ministry. Gusenbauer has said he wants to cancel the purchase of the planes and spend more on pensions and education instead. Delivery of the planes is expected to start next year. „People in Austria think that the country is rich and wealthy but not everything is fairly distributed,” Gusenbauer told national television, „That's why people feel there needs to be a correction when it comes to pension payments, health,” and education policy, he said. Gusenbauer has also pledged to halt sales of stakes in partly state-owned companies such as Telekom Austria AG and Oesterreichische Post AG, a policy Schuessel's Finance Minister Karl-Heinz Grasser had promised to continue.

„The Social Democrats won't be able to carry out everything they said they'd do,” Wolfgang Matejka, chief investment officer of Vienna-based Meinl Bank, said in a telephone interview. „The party will have to compromise.” Gusenbauer has pledged greater investment to create jobs, arguing that unemployment, at 4.8% in August, in the country of 8.2 million people is still higher than when Schuessel came into office. He says tax changes under the People's Party have only benefited large companies, and smaller businesses need help to invest. Gusenbauer's party recovered to win today after falling behind in the polls in March, following news of losses linked to hedge-fund investments at Bawag PSK Bank, owned by labor unions close to the Social Democrats. The People's Party ran a campaign saying the Bawag scandal showed the Social Democrats couldn't run a business and wouldn't be able to run the government. Last week, though, Profil magazine reported a link between Schuessel and Bawag, saying that the chancellor had been on a trip to Bulgaria with then-Bawag CEO Helmut Elsner in March 2003. The trip was sponsored by investor Martin Schlaff. The men attended the opening of the new headquarters of Bulgarian mobile phone company MobilTel. Schlaff's purchase of MobilTel was partly financed by Bawag. Analysts including Werner Beutelmeyer of the Linz-based Market polling institute have said the magazine article hit support for Schuessel. (Bloomberg)