(Bloomberg) -- Sebastian Kurz clinched a historic alliance with Austria’s Green party to claim a second term as chancellor and position his country at the forefront of Europe’s battle to limit climate change.Kurz, a 33-year-old conservative, announced the deal late on New Year’s Day. Pending approval by a Green party conference on Saturday, the new administration could be sworn in by President Alexander Van der Bellen (himself a former Green leader) on Jan. 7.Two years after he leaped to prominence by embracing the backlash against immigration, Kurz may be about to set a very different precedent for Europe’s conservatives by teaming up with the Greens. His new coalition brings the Austrian Greens into the federal government for the first time and offers a template for politicians across the continent searching for a formula to repel the threat of populism.German conservative Ursula von der Leyen took charge of the European Commission last month after forging a parliamentary majority around her plan to decarbonize the European economy. The next government in Berlin could see a similar alliance as the Greens supplant the ailing Social Democrats as the natural partner for Angela Merkel‘s Christian Democrats.“Kurz is now trying to address the two main issues of the next decade: immigration and climate change,” said Carsten Brzeski, chief economist at ING Germany. “This can become an interesting test case for Germany, and indeed for Europe: the first conservative-Green coalition.”It’s a risky project though.From 2015, Kurz used the European refugee crisis to take over his party. He dressed the conservatives in the clothes of populism and steered them out of an awkward coalition with the Social Democrats to join forces with a xenophobic party founded by former Nazis. After winning two straight elections, a third of his voters are now former supporters of the Freedom Party and other rightist groups.By teaming up with the Greens, Kurz finds himself on the opposite side of the debate from the populists and vulnerable to their attacks for the first time. Concessions to his partner could also estrange his new voters as well as People’s Party mainstays like farmers, industry, commuters and traditionalists panicking about meat prices or fuel taxes.“It’s going to be hard to swallow for many groups in the People’s Party,” said Thomas Hofer, a political analyst and consultant in Vienna. “It’s also a fine line to tread because of the voters he won from the Freedom Party.”Yet Kurz had few other options after the tumultuous months that started when the “Ibiza” bombshell exploded on Austria’s political scene in May. German media published excerpts of a video shot on the Spanish island that appeared to show nationalist leader Heinz-Christian Strache offering state contracts in return for campaign funds. That toppled Strache and Kurz’s government, and triggered a snap elections on Sept. 29.The Freedom Party descended ever further into scandal. Secret gold stashes in the Alps, eye-watering expense accounts, and photos of cash-filled bags from eastern European donors emerged. The Social Democrats failed to benefit from the affair under their hapless and gaffe-prone new leader Pamela Rendi-Wagner. Kurz and the Greens were the only clear winners.“There is no alternative, and he knows it,” Hofer said.Litte is known yet about the government program Kurz and Green leader Werner Kogler, 58, have agreed on and they declined to take questions when they announced their agreement on New Year’s Day. The programme will be presented Thursday afternoon. Both have flagged to their followers that their very different policies may make for some difficult compromises.Kurz will have to show to his supporters that his tough line on migration and integration remains intact, that there are neither more taxes nor more debt and that legislation will remain business-friendly. Kogler will need some wins on climate policy, including tangible investments in infrastructure and some form of carbon taxes, at least a toning down of the anti-immigration rhetoric of Kurz’s former government, and measures on transparency and anti-corruption.“It is possible to cut taxes and make the tax system more ecological,” Kurz said. “It’s possible to protect the climate, and the borders.”Kurz will appoint his close ally Gernot Bluemel as the next finance minister. The Greens will get an enlarged transport ministry that will be headed by environmental activist Leonore Gewessler, and name as justice minister Alma Zadic, a 35 year-old lawyer who fled the Bosnian civil war to Austria in the 1990s.“I think this can hold,” Brzeski said. “Kurz has shown he’s very flexible and adaptable.”(Updates with statements on deal by Kurz and Kogler.)To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.netTo contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net;Chad Thomas at cthomas16@bloomberg.netFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.
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