Austrian politics: chancellors, casinos and corruption

Austrian politics: chancellors, casinos and corruption

A second corruption scandal from within cabinet has raised concerns about institutional corruption.

WHAT’S HAPPENING?

A growing number of Austrian government officials have been implicated in an ongoing high-level corruption scandal.

KEY INSIGHTS

– Austrian Chancellor Sebastian Kurz has called for the Vienna-based public prosecutor’s office to be disbanded and replaced by a new federal body following a raid on his finance minister’s home.
– The creation of a federal prosecutor would require an amendment to the constitution, a move previously opposed by Kurz’s own party.
– A new report from the Council of Europe has found Austria’s efforts to address corruption to be unsatisfactory.
– Austria’s incumbent coalition is likely to institute structural changes to regain domestic and European political support.

On February 11, Austrian authorities conducted a search of the home of Finance Minister Gernot Bluemel in Vienna, searching for evidence of corrupt dealings. Bluemel publicly denied that he or his People’s Party had committed any wrongdoing, stating that neither had accepted donations from gambling firm Novomatic in exchange for granting gambling licenses. Following the raid, Austrian Chancellor and fellow People’s Party member Sebastian Kurz called for the disbanding of the Vienna-based anti-corruption public prosecutor’s office, WKStA, that had conducted the search.

Since then, Kurz has spoken with the WKStA and has indicated that he is willing to testify on the matter whilst simultaneously levelling criticism at the body. Kurz highlighted the damaging information leaks coming out of WKStA and has publicly denied that he was the “Kurz” referred to in leaked calendar entries from Novomatic. According to the chancellor, the leaks instead reference Martina Kurz, a Novomatic supervisory board member; the chancellor claimed that this could be proven by a quick Google search. This current scandal is known as the “Casino Affair” due to the involvement of Austrian gambling firm Novomatic Group, which is owned by multibillionaire Johan Graf. It has been alleged that government officials from Kurz’s party agreed to provide gambling licenses and other political favours in exchange for the appointment of Peter Sidlo as the Chief Financial Officer of Casinos Austria. Numerous reports have suggested that Sidlo — a member of the Freedom Party — had no prior experience that would warrant such an appointment.

Compounding the Austrian government’s problems, a Council of Europe report released on March 1 determined that the country’s anti-corruption response had been inadequate. The report highlights the low levels of compliance by members of Austria’s parliament and concluded that only 2 of the 19 recommendations made by the Council back in 2017 have been satisfactorily addressed. As a result, Austria has been asked to submit a progress report to the Group of States Against Corruption (GRECO) before September 30.

FROM VIENNA TO IBIZA

Photo: Ivan Radic/Flickr

These events are the latest inflection points in an ongoing investigation into high-level corruption that involves current and former Austrian politicians. The focus on Kurz and his government is directly related to the historical ties between his People’s Party and the Freedom Party (FPO). After the 2017 elections, the conservative People’s Party formed a coalition with the right-wing populist FPO. In Kurz’s first chancellorship, the coalition governed the country until June 2019, when the “Ibiza scandal” forced the vice-chancellor and leader of the FPO, Heinz-Christian Strache, to resign his position. Caught on tape with someone he believed to be linked to a Russian oligarch, Strache and his FPO deputy appeared to agree to provide political favours in exchange for positive media coverage. The downfall of the FPO also sent the country back to the polls. In the 2019 election, Kurz was able to win back the chancellorship, forming a new government with the left-wing Green Party despite their starkly divergent policies.

Further complicating Austria’s political issues is the fact that the investigators themselves have also been embroiled in recent controversies. In 2018, a WKStA investigation led to a raid that saw the EGS police unit seize sensitive information from the Office for the Protection of the Constitution and Counterterrorism (BVT). At the time the BVT had come under considerable pressure from the FPO and Strache, who at one point had called the office a “state within a state”.

Overall, the investigation into the BVT was considered by many to be highly suspect. The EGS had been directed by a local FPO politician and the unit was usually engaged in catching burglars and other street criminals – not dealing with internal affairs. Furthermore, the items seized reportedly contained information on right-wing groups close to Strache and the FPO and the corruption investigation into the head of BVT and others were later dropped. This has led critics to suggest that the raids were conducted under the auspices of FPO officials to protect their own party and other right-wing allies. Ultimately, the raid only managed to strain Austria’s intelligence relationships with other states and contributed to perceptions of FPO corruption. Additionally, the disruption caused by fallout from the raid may have contributed to the more recent intelligence failure that culminated in the Vienna terrorist attack, which resulted in the deaths of four people.

KURZ OR THE WKSTA?

Photo: European People’s Party/Flickr

Whilst Kurz appears to be clear for now, the raid on one of his closest political allies will have ramifications for the chancellor and the People’s Party. If evidence of corruption is found on Bluemel, Kurz’ government is likely to fall. Unlike the Ibiza Affair where Kurz and his party could draw a line between themselves and their FPO allies, evidence of corruption within the party itself will cause catastrophic reputational harm. Not only will the chancellor’s own integrity face increased scrutiny, but his judgement and leadership may be called into question. Kurz’s call for the disbandment of the WKStA and the establishment of an independent federal prosecutor’s body will also look less like criticism and more like political self-service. Furthermore, evidence of corruption will likely result in criminal proceedings and prison sentences for those involved. Judging by previous examples, such as former finance minister Karl-Heinz Grasser, multiple-year jail sentences for corrupt officials are not out of the question. As such, the uncovering of substantive evidence on Bluemel could precipitate a breakdown within the party itself as other members race to distance themselves from the current leadership. As for WKStA, such a success may be the only way for that office to regain the trust of the country and turn its image around.

However, if no evidence is found, a constitutional amendment and dissolution of the WKStA under the current government seems likely. The public prosecutor’s reputation has suffered in recent years and the disbandment could be an opportunity for the government to shift the focus away from itself whilst simultaneously plugging unwanted leaks. Additionally, the establishment of a new federal prosecutor independent of direct government control could help the People’s Party to bolster domestic and international perceptions of its government. An anti-corruption prosecutor independent of the Justice Ministry would serve to avoid future issues concerning the politicisation of institutions and conflicts of interest.

As for the Council of Europe recommendations, Kurz’s motivation to implement the report’s recommendations will depend on the outcomes of the existing investigation into Bluemel. For the meantime, it seems unlikely that the People’s Party will have the bandwidth to focus on GRECO with the shadow of a corruption investigation and possible criminal sentences looming over some of its top members.