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Austria’s Social Democrats (SPÖ) and the pro-business People’s Party (ÖVP) have agreed to renew their coalition government, as the credit crisis threatens to hamper economic growth. The news has disappointed Austria's two far-right parties, who made sweeping gains at legislative elections on September 28. The Freedom Party and the Alliance for the Future of Austria took 29% of the vote between them, and hoped to become powerbrokers.

The SPÖ, led by Werner Faymann, and the ÖVP, led by Josef Pröll, announced the agreement after almost two months of talks. The SPÖ leader will become Federal Chancellor and Pröll the Vice-Chancellor, Faymann told reporters at a press conference in Vienna.

The coalition partners will announce the appointments to the new cabinet by early December, and Austria’s President Heinz Fischer will swear in the new government within two weeks of that date.

The two parties agreed to cut taxes by €2.7bn from 2009 as economic growth in the country is slowing and unemployment is rising. The Social Democrats, the largest party after the legislative elections, have pledged to spend more on welfare and halve the tax on the sale of food to 5 per cent – moves that might lead to higher budget deficits. They also said they want to cut taxes for low- and middle-income families, as the country’s economy is set to grow at the slowest pace for six years in 2009.

27 November 2008

 Last updated: 27/11/2008 15:58:00

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