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(Bloomberg) — Austria’s far-right Freedom Party is forecast to win the most votes at a federal election for the first time, in what would be a bitter defeat for the nation’s two historical political groups that will likely herald a complicated stretch of coalition talks. 

The populist party has topped public opinion polls for almost two years, with its leader, Herbert Kickl, campaigning on a pledge to deport asylum seekers and stop supporting Ukraine’s defense against Russian aggression as a self-proclaimed “chancellor of the people.”

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“We are fighting for liberation from the system,” Kickl told a crowd of supporters at a get-out-the-vote rally in Vienna on Friday. “We want to build a new chapter in Austrian history, where the people are the protagonists.”

Sunday’s ballot comes at a difficult time for Austria, which is set for a second year of economic contraction and is only now recovering from a bout of high inflation that often surpassed its euro-area peers.

But Kickl, 55, has also been able to capitalize on political vacuum following the 2021 ouster of conservative wunderkind Sebastian Kurz on corruption charges. Kurz’s successor as chancellor — Karl Nehammer, of the People’s Party — has failed to replicate his charismatic style, although his handling of recent flooding may have provided a late boost to his standing. 

Meanwhile, the leader of the Social Democrats — small-town mayor Andreas Babler — only took office in 2023 after an internal power struggle, and has failed to capture the hearts and minds of the broader public. 

Polls show support for each of the three leading parties remains fairly similar, even with the Freedom Party in the lead, suggesting upsets can’t be ruled out. 

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Austrian state broadcaster ORF is scheduled to release an early projection based on partial results shortly after the last voting stations close at 5 p.m. CET. Preliminary results are due before midnight.

Coalition Building

The current coalition of People’s Party and Greens isn’t expected to have enough votes to continue governing, and the two groups have shown limited appetite to do so.

As leader of the biggest party after the vote, Kickl would traditionally be asked to start talks to find partners to run the government, but his ambition to lead Austria will face the reality of coalition arithmetic. The fact that he’s considered a toxic presence by most competitors doesn’t help.

The People’s Party has been part of every government coalition since 1987, and Nehammer has vowed not to form a government with Kickl. However, he hasn’t ruled out an alliance with the Freedom Party itself; such pairings at Austria’s provincial and municipal level are frequent.

A centrist government would probably need backing from the People’s Party, the Social Democrats and a smaller third group — the liberal NEOS or the Greens. Finding common ground for a coalition program will be an arduous task, even in a nation used to consensual rule between its two historical parties. Still, the wish to keep the Freedom Party out of government could propel such a alliance. 

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Austrian coalition negotiations have traditionally taken months, not weeks, so the talks could stretch into next year. Nehammer’s existing team will continue to govern in the meantime.

Economic Reality

Whoever forms the next government will face a lengthy list of policy challenges.

Despite being one of Europe’s wealthiest nations based on gross domestic product per capita, the competitiveness of Austria’s industrial base is at risk from aggressive wage hikes and government hand-outs to compensate for fast inflation. The likely end of Russian gas deliveries in December removes a cheaper source of energy, and the transition to alternative sources is fraught with risks.

Labor shortages are acute in key sectors, such as tourism and health care. Budget consolidation measures also will be needed to meet the European Union’s deficit target of 3% of economic output. 

“Austria urgently needs structural reforms to stimulate the economy and reduce the huge public deficit,” said Monika Koeppl-Turyna, an economist at the ECO Austria research institute in Vienna. “Prolonged uncertainty about the formation of a coalition would make it more difficult.” 

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