Austrian Chancellor says he will resign after talks on forming government fail

Austrian Chancellor Karl Nehammer said on Saturday that he will resign in the coming days after talks on forming a new government failed a second time.

The announcement came after the People’s Party and the Social Democrats continued coalition talks a day after the liberal Neos party’s surprise withdrawal from discussions.

“We have tried everything up to this point.

“An agreement on key points is not possible, so it makes no sense for a positive future for Austria,” Mr Nehammer, from the conservative People’s Party, was quoted as saying by broadcaster ORF.

In a statement on social media he said: “Unfortunately I have to tell you today that the negotiations have ended and will not be continued by the People’s Party.”

He said that “destructive forces” in the Social Democratic Party have “gained the upper hand” and that the People’s Party will not sign up to a programme that is against economic competitiveness.

Social democratic leader Andreas Babler said he regretted the decision by the People’s Party to end the negotiations. “This is not a good decision for our country,” he said.

Mr Babler said that one of the main stumbling blocks had to do with how to repair the “record deficit” left by the previous government.

“I have offered to Karl Nehammer and the People’s Party to continue negotiating,” he told reporters Saturday.

The next government in Austria faces the challenge of having to save between 18 and 24 billion euros (£15 billion and £20 billion), according to the EU Commission.

In addition, Austria has been in a recession for the past two years, is experiencing rising unemployment and its budget deficit is currently at 3.7% of GDP – above the EU’s limit of 3%.

The talks had dragged on since Austria’s president tasked the conservative chancellor in October with putting together a new government.

The request came after all other parties refused to work with the leader of the far-right Freedom Party, which in September won a national election for the first time with 29.2% of the vote.

It was not immediately clear what would happen next.

The People’s Party will have to search for a replacement for Mr Nehammer, who has always ruled out the possibility of a coalition with far-right leader Herbert Kickl.

But Mr Nehammer’s expected resignation could now prompt the party to rethink its options under new leadership.

The People’s Party and the far-right Freedom Party are close on economic policies as well as other issues such as migration and are already working together in four coalitions on a local level.

An early election would be another option.