Rise and fall: the scandal that toppled Austria’s Sebastian Kurz


In the end, the only thing quicker than the rise of Sebastian Kurz was his downfall.

For the past four years, the 35-year-old has been the master of Austrian politics. But a scandal that broke just 12 days ago has brought his second chancellorship to an abrupt end. Police raided ministries across Vienna, revealing the existence of a probe by Austrian state prosecutors into grand corruption at the heart of government. Kurz is its central suspect.

No charges have been brought. But the allegations are explosive. Kurz and a coterie of close allies are suspected of illicitly using taxpayers’ money to bribe media organisations into providing positive coverage of the then novice politician, which helped propel him to power in December 2017.

It is a mark of Kurz’s success that the political backlash has been so swift. Austria’s opposition parties were even willing to contemplate a coalition uniting the far right, greens, socialists and free market liberals just to oust the chancellor and shunt his conservative People’s party from power.

“It’s a spectacular, sheer political fall. He was so absolutely successful [at winning votes] as a politician in Austria,” says Thomas Hofer, a political consultant. “His closest allies and his sternest critics both sort of regarded him with this sense that he could walk on water, if he wanted to.”

Police raided ministries across Vienna on October 6 as part of a probe by state prosecutors into government corruption
Police raided ministries across Vienna on October 6 as part of a probe by state prosecutors into government corruption © Lisi Niesner/Reuters

In Austria’s last elections in September 2019, Kurz delivered the People’s party one of its biggest ever mandates: 37.5 per cent of the vote. Even after his swift resignation as chancellor on October 9 Kurz is to remain the party’s leader, and will head its parliamentary caucus — giving him an automatic seat at the cabinet table. But it is unclear how tenable such a position will be. Vienna is rife with rumour that further revelations are to follow. Investigators have only just finished reviewing the first third of seized materials.

Prosecutors have already produced hundreds of pages of allegations, and released dozens of private messages between Kurz and his allies, plucked from phones and computers seized in a sprawling series of investigations stretching back to 2019. After the latest raids, another 400 pages were publicly released.

Regardless of any legal case that may be brought for bribery or perjury, the two central criminal allegations prosecutors are looking into, the investigation has laid bare an ugly side to Kurz’s style of government: a set of disclosures that range from the shocking — political ruthlessness, cynicism and plotting — to the embarrassing, with a superabundance of emojis and cringeworthy proclamations of loyalty. The scandal has breathed new life into the old Habsburg bureaucrats’ adage, jedes Schrifterl ist ein Gifterl — every little thing put down in writing can be poison.

“Austria [now] knows one thing for certain: that abuse of power, serious systematic corruption, manipulation of the population, perfidy and hypocrisy are what hold the [People’s party] together at its core,” railed Herbert Kickl, head of the far-right Freedom party, at an emergency session of parliament last Tuesday.

The corruption scandal forced Sebastian Kurz to resign as Austrian chancellor
The corruption scandal forced Sebastian Kurz to resign as Austrian chancellor © Joe Klamar/AFP via Getty Images

Austria is a small European country, but one that is central to the EU project. If the rule of law is faltering in Austria, then it is a damning indictment of the EU’s political health.

The government — now led by Kurz loyalist Alexander Schallenberg — narrowly survived a vote of no confidence. But the anger among parliamentarians was plain. From the left and right, they criticised what has become known as the “Kurz-system”: an alleged network of patronage reaching from the chancellery across the Austrian political, economic and media landscape.

“A new parliamentary committee on inquiry will now investigate to what extent the People’s party’s abuse of power has impacted the workings of state,” says Stephanie Krisper, an MP for the liberal Neos, and a vociferous critic of government corruption. “What is unique is how improperly Sebastian Kurz and his ‘new’ People’s party acted and what their system was willing to do to protect itself. Since day one they have attacked the justice system and investigations against them. It is Orbanesque.”

But, notes Krisper: “That power corrupts is well known, and of course, in Austria, it is not just something that began with the [Kurz system].”

A political outsider

In 2017, Sebastian Kurz was Austria’s foreign minister — its youngest ever. But he had ambitions to go further. Along with a group of close advisers he had watched the success of Emmanuel Macron’s En Marche movement in France and believed that a similar approach — a political outsider promising great reform — was needed in Austria.

Kurz envisaged a movement of his own that would break the cosy consensus politics of the centre ground that dominated the Austrian government, and had long stifled real reform. Grand coalitions between the left and right had been the norm of Austrian politics since the war. But as a result, very little ever changed. The education system, many Austrians complain, is in need of radical reform, but for decades has only seen piecemeal changes that both the left and right can agree on.

To shake things up dramatically Kurz mixed traditional fiscal conservatism with a dash of social libertarianism, and outflanked the far right by adopting most of its hardline attitudes to immigration.

Thomas Schmid, the former general secretary at the ministry of finance, was one of Kurz’s most loyal operators
Thomas Schmid, the former general secretary at the ministry of finance, was one of Kurz’s most loyal allies © Lukas Ilgner

Having ruled out forming a new party of his own, or allying himself with Austria’s liberals, Kurz decided his best chance was to take over the conservative People’s party and radically rebrand it. He ditched its stuffy imagery and filled its materials with pictures of the young and borrowed from Labour’s Tony Blair in Britain, relabelling it the New People’s Party.

It was all part of what he and his team dubbed “project Ballhausplatz”, documents released as part of the new investigation by prosecutors show, after the name of the palace that houses the Austrian chancellery. The challenge was to make himself appear both trustworthy and credible — first to the old guard of the People’s party and then the electorate. Kurz was barely out of his 20s. He had no university education, and had spent his entire career in politics.

The documents also reveal how ruthless Kurz and his close team could be. For example, he deliberately blocked a 2016 social care reform package agreed between the then leader of the People’s party and the Austrian social democrats, because he recognised how popular it might be. His goal was to wreck the leadership of his boss, the incumbent party leader, Reinhold Mitterlehner, who Kurz described as an “arse” in one message to Thomas Schmid, a close ally at the ministry of finance. Austria was run by “old fools”, Schmid replied.

Schmid has emerged at the centre of the case being explored by prosecutors. He was one of Kurz’s most formidable and loyal operators. “I am one of your praetorians,” Schmid texted Kurz in one 2017 message. “I will do anything for my chancellor,” he said in another.

Schmid was the general secretary at the finance ministry where he oversaw the federal budget and the daily running of the department. His role gave him access to other departments across the federal government and, more importantly, the ability to sign off on large expenditures.

Austria’s government is now led by Kurz loyalist Alexander Schallenberg
Austria’s government is now led by Kurz loyalist Alexander Schallenberg, centre © Thomas Kronsteiner/Getty Images

According to prosecutors, Schmid is suspected of using his position to illicitly funnel €1.2m of finance ministry funds — taxpayers’ money — towards the media group Österreich, run by Wolfgang Fellner. In return the group allegedly ran polls, cooked up by another Kurz ally, that were highly favourable to the young foreign minister, and painted him as the best new leader of the People’s party. The placed polls painted Mitterlehner — the People’s party leader — as ineffectual and weak.

“I have never really gone as far as we have,” Schmid wrote in 2018 in a text message to Johannes Frischmann, Kurz’s former press spokesperson, that prosecutors cite, in the warrant, as a key piece of evidence. “Ingenious investment. And [Wolfgang] Fellner is a capitalist . . . Whoever pays [gets to] create. I love that.”

Österreich has disputed the allegations. It says it received far less money from the finance ministry than investigators have claimed. And it denies outright money — which paid for government adverts — was ever conditional on positive coverage.

‘Political witch hunt’

The investigation, which is being undertaken by the central state prosecutor for economic crimes and corruption, the WKStA, has rocked the Austrian political landscape. But in fact, it has been brewing for months.

Schmid’s phone, for example — where the WKStA found more than 300,000 messages — was first confiscated in October 2019. For the past two years, intrigue upon intrigue gathered around the Kurz government.

The Schmid-Österreich affair is in fact a tale of at least five other interlocking alleged conspiracies:

  • The Ibiza affair, in which in 2019 former vice-chancellor and head of the far-right Freedom party, Heinz-Christian Strache, was filmed on the Balearic island soliciting what he thought was Russian help to influence the Austrian media. A sting operation caught him telling a woman he believed to represent a powerful Russian oligarch that in Austria, political power was obtained through money and corruption. He suggested the Russians buy the country’s biggest newspaper, make it more positive towards him, and in return he would dole out political favours. The revelations led to the collapse of the first Kurz ministry — a coalition with Strache.

  • The Pilnacek case, in which a top justice ministry official linked to Kurz is alleged to have leaked sensitive investigatory information.

  • The Casinos case, in which it is alleged People’s party and Freedom party officials were systematically bribed by the Austrian gambling industry.

  • Wirecard: the company’s chief operating officer, Jan Marsalek, was receiving classified information from Austrian intelligence. Some officials have been charged with receiving bribes.

  • The ÖBAG perjury case, in which Kurz is alleged to have gifted control of the state holding company, ÖBAG, to Schmid — a highly lucrative role — and then misled parliament about his role in influencing the appointment process.

In probing these matters, the WKStA — and a parallel parliamentary investigatory committee — have slowly gathered reams of evidence.

For Kurz and his supporters, the prosecutorial project has been nakedly political. They allege the WKStA has selectively used evidence, and sought any excuse it can to try and gain warrants to go after People’s party officials. The prosecutor has had a poor record in recent years of losing cases, they note. Indeed, they point out that despite a whole series of accusations from the WKStA few charges have been brought against the Kurz government.

Sebastian Kurz mixed traditional fiscal conservatism with a dash of social libertarianism in the rebranded People’s party
Sebastian Kurz mixed traditional fiscal conservatism with a dash of social libertarianism in the rebranded People’s party © Joe Klamar/AFP via Getty Images

Kurz and his allies have been accused of trying to hamper the process — a gambit that has raised the political stakes and led to allegations of evidence tampering and attempts to thwart the course of justice. Five hard drives were destroyed by chancellery officials last year containing information requested by a parliamentary investigation, for example.

A spokesperson for Kurz declined a request for interview. The former chancellor has denied wrongdoing, and has indicated he will waive his parliamentary immunity to allow prosecutors to continue to look into his conduct in office. Schmid resigned from his position as chief executive of ÖBAG earlier this year. He too has denied any wrongdoing.

The scandal republic

In 1985, the German magazine Der Spiegel caused a sensation in Austria, when in an editorial it dubbed the country Der Skandalrepublik. It listed a series of investigations and allegations of corruption in Austrian business and political life.

Almost four decades on the current set of alleged misdemeanours make those of the mid-1980s seem quaint. But they also suggest an enduring political mindset.

“Throughout Austrian political history you have these kind of incidents,” says Marcus How, head of analysis at the central European political consultancy VE Insights. “Really you could probably tell the entire history of modern Austria just through the history of its scandals. There have been so many.”

Indeed, many in Austria have been quick to draw parallels with Kurz’s alleged payments for positive coverage with an alleged scheme to do the same that entangled social democratic politicians just over a decade ago.

“Austria likes to market itself as a mini-Germany but really it is more of a [central] eastern European or even Balkan country in its culture and structures — and the way in which they are misused,” says How.

In Austria this system in which power is exercised through allies is known as the Parteibuchwirtschaft. As part of it, loyalists are levered into key positions of influence across society by whoever sits at the top. When the social democrats are in power, social democrats get the big jobs. Vice versa, when the People’s party is in control, positions go to its placemen.

“In Austria, every company, every institution, really has a political orientation of its own,” says one senior People’s party strategist. “It’s the legacy of how the country was pulled together after the war. I can tell you which companies are social democrat and which are People’s party, it really does work like that.”

“In a sense it’s a very catholic legacy too,” says How. “A sort of counter-reformation style of power with guilds and societies and fraternities that all work behind the scenes.”

Kurz, if anything, says How, had to work extra hard to navigate this tradition, because his youth and lack of a strong base within the People’s party put him at a disadvantage. The aggressiveness of his extremely-tightly knit inner circle — figures such as Schmid — in trying to manoeuvre a new, young generation of Kurz ultra-loyalists into positions of influence, and their apparent lack of scruples in doing so, is the driving force behind much of the alleged wrongdoings.

“The ‘Kurz-system’ as the opposition frames it, is actually something that reaches far back, farther back than Kurz,” says Hofer. “All Kurz [allegedly] really did is take it to another level.”

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