Molterer next Austria finmin, Grasser, Schuessel out

VIENNA, Jan 9 (Reuters) Conservative Wilhelm Molterer was named vice chancellor and finance minister in Austria's new coalition government today after the outgoing government's two key members said they would not serve again.

Molterer won the unanimous approval of his party for the deal with Social Democratic chief Alfred Gusenbauer, the next chancellor, who by contrast sparked unrest in his party for appearing to cede key ministries to his rivals.

However, the departure of Chancellor Wolfgang Schuessel and Finance Minister Karl-Heinz Grasser, key members of the previous conservative-rightist coalition, could make it easier for the centre-left to accept the accord with the conservative People's Party.

Gusenbauer obtained the approval of 75 per cent of his party's executive for the coalition agreement, reached after more than three months of tortuous negotiations.

Schuessel, who for the past seven years headed a coalition with the far right until he unexpectedly lost elections last October, secured the finance ministry along with the foreign, economy and interior portfolios for the conservatives.

He blocked Gusenbauer's demands to abolish university tuition fees and undo corporate tax cuts introduced by his government, watered down Gusenbauer's welfare spending plans and delayed a tax reform for middle incomes until 2010.

''This is a government programme which was spendidly negotiated,'' Molterer told a news conference in Vienna. A career politician, Molterer has previously served as agriculture minister and initially opposed Schuessel's coalition with the far right.

The new government is due to be sworn in on Thursday.

Austrian newspapers and state television almost uniformly portrayed Schuessel as the winner of the coalition negotiations.

BROKEN PROMISES Two of the leading quality newspapers both printed cartoons showing Gusenbauer as an emperor with no clothes.

''The People's Party lost the elections and won the negotiations,'' the liberal daily Der Standard said.

Members of the Social Democrats' leftist youth wing and students, angered that the new government will retain university tuition fees, demonstrated outside the party headquarters.

''The Social Democrats have abandoned everything to gain power.

They have broken all campaign promises,'' said David Hackl, a 19-year-old programmer who was among the protesters.

Hannes Androsch, a prominent and popular former Social Democrat finance minister, told daily newspaper Kurier: ''This really is a conservative government with a Social Democratic chancellor. The party members are absolutely stunned.'' Schuessel told the news conference he would leave the government and also pass the party leadership on to Molterer, but remain the conservatives' leader in parliament.

Schuessel and Molterer said they had tried hard to win over Grasser in the past few days to stay on as finance minister.

But the flashy and popular 38-year-old said his decision was final to return to the private sector and to spend more time with his jet-set wife, crystal glass products heiress Fiona Swarovski.

Foreign Minister Ursula Plassnik, a close Schuessel confidante, remains in office. Her sceptical stance on Turkey's efforts to join the European Union is shared by Gusenbauer.

The conservatives also retained the economy ministry, where incumbent Martin Bartenstein will continue, as well as the health, interior and agriculture ministries.

The Social Democrats took over the justice, defence, education, social affairs, women's and infrastructure ministries, and will announce their ministers tomorrow.

REUTERS BDP BD2222