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Austria's finance minister resigns in tax row

Austria's finance minister has resigned after eight months in the role, the casualty of a bitter dispute over tax reform in a country seen as a model of EU fiscal reform.

VIENNA: Austria's finance minister resigned on Tuesday (Aug 26) after eight months in the role, the casualty of a bitter dispute over tax reform in a country seen as a model of EU fiscal reform.

"Those who say that we need tax reform now can only do that with new debt," said Michael Spindelegger, who has also stepped down as the country's vice chancellor and head of the centre-right OeVP party. His abrupt resignation comes amid a fierce row in the European Union over government belt tightening, which has plunged France's government into crisis this week.

Spindelegger's resignation also calls into question the future of Austria's ruling coalition of OeVP and the centre-left Social Democrats, which has been beset by divisions over plans to overhal the tax system. The Social Democrats want to introduce taxes on inheritance and a "millionaires tax" on the super rich - an idea Spindelegger rejected as a "drop in the ocean" on Tuesday.

Social Democrat Chancellor Werner Faymann said he expected the coalition to make it to the next national elections in 2018, despite a growing challenge from the far right.

Austria has the lowest unemployment rate in the EU - five per cent in June according to EU statistics - and a low public deficit of 1.5 per cent of gross domestic product (GDP) last year. But its public finances are in bad shape, with public debt expected to hit nearly 80 per cent of GDP this year, up from 74.5 per cent at the end of 2013.

Vienna brought in an austerity plan to strip out €28 billion (S$46 billion, US$37 billion) two years ago with the aim of balancing its books by 2016.