The crash landing of Austria’s chancellor

This is an audio transcript of the FT News Briefing podcast episode: The crash landing of Austria’s chancellor

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, October 20th, and this is your FT News Briefing.

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Marc Filippino
China is pressuring McDonald’s to help with the launch of its new digital currency, and extreme weather like flooding could seep into the multitrillion dollar US municipal bond market. Plus, Austria’s former Chancellor Sebastian Kurz used to be seen as a beacon of hope, a favourite son-in-law. Then came a scandal.

Sam Jones
And Kurz is no longer this kind of favourite son-in-law. He’s a bit of a kind of, you know, ruthless, sometimes foul-mouthed political operator.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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Marc Filippino
China’s central bank is getting ready to launch the world’s first big digital currency, and it’s trying to use the upcoming Olympic Games to help with the rollout. The FT reports that Beijing is pressuring one of the largest Olympic sponsors, McDonald’s, to expand digital renminbi payments at its restaurants across the country before the Beijing Winter Olympics in February. McDonald’s is already piloting digital renminbi payments at its locations in Shanghai. But China wants the hamburger chain to expand the pilot across the country. McDonald’s declined to say whether it was under pressure from Beijing. A person familiar with the situation said Visa, an Olympic sponsor, and Nike, a US team sponsor, were also facing similar pressure. Neither of those companies had any comment for the FT.

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Marc Filippino
Hurricane Ida pummelled the US Gulf Coast earlier this year. Dozens of people were killed and several states were hit by flash flooding. As storms like Ida become more common, they could affect the municipal bond market. Bonds are one of the ways cities pay for infrastructure, and a new study shows that US infrastructure is at a greater risk of flooding compared to previous estimates. Here’s the FT’s US capital markets correspondent, Kate Duguid.

Kate Duguid
This group, called First Street Foundation, put out research last week that shows that about a quarter of all US infrastructure is at risk of what they call operational flooding, which means that it would become non-operational if flooded. Some of the states in the worst shape were places like Louisiana, Florida, West Virginia. But the likes of New York, California, Connecticut were all up there, too. In some of the most at-risk cities, places like New Orleans, the share of infrastructure with operational risk was basically a 100 per cent.

Marc Filippino
That’s incredible, Kate. So how would flooding affect the city’s ability to borrow or manage the debt it already has?

Kate Duguid
So there are a number of different ways that this could affect the municipal debt market. The first is that like there are municipal bonds that are issued to pay for a particular project, and that project may be dependent on revenue. So, for example, you raise money to pay for a hospital and in order to pay the investors on that bond, in order to pay off that bond, you have to earn a certain amount of money through the hospital. If that hospital is taken out by a flood, the source of revenue is taken with it. It might be rebuilt. It might not. That’s one of the most direct ways. The sort of more indirect way, but I think the much more dangerous issue, is that natural disasters can drive people away, can drive businesses away and lower the value of existing property. So therefore it can really shrink the tax base of a city or a state, which is another of the main ways that muni bonds are paid off. All of this also means that their credit risk — so the amount of money that they have to pay to borrow — that that could go up because they’re seen as riskier borrowers.

Marc Filippino
All this is a relatively new development. Seeing that municipal bonds have always been kind of a safe haven for investors, right? Is that changing?

Kate Duguid
I don’t think it’s changed yet, but you’re absolutely right. Municipal bonds typically have long maturities, so they mature in 15 to 30 years on average, and that’s a lot of time for something to go wrong. And so some of their safe haven status could be jeopardised by the fact that these natural disasters are getting worse and more frequent at a pretty rapid clip.

Marc Filippino
Kate Duguid is the FT’s US capital markets correspondent.

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Marc Filippino
Now to Austria and the spectacular political downfall of the country’s former chancellor, Sebastian Kurz.

Sebastian Kurz
Non-English audio clip, fading . . . 

Marc Filippino
That’s the 35 year old leader in his resignation speech a week and a half ago. He was accused of using taxpayer money to bribe media organisations. Kurz denies all this, but as Sam Jones, our correspondent in Vienna says, a barrage of text messages came out during the scandal.

Sam Jones
And they paint quite an ugly, cynical picture of the workings of government and Kurz is no longer this kind of favourite son-in-law. He’s a bit of a kind of ruthless political operator.

Marc Filippino
Sam joins me now to talk more about it. Hey, Sam.

Sam Jones
Hi, there.

Marc Filippino
So Sam, can you remind me of the details of the allegation and we should mention that Kurz hasn’t been charged yet.

Sam Jones
The central allegations are that some of his key allies in in positions of influence in the Austrian government used taxpayers’ money four years ago or so, to illicitly buy adverts in Austrian newspapers in exchange for positive coverage of Kurz, who was then Austria’s foreign minister. That coverage was mostly polls. Now, those polls might have been accurate, but they might have been based on small sample sizes, or they might have been sort of slightly skewed towards him. But the crucial thing is that they were only included, according to prosecutors’ allegations, in newspaper coverage, because those newspapers were being paid secretly by Austrian government ministries.

Marc Filippino
So why is this all so dramatic? Kurz was this dashing young path breaker, the guy to shake up Austria’s political order or was it?

Sam Jones
There were very high expectations that he would change things, and it’s very important to remember that, you know, until the coronavirus hit, he was, you know, Austria’s possibly Austria’s most successful politician of the last few decades. You know, he was regarded by his, his kind of opponents and also the people that supported him as all this almost like political saint who couldn’t do much wrong and he did something radical. He actually took the far right into government. And for a lot of conservative politicians across the EU, there was sort of a sense that actually, you know, maybe this is what we should be doing. Maybe the way that we diffuse this problem, this this popular anger about immigration is actually by taking on board some of the concerns and not giving the far right the fuel of being in opposition. So he was regarded as this kind of very clever new radical almost to sort of centre or moderate, conservative radical.

Marc Filippino
So this is really shaking things up in Austria, Sam, but how is this being seen more broadly in the EU?

Sam Jones
I think it comes at a slightly tricky time for the EU. Brussels at the moment is fighting a number of fires related to the rule of law in Europe. You know, obviously there’s an ongoing kind of animus between Brussels and Hungary and the regime of Viktor Orban. But more recently, there is this huge issue in Poland over the enforcement of EU law in Poland. And now you add Austria into this mix, and it kind of begins to look like in central Europe, there is this real kind of rule of law issue. I mean, I hasten to add that the Austrian government has certainly not changed its stance towards the EU as a result of this. But but the sort of picture it paints is that in central Europe, there is a problem. That’s worrying because Austria is a small but very important little central European state that really is culturally and socially at the heart of what the EU would like to think of itself as being. And if this state is also seeing distrust in its democracy and in its judiciary spread and politicians willing to criticise those institutions heavily, then that perhaps says something really worrying about the state or the health of democracy and of political discourse in the EU.

Marc Filippino
Sam Jones covers Austria for the Financial Times. Thanks, Sam.

Sam Jones
Thank you.

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Marc Filippino
WeWork is finally set to list on the public markets. The co-working company tried to go public two years ago. Back then, the high-flying company was valued at $47 billion, but a lot has happened since then. WeWork’s charismatic founder Adam Neumann was ousted. New management slashed cost and the firm’s basically been humbled. It’s still losing billions of dollars, though. But yesterday, shareholders at a blank-cheque company called BowX Acquisition approved a $9 billion merger with WeWork. The co-working company will start trading on the Nasdaq Stock Exchange this Thursday under the ticker WE.

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Marc Filippino
Before we go, we wanna let you know that we were nominated for a People’s Lovie Award. For folks in the US, that’s the European version of the Webbys. And we were nominated for Best News and Politics podcast. Now we love what we do and we don’t need an award, but it would be really nice to get one. And we’re hoping you could help us out by voting for us online. We’ll link to the Lovie Awards website in our show notes, and I’ll tweet out the link for my handle on Twitter. I’m at Marc Filippino and thank you so much for your support.

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Marc Filippino
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

*Correction: WeWork is going public on the New York Stock Exchange, not Nasdaq. 

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