By Francois Murphy

VIENNA (Reuters) - Austria's far-right Freedom Party (FPO), which won September's parliamentary election with 29% of the vote, is due to start coalition talks with the conservative People's Party (OVP) this week aimed at creating the country's first FPO-led government.

The eurosceptic, Russia-friendly FPO and the OVP overlap on immigration and taxation but clash on Russia and Ukraine. Below are areas that could prove straightforward and more challenging in their discussions.

APPROACH TO IMMIGRATION

The parties take a similarly hard line on immigration, to the point that the FPO has accused the OVP of copying its policies. The OVP, however, led the outgoing coalition government and the FPO says it can go even further.

Both have pledged to deploy more police at the border, replace cash payments for refugees with benefits in kind and deport Afghans and Syrians back to their home countries even though it is not currently considered safe and therefore legal.

They also support setting up centres outside the EU where asylum-seekers' claims would be processed. 

Both have said their inspiration is Denmark, but Denmark has an opt-out from EU asylum policy, which Austria does not.

In 2022, Denmark agreed with Rwanda to explore setting up a system under which asylum seekers arriving in Denmark could be transferred there. That work was later put on hold and Denmark switched to trying to establish a similar system together with the EU or other EU member states.

Other FPO ideas may be harder for the OVP to accept, such as stripping naturalised Austrians of their citizenship if they commit a crime, or carrying out "pushbacks", driving people seeking to enter Austria back into neighbouring countries by force, which is widely seen as illegal in the European Union.

The FPO wants to restrict social benefits to Austrian citizens, establish national preference for social housing, and deny all but basic medical care to asylum seekers, which could well be challenged in the courts if introduced. 

POSITION ON RUSSIA

The FPO opposes European Union aid to Kyiv and sanctions on Moscow over its invasion of Ukraine, arguing they violate Austria's neutrality.

The OVP-led government says Austria's military neutrality, which prevents it sending weapons, does not forbid taking sides politically. The OVP says Austria must support Ukraine.

The FPO wants to scrap Austria's participation in European countries' planned Sky Shield missile defence system that includes neighbouring countries including Germany and Switzerland. The OVP supports the project.

The OVP has demanded assurances from the FPO that it wants no Russian interference in Austria.

The FPO's manifesto, published before Russian natural gas stopped flowing to Austria by pipeline last week, says Russian gas "will continue to make an important contribution to our security of supply". The OVP has backed switching to other sources entirely.

MEDIA

The FPO accuses national broadcaster ORF of being left-wing and trying to "indoctrinate" its viewers. It wants to scrap the compulsory levy that funds ORF and overhaul ORF to promote what it describes as objectivity. The OVP says it supports independent media but also wants to slim down ORF.  

ECONOMY

Both parties call for income tax cuts and oppose introducing new taxes. It is less clear how they would reduce Austria's budget deficit, which needs to be brought back within the EU's limit of 3% of economic output.

Both say savings can be achieved by reducing bureaucracy and state spending, without providing many specifics. 

The FPO has pledged to force banks to make their lending conditions more "fair" through measures like capping loans' interest rates, lowering fees and extending maturities. That could prove difficult for the pro-business OVP to accept.  

ENVIRONMENT

Both parties defend what they see as the right to drive petrol-fuelled cars and they oppose measures that would make that more expensive or difficult.

The FPO calls for scrapping the existing carbon tax, opposes an EU ban on new petrol-fuelled cars being sold as of 2035, and wants to slash the tax on new petrol-fuelled cars.

It also wants to cap the price of fuel for trucks "in phases of particular inflation".

(Editing by Alexandra Hudson)