VIENNA -- Austria's year-old governing coalition collapsed Thursday in disagreement over the country's 1996 budget, and new elections were expected by year's end.


Last-minute budget talks between Chancellor Franz Vranitzky, a Social Democrat, and Vice Chancellor Wolfgang Sch--ssel of the conservative People's Party broke down overnight.


Austria's Parliament will vote to dissolve itself Friday and new elections are likely Dec. 17, said Andreas Khol, parliamentary head of the People's Party.


The People's Party, the junior coalition partner, charged that the Social Democrats wanted to rely too much on new taxes to reduce the 1996 budget deficit instead of cutting into country's generous social safety net.


"The only consequence of the collapse of the partnership is new elections," Sch--ssel told a news conference.


Both parties lost ground badly in the last elections, in October 1994. A new poll could benefit Austria's right-wing populist Joerg Haider, who campaigns on anti-corruption and anti-foreigner sentiment.


Haider's views that the two governing parties are hopelessly corrupt and out of touch have struck a chord with an increasing number of disenchanted voters.


The coalition of Austria's two mainstream postwar parties oversaw the country's admission to the European Union, which took effect on Jan. 1, 1995.


But it could not overcome what Sch--ssel called a "fundamental battle over direction" of the country.


He charged that the Social Democrats wanted to close the budget deficit with about 30 billion schillings ($3 billion) of new taxes and only 8 billion to 10 billion schillings of budget cuts.


Vranitzky said the conservative People's Party would have to answer for its "flight from responsibility" less than a year after the government took office.


Some members of the People's Party have flirted with the idea of joining forces with Haider.


However, a poll published in the weekly magazine News Thursday showed that the Haider-People's Party combination was the coalition least likely to find favor with Austrian voters.


No party seems capable of winning the election with anything like a clear mandate, and Sch--ssel has been widely criticized by commentators this week for risking Austria's stability by provoking new elections.


"Sch--ssel's Gamble," the weekly Profil headlined Monday.


Another poll in News showed that while Haider's Freedom Party is still gaining support -- and is almost level with the traditional big two -- a majority of Austrians would be either greatly or somewhat concerned if he became head of government.


Business leaders, artists and other public figures frequently say that any government role for Haider would drive Austria into the kind of international isolation it experienced during the 1986 to 1992 presidency of Kurt Waldheim, the former UN secretary general who concealed his World War II service in the German army in the Balkans.


Vranitzky has always strongly opposed Haider and will certainly campaign on the danger of Haider getting closer to power. The chancellor said Thursday he stood for "security, and not for experiments" in the government.