Analysis: Austria admitted the mavericks. Will it now pay the price?

As the coalition government in Vienna collapses, fears grow that the slick far-rightist Jörg Haider will stir up tensions across Europe

He has praised the "orderly" employment policies of the Nazis, defended the Waffen SS and visited Baghdad. But yesterday the Austrian maverick, Jörg Haider, was doing what he does best: throwing his country's politics into turmoil.

In 1999, when his far-right Freedom Party won 27 per cent of the vote, Mr Haider helped evict a complacent, 13-year-old, left-right coalition between the country's two biggest parties. Now he has pulled the plug on its successor.

This time things are different because the Austrian government which fell on Monday included ministers from Mr Haider's own party.

The collapse of the government was triggered by the resignation of the FPO party leader Susanne Riess-Passer, its finance minister, Karl-Heinz Grasser, and transport minister, Mathias Reichold, all of whom owe their political careers to Mr Haider.

More important, it brings back to the fore the party's slick, sun-tanned eminence grise. Mr Haider had stayed out of the coalition, using his influence behind the scenes. Now he is back in the front line.

At a meeting of FPO officials yesterday he was nominated party leader, a decision due to be confirmed at a special convention later this month. With elections likely to take place on 24 November, Europe is bracing itself for a fresh display of pyrotechnics as the far-right demagogue rails against immigration, the European Union, and its plans for enlargement.

It is a suitably unpredictable end to a controversy that took Austria to the verge of international isolation. When the FPO was included in the government led by Wolfgang Schüssel, leader of the conservative Peoples Party, Europe's reaction was swift and unprecedented. On 31 January 2000, at the instigation of France and Belgium, 14 EU member states announced that bilateral political ties with Austria would be severed.

Significantly, both France and Belgium have strong far-right parties which their leaders are anxious to exclude from power. Despite reservations, other nations fell in behind the gesture, buying the argument that it sent a strong message about democratic values to voters in ex-Communist countries queueing up to join the EU.

But the sanctions became a growing embarrassment. Eventually they were scrapped as EU leaders agreed a new procedure to deal with countries which breach fundamental values. In Brussels those who opposed sanctions feel vindicated by the huge internal rifts inside the FPO. The argument is the same as that put in February 2000 by the Austrian foreign minister Benita Ferrero-Waldner, who comes from Mr Schüssel's Peoples Party, to justify getting into bed with Mr Haider's allies.

"With a populist opposition party like the Freedom Party you have two options," said Ms Ferrero-Waldner, "One option is to isolate them successfully and permanently. This we have tried at federal level for the past 14 years. The only effect was that the Freedom Party gained ever-increasing support by continuing their populist opposition. The other option is to convince them to share responsibility for necessary and sometimes unpopular political measures."

Since it joined the government, taking a share of the blame for difficult policies, the FPO has suffered a series of defeats in provincial elections. It has slumped from its 1999 position of 27 per cent to 17 per cent in a Gallup opinion poll being published today.

Meanwhile, a bitter power struggle, fought out ostensibly over the issue of tax reforms, between Mr Haider and Ms Riess-Passer, finally ended in tears. In effect the party split between the pragmatists inside the government, and Mr Haider and hardliners on the outside, as the FPO ministers backed Mr Schüssel's decision to postpone tax cuts to compensate victims of Austria's disastrous flooding.

Around Europe there is growing evidence that admitting the mavericks and far-right parties into a coalition can be the least worst option. In the Netherlands, after the murder of the charismatic anti-immigration campaigner, Pim Fortuyn, the party he founded could not be excluded from government when it won 26 parliamentary seats. But seven months into its existence Lijst Fortuyn has been plunged into crisis by its new proximity to power. The party has been riddled with disputes between purists and pragmatists. In Denmark, the far-right Danish People's Party under Pia Kjaersgaard, has dipped slightly in the polls since the election of a new, minority government which has reached deals with the DPP over immigration. Meanwhile the Italian Alleanza Nazionale has moderated its behaviour and language now it is a central part of Silvio Berlusconi's coalition.

In countries where the far-right has been excluded from power, despite winning a significant number of votes, they have tended to prosper. In Belgium the separatist Vlaams Blok, which is not in power in any layer of government, won a third of the vote in municipal elections in Antwerp in October 2000. In France, unencumbered by national office, Jean-Marie Le Pen staged a formidable upset in this year's presidential elections.

For Austria and Europe there will now be a period of considerable uncertainty. Mr Haider is certain to stir up tension between Austria and its eastern neighbours over the EU's planned enlargement in 2004. Among the themes he will exploit are worries over safety at the Czech nuclear power station at Temelin, and over the post-war treatment of the Sudetenland Germans.

Yet, Austrian officials insist that there will be no short-term threat to the EU's enlargement talks. The key decisions will be taken at a summit in Brussels in October, before the Austrian elections, and at one in Copenhagen in December – after the poll but before a government will have been formed. Mr Schüssel will represent Austria, pushing a pro-enlargement policy.

Only were Mr Haider to pull off an upset and return his party to government, would things look more sticky. All member states have to ratify treaties of enlargement, Austria included.

So everything now hinges on the charisma and campaigning skills of Mr Haider.

Yesterday's party meeting anointed him leader although – for tactical reasons – the job of "leading candidate" in the elections is expected to go to the social affairs minister Herbert Haupt. This provides a potential scapegoat should things go wrong in the election and might open up more post-electoral coalition possibilities.

The People's Party has not ruled out the possibility of reforming its alliance with the FPO (although to do so, having found them impossible to work with, might look a little perverse). Other possibilities include victory for the socialists (who are now riding high in the polls) or a coalition with the Greens – or a return to a left-right alliance, possibly without Mr Schüssel.

Mr Haider, of course, is a wild card and his return to the stump could revive his ailing party. He kept some distance from the government, and will, as usual, claim the status of an outsider. But it was an open secret that he pulled many of the strings of the FPO.

Meanwhile many Austrians who, in 1999, defected to the FPO out of disappointment with the previous coalition are now just as disillusioned with Mr Haider's party.

The rise of the far right: How extremists have gained a hold on power

Austria

*Freedom Party: Far-right party joined coalition government in 2000. Its former leader Jörg Haider defended Nazis and EU states imposed unprecedented diplomatic sanctions on Austria in protest at the party being in power. An internal power struggle led to collapse of the government this week.

Denmark

*The People's Party has supported the Liberal and Conservative coalition in power since 2001. Its leader, Pia Kjaersgaard, has long opposed immigration and the more moderate Danish parties have exploited a rise in xenophobia. The government sparked an outcry when it proposed hardline immigration policies.

Italy

*National Alliance and Northern League joined the Forza Italia coalition in 2001. Gianfranco Fini, leader of the "post-fascist" National Alliance, and Deputy Prime Minister, called Mussolini the greatest statesman of the century. Northern League backs deporting jobless immigrants.

Netherlands

*Lijst Fortuyn had surprising success in May elections after the murder of its leader, Pim Fortuyn. Lijst Fortuyn won four cabinet posts in coalition with Christian Democrats and Liberals, including responsibility for immigration. It has had a series of inexperienced leaders.