The European Union lifted diplomatic sanctions against Austria without conditions Tuesday night, leaving the far-right Freedom Party firmly in government here and gloating.
By backing down after seven months of bitter confrontation, the EU governments were left with little but embarrassment to show for their failed effort to isolate Austria, one of the union's 15 members.
Because France holds the rotating presidency of the union, French President Jacques Chirac, a leading force behind the sanctions, was left with the awkward duty of declaring the measures over. The move came even though ministers from the party of far-right politician Joerg Haider, who is viewed by many in the EU as a racist xenophobe, still hold half the posts in Austria's federal Cabinet, including vice chancellor.
"The nature of the Freedom Party and its uncertain evolution remain cause for serious worry," an EU statement released in France said. "The 14 (EU states) consider that particular vigilance should be used with regard to this party and the influence it exerts on the government of which it is part."
Austrian Chancellor Wolfgang Schuessel, who stunned EU members by forming a coalition with the Freedom Party in February, insisted that his government would have taken steps it has promised to combat racism and compensate Nazi-era victims regardless of the sanctions.
He called the EU governments' first campaign against one of their own a "rather sad chapter."
When an EU report called Friday for an end to the ban on bilateral contacts, Haider refused to apologize for calling Chirac a "pocket-sized Napoleon." He told reporters: "Napoleons always end at Waterloo."
While European governments lifted all sanctions, and Canada followed their lead, Washington will continue to limit contacts between U.S. officials and Austrian ministers to matters of urgent U.S. national interest, according to the State Department.
The United States also will monitor the Austrian government to ensure that it keeps the promise, put in writing when the coalition government was formed, to reject racism and xenophobia and compensate victims of Nazi rule in Austria.
Haider resigned as head of the Freedom Party soon after Austria's EU partners froze bilateral relations, but he is still the party's leading figure.
Haider's words, more than anything he has done as a provincial governor, have given him an image as a Nazi sympathizer, a charge he strongly denies. In one often-quoted remark, he called veterans of Hitler's SS storm troopers "decent people of good character," though he later apologized for the comment.
His political rivals are convinced that Haider is positioning himself to become Austrian leader, and the charismatic populist is likely to get a big boost from the end of sanctions that he had always said would not last.
Although an EU fact-finding mission said Friday that the sanctions had been "counterproductive" and had "stirred up nationalist feelings in the country," the statement issued in Paris on Tuesday night called them "useful."
The three-man EU team, headed by former Finnish President Martti Ahtisaari, also said the largely symbolic sanctions "have heightened awareness of the importance of the common European values, not only in Austria but in other member states."
But their investigation confirmed that Haider's party "had exploited and enforced xenophobic sentiments in campaigns," they said, adding: "This has created an atmosphere in which openly expressed remarks against foreigners became acceptable, causing feelings of anxiety."
There was nothing in Tuesday night's EU statement to suggest what its members plan to do if the Freedom Party's most extreme members don't mend their ways.
Austria may be forced to become more welcoming to immigrants by the harsh realities of economics. Like most of Europe, the country is suffering from a severe shortage of workers in information technology and other computer-related fields. Businesspeople are pressuring the government to relax restrictions on immigration to meet the need for an estimated 13,000 more information technology workers over the next three years. Haider has called for tighter laws that would emphasize temporary "guest workers" over permanent immigration.
EU governments were left with no choice but to end their divisive standoff with Austria after Ahtisaari's mission reported Friday that the country protects minority rights at least as well as, or in some cases better than, other EU countries.
The report recommended that the sanctions be lifted, and Haider, who is governor of Carinthia province, immediately declared victory.
Haider also took a shot at German Chancellor Gerhard Schroeder, saying he had a "very regrettable role" in the sanctions strategy.