By Katya Adler in Vienna

A 73-year-old Israeli woman is taking legal action against Austria's controversial Freedom Party leader, Joerg Haider.

Noemi Merhav, who lives in Haifa, says the far-right Austrian politician owns a 3,700-acre estate, illegally acquired by his family under Nazi law.

In 1938, Ms Merhav's mother, Matilde Roifer, gave her brother-in-law, Naftoli Emdine, power of attorney to oversee the Baerental (Bear Valley) estate in the southern Austrian province of Carinthia, after she moved with her three children to Italy and then to Palestine.

Nazi law

Ms Merhav says her uncle was forced to sell Baerental in 1941 under Nazi property laws which required the sale of all Jewish property to non-Jews in Nazi-occupied areas.

But, she says, his power of attorney had by then expired and he was no longer entitled to sell.

Ms Merhav and her son, Zvi, hope the power-of-attorney papers, obtained by Austrian journalists, will help her family convince the courts that the estate, known for its timber, sawmill and hunting, was effectively stolen from them.

Sold for a pittance

But Mr Haider, whose past comments playing down the crimes of the Nazi era have caused an uproar both at home and abroad, says he inherited the property legally.

His great-uncle, Josef Webhofer, purchased the estate in 1941 - though Ms Merhav says he paid about 1% of its true value.

Mr Haider inherited Baerental in 1986, the same year he became Freedom Party leader.

He is currently provincial governor in Carinthia, a position he was once forced to resign after publicly praising Hitler's economic policies.

It is thought unlikely that Ms Merhav will win back the Baerental estate.

Her mother received $120,000 from Mr Webhofer in an out-of-court settlement in 1952 after she tried to reclaim the land.

Compensation

But this is another poisonous twist in relations between Austria and Israel which, last week, withdrew its ambassador in protest at the Freedom Party's inclusion in the Austrian Government.

In a bid to calm international and domestic alarm over the Freedom Party's xenophobic reputation, the new centre-right coalition swore to abide by democratic, humanitarian and European values.

It has listed the compensation of Nazi-era victims as a number one priority.