The two parties will each have 52 seats in the 183-seat parliament, with Chancellor Viktor Klima's Social Democrats confirmed as the largest party with 65 seats.

The Freedom Party's electoral success created a furore because its leader, Joerg Haider, has in the past expressed support for Nazi ideology.

Mr Haider says he is willing to take part in coalition government, but the Social Democrats have ruled out any coalition with the Freedom Party.

People's Party leader Wolfgang Schuessel pledged to take his party into opposition if it was beaten into third place.

But correspondents say the fact that the People's Party now has the same number of seats as the Freedom Party - and only about 400 fewer votes in total - gives him scope to back away from this commitment.

Israeli threat

The prospect of a coalition government including the Freedom Party has drawn an angry response from Israel.

David Levy (left) warned his counterpart Wolfgang Schuessel of Israeli fears

On Monday, Israeli Foreign Minister David Levy said Israel might sever relations with Austria if Mr Haider joined the government.

"Although the elections in Austria, just like anywhere else, are a country's own business, the results in Austria are the business of the Jewish people and of the State of Israel," he told Voice of Israel radio.

Austrian Foreign Minister Walter Schuessel said he had tried to reassure Mr Levy that Austria was not a neo-Nazi country.

"We have learned our lesson from history. The overwhelming majority of the Austrian voters do not want any of these extremist positions," Mr Schuessel said.

Regrets

Mr Haider, the son of a minor Nazi official, said the negative reactions were "acts of hysteria."

In a BBC interview last week Mr Haider said that he regretted making controversial comments, including a remark that the Nazi Third Reich had a sound employment policy.

"In a civilized world, when there are differences of opinion, we don't resort to threats, we sit down at the negotiating table," he said, in Klagenfurt, the capital of Carinthia province where he is governor.

"I think you have to regret it because it's difficult to explain a complex historical process in a few words," he said.