As Europe geared up for diplomatic measures against Austria, President Klestil put off a decision on whether to allow the far-right Freedom Party to enter a coalition government.

He had been expected to make a statement on Wednesday after the conservative People's Party and the Freedom Party, led by Joerg Haider, sought his approval for the pact.

But Mr Haider, who said the meeting had been constructive, said Mr Klestil would not be making a statement until Thursday.

Mr Klestil said in a magazine interview he had little choice but to swear in the new coalition, but would prefer not to.

In an unprecedented outburst, he told NEWS magazine the new government would damage Austria internationally and lashed out at would-be Chancellor Wolfgang Schuessel, leader of the People's Party.

He said: "If I were to swear in this government, I would not do it out of personal conviction, because I fear that Austria would suffer internationally."

But he added: "In a democracy, a parliamentary majority has to be respected. Personal preferences do not count."

Earlier, Israeli Prime Minister Ehud Barak's office said if President Klestil approved the proposed coalition agreement, Israel's ambassador to Vienna will be recalled to Israel for "an indefinite period".

The coalition, agreed on Tuesday, is intended to end the power vacuum that has existed since inconclusive elections four months ago, but it could well lead to the country's international isolation.

International isolation

The United States and Austria's 14 European Union partners have threatened to freeze political ties with Vienna if the Freedom Party is allowed into power

On Wednesday the foreign policy advisor to German Chancellor Gerhard Schroeder said the European Union would not allow introductory visits to European capitals by the new government if the Freedom Party were a part of it.

Michael Steiner told German television: "We can't expect EU entry candidates to follow strict entry criteria and then simply ignore a right-wing extremist element."

"Look at the Austrian election campaign and the kind of language that was used. These are not the basic values that we share," he said.

The BBC's William Horsley says within Austria the threat of sanctions from other EU states is widely seen as over-reaction or hypocrisy.

But he says Austria's choice does pose a serious test for Europe as a whole.

Hardline stance

Mr Haider, best known for controversial remarks playing down the crimes of the Nazis, has frequently made known his hardline opposition to immigration and European Union enlargement.

He has also previously played down the crimes of the Nazis, although he has since apologised for this.

On Tuesday night, again seeking to distance himself from past remarks, he said: "The Freedom Party and its leadership are a purely democratic party, far removed from any sympathy for totalitarian regimes, far removed from any sympathy for Nazism."

He went on to describe Nazism as "the greatest crime against humanity of the 20th century".

Austria has long had a problem with violent neo-Nazi groups, which have attacked immigrants and sent letter-bombs to leading democratic politicians.

Mr Schuessel has come in for a lot of domestic criticism for his willingness to join up with Haider.

Secret policies

Mr Schuessel will be chancellor in the government if President Klestil gives his approval but Mr Haider will not join the cabinet, remaining provincial governor in Carinthia.

At a joint news conference on Tuesday Mr Schuessel said the two parties had finalised a deal and agreed on the content of a reform programme.

Details of the policies and the lists of ministers are being kept secret until the president has approved the coalition, which would command 104 seats in the 183-seat parliament.