Austria's main far-right party has signed an agreement to enter a coalition government, but the president has not given his approval.

The anti-immigration Freedom Party and the conservative People's Party agreed the coalition after signing an accord guaranteeing human rights and democratic values.

But President Thomas Klestil said he was not yet ready to endorse the new government.

"The president will study the government programme and the list of ministers which he has received and will decide on further steps at the appropriate time," a presidential spokesman said.

People Party leader Wolfgang Schuessel said he expected to be asked to form a government later in the day.

Freedom Party leader, Joerg Haider - who is not expected to join the cabinet - said the government programme contained nothing which would justify the alarm generated by his involvement.

Mr Haider has in the past praised Hitler's employment policies.

Austria's 14 European Union partners, the United States and Israel have threatened to isolate Vienna politically if the Freedom Party is allowed a share in power.

As the president met the two leaders, the European Parliament adopted a resolution condemning the inclusion of the Freedom Party in an Austrian government.

It urged the EU to be ready to suspend Austria if there were any serious and persistent breaches of basic EU principles.

Israel earlier warned it would recall its ambassador if the Freedom Party was in government.

Tough decision

On Wednesday night, about 15,000 Austrians demonstrated in the capital against the planned coalition.

President Klestil had previously said he did not feel the Freedom Party, which came second in elections last October, was fit for office.

But he also said he had to uphold the electoral will of the people.

If he had refused to allow the coalition, a political stalemate that has lasted four months would have continued and, most likely, new elections would have had to have been called.

Opinion polls show Mr Haider would win a new election outright.

Back from the wilderness

Mr Haider has caused outrage at home and abroad during his political career. He was forced to resign as governor of Carinthia in 1991 after praising the employment policies of the Nazis.

During his return from political oblivion he has been keen to distance himself from such remarks.

On Tuesday, as his party stepped closer to forming a coalition, he described Nazism as "the greatest crime against humanity of the 20th century".

But he also criticised the international community for threats to isolate Austria if his party entered government.

He said: "We are not open for the argument that foreign countries will decide the internal policy in Austria. We are a vivid democracy."