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In a letter to Portuguese Prime Minister Antonio Guterres, who holds the rotating EU presidency, Mr Klestil also called for the creation of a mechanism to allow the EU to react if it suspected a member state was "departing from European values".
"In my opinion a procedure at community level would be preferable because the accused member would be given an opportunity to respond to fears before any measures are taken against this member," the Austrian leader said.
 Protests have raged in Austria since the Freedom Party took power
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Mr Haider has since resigned as party leader, but had previously caused controversy with his remarks playing down the crimes of the Nazis and for his opposition to immigration and EU expansion.
The Austrian president had expressed reservations about the Freedom Party's place in the coalition, but said he had no alternative but to swear it in as it had a comfortable parliamentary majority.
Co-operation
Mr Klestil asked Mr Guterres to circulate his appeal for an end to sanctions to heads of government at an EU summit in Lisbon on Thursday.
The Austrian leader said it had become apparent that "a clear distinction between bilateral sanctions and co-operation within the framework of the European Union is in practice not possible."
"It should also be in the interests of the European Union to develop such a mechanism as soon as possible in order to find a way out of the present situation and to end the measures taken by the 14 against Austria as quickly as possible, for the good of my country and of its people," he added.
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