Europe's Austrian dilemma is approaching a moment of definition. The appointment of three human-rights experts to investigate human rights in Austria and report on the political evolution of the junior coalition partner, the far-right Freedom Party, offers the prospect of an exit strategy should Austria's 14 EU partner-states choose to avail of one.
The stakes are high. Chancellor Schussel is gambling on a breakthrough before the promised plebiscite in Austria. Jorg Haider is primed to exploit any failure to lift the diplomatic siege. The EU 14 risk opening up a Pandora's box if the matter is left to fester. Unresolved, Austria's European dilemma will unleash a rancorous and divisive internal debate, whose political chain reaction risks a high toxicity fall-out for the wider EU project of reform and enlargement and also for future relations with Austria.
What is being tested is the fault line between seeking to exercise due vigilance and undue influence. This debate goes to the heart of a Europe of values.
On the European continent, we have suffered from and experienced the consequences of hateful racism and ultra-nationalism in the past. These vulgar entrails again have been re-exposed so recently in the ethnic-cleansing rituals of a disintegrating former Yugoslavia. We have cause to be concerned when parties of the extreme right, such as org Mr Haider's FPO, are brought into the mainstream through participation in government.
One cannot countenance turning the clock back. To refuse appeasement through silence, to insist on speaking out and to express concern is not to interfere in the sovereign rights of a member-state.
In these terms I have always appreciated the spirit and political intent of the initiative championed by the Portuguese presidency. The European institutions have a duty to recall and defend, as universal and indivisible, fundamental values as espoused by the treaties - freedom, democracy and respect for human rights. When a party with a dubious, xenophobic background and a leadership susceptible to playing the racist card enters government it is right to maintain a heightened vigilance.
However, it is important not to rush to judgment, and while appreciating the intent, I have always remained less convinced of the method chosen by the EU 14 by way of parallel bilateral policies of diplomatic isolation of Austria.
The EU and its institutions have no quarrel with the Austrian people. Austria has a creditable record with regard to freedom, democracy and respect for human rights. Like all others, Austrians' rights to their sovereign democratic due process and to their constitutional and legal prerogatives must not only be respected, but defended.
The arrival of the FPO in office was a rude awakening for many inside and outside Austria. It most likely represents a complex motivation on the part of those who voted for it. The fossilised state of the clientelist and discredited Austrian patronage system, "proporz", rewarded card-carrying members of the dominant parties of government with jobs and perks while excluding others. This presented a golden opportunity to the populist Mr Haider in opposition.
Austrians voted for Mr Haider with mixed motives. One also senses this mixed motivation with regard to the diplomatic isolation policy of some inside the EU. In signing a deal last February with Mr Haider, Mr Schussel, whose own EU record has been impeccable, rode into office on the back of a tiger.
Nominally, Mr Haider no longer leads his party but he has not gone away. Mr Schussel's recent concession to hold a non-binding plebiscite later this year may prove to be a rash hostage to fortune.
Before the government was formed, the Freedom Party last February reached the dizzying heights of 35 per cent in the opinion polls, rising from 27 per cent the previous October. This made it potentially the largest party in the state, should there have been another election at that moment.
Mr Schussel's second throw of the dice is his gamble that the three "wise men's" report on Austria will open up a potential exit strategy for the EU 14 ahead of the trigger date for an Austrian plebiscite, the price charged by Mr Haider for agreeing to this external review. If in a worst case scenario this happens, the plebiscite could bring cold comfort to Mr Schussel and the prospect for early institutional reform of the EU.
The stakes are high in the coming months, but not just for Austria. At the end of September, Denmark will hold its third referendum on the euro. First they said "No" to the Maastricht Treaty. Then they said "Yes" to the Maastricht Treaty, subject inter alia to no single currency.
At a time which appeared auspicious, the Danish government decided to put the question again. The opinion polls were positive. The outlook was good for a "Yes" to the euro. Then came the isolation of Austria which these sturdy citizens of another small EU state have been wont to interpret as the bullying of a smaller EU state. Consequently the polls have slipped and at present the naysayers are in the ascendant.
A Danish "Yes" could do with an early decommissioning of the EU's Austrian dilemma. The consequences of the Danish referendum are unlikely to be confined only to that state. It may well exercise a domino effect, positive or negative, on the two other euro doubters, Sweden and the UK.
The three "wise men" will report directly to the state holding the Presidency of the EU: France. The key strategic priority of the French presidency is to steer through a successful reform of the European treaties at their December summit in Nice. The Nice treaty is a necessary precondition to enlargement set in Helsinki by the EU 15.
The non-binding Austrian plebiscite, if it takes place, will ask six questions; one of which carries a veiled implicit menace with regard to EU reform: "Should the government, as part of the impending reform of the EU Treaty, ensure with all suitable means that the sanctions unjustly imposed on Austria by the other member states of the European Union are immediately lifted?" What are "all suitable means"?
Mr Schussel has been at pains to rule out words such as threat, blackmail and veto and though asserting Austria's rights, he insists there is no intention to deliberately slow things down. Mr Haider, with his potent and incendiary polemics, surely has other ideas.
The French will receive the report of the three "wise men". France is not just any other presidency of the EU. France has been to the fore in promoting and sustaining the current policy of bilateral diplomatic isolation of Austria. President Chirac has been the object of gratuitous personal abuse by Mr Haider.
Chirac personally led a drive to isolate those persons from his centre-right faction in France who sought to gain preferment with the assistance of the extreme right of Mr Jean-Marie Le Pen, even at the level of regional government. His credentials are good. If, for wider reasons of European policy they should wish to be more open on Austria, having regard to the dynamics and prospects of French domestic politics, it could be that neither the Elysee nor the Quai d'Orsay will wish to be the first to blink when the "wise men's" report drops through the Presidency letterbox.
A moment of truth is at hand. The EU 14 must choose to engage or to continue with their bilateral diplomatic isolation. Continued isolation will mean escalation.
By and large, the business of the European Union and its institutions has not been affected to date by its Austrian dilemma. If left unresolved, this is likely to change dramatically and for the worse.
Common sense commends a solution. I hope the EU 14 will have the wisdom to see this and act accordingly.
Pat Cox is leader of the Liberal Group in the European Parliament. Garret FitzGerald is on leave.