When Wolfgang Schuessel announced his conservative People's Party would form a coalition with the far-right Freedom Party two years ago, some said he was entering into a pact with the devil.

Schuessel became the first conservative chancellor in 30 years

But the opportunity was too good to miss.

The deal handed the People's Party, which took just third place in 1999 general elections, the senior role in a coalition government and crowned Mr Schuessel chancellor.

In return, the anti-immigrant, anti-European Freedom Party under the leadership of the charismatic Joerg Haider entered government in what was seen as the most radical realignment of domestic politics since 1945.

EU meddling

The party's spell at the top got off to a turbulent start.

Within hours of the announcement of the coalition deal, the European Union had slapped diplomatic sanctions on the country.

The party could not translate Haider's flair into action

In what was condemned by some as a rather childish form of protest, some EU politicians refused to shake hands with their Austrian counterparts. One even said he would not appear in a group photo with an Austrian.

The sanctions gave the fledgling government a chance to present a united front against Brussels, whose behaviour was seen by many Austrians - even those vehemently opposed to the far-right - as undemocratic interference with a country's sovereignty.

It was only after the EU sheepishly backed down and lifted the measures that the cracks in the coalition started to emerge, as Austrians started to refocus their attention and politicians had to start getting on with the nitty-gritty of government.

In an initial attempt to thaw Austria's period of diplomatic isolation, Mr Haider had handed over the reins of the Freedom Party to vice-chancellor Susanne Riess-Passer, pledging to withdraw to his southern stronghold of Carinthia and concentrate on local affairs.

But as the party - which picked up a staggering 27% of the vote in the 1999 elections - started to violently dip in the opinion polls, Mr Haider could not keep quiet.

The far-right leader consistently criticised government politics, challenging decisions taken by Freedom Party ministers in the cabinet.

His recent forays to Baghdad, where he met Iraqi leader Saddam Hussein, were thought to have seriously embarrassed far-right members of the Vienna coalition.

The latest row over tax cuts appears to have been the straw that broke the camel's back.

Return of the reds

Ms Riess-Passer's departure from the party leadership has paved the way for Mr Haider to return to the top of the Freedom Party, a position he never really relinquished.

But its two years in government have seriously damaged the party's credibility. Although it rode high on Mr Haider's rhetoric while outside the Vienna halls of power, it failed to deliver while inside them.

Analysts suggest that in the next round of elections in November, the party is unlikely to pick up more than 15% of the vote.

The conservatives will fare better.

"It's very unclear how much better though," said Ferdinand Karlhofer, a political analyst at Innsbruck University.

"We'll have to wait and see what the exact fallout is for Schuessel and co., and how successfully they manage to avert the blame away for this crisis in Austrian politics from themselves."

The next elections will almost certainly mark the return of the Social Democrats, ousted after 30 years in power two years ago, despite notching up the highest score in the elections.

They could team up with the much smaller Green Party, or with the conservative People's Party, with whom they had ruled in coalition for 13 years until the deal of 2000.

But one thing looks certain. Mr Haider's Freedom Party is out - at least for the time being.