VIENNA -- Austria's new coalition of conservatives and Joerg Haider's far-right Freedom Party took office Friday, under siege from violent protests at home and a diplomatic uproar abroad.
In Vienna's Hofburg Palace, President Thomas Klestil swore in a Cabinet led by conservative Chancellor Wolfgang Schuessel as several thousand protesters clashed with hundreds of riot police outside.Israel withdrew its ambassador to Vienna in protest at the inclusion in the government of the far right, whose leader has made several remarks in the past playing down Nazi crimes.
Austria's 14 European Union partners began moves to isolate the new government politically, deepening one of the worst crises in the affluent bloc's history.
Schuessel, speaking in a chancellery that was ringed by police vans and riot police with muzzled dogs, said he was fully aware of the mountain the new government would have to climb.
"We know that many will be watching us closely," he said as the Cabinet met for the first time.
"We know that it won't be easy to win the hearts of the people, but we also know that Austria needs an effective government to introduce a courageous reform program."
Vienna's ATX index of leading stocks fell 3.5 percent to its lowest level in more than a year, driven by a huge slide in Bank Austria, the market's most visible stock abroad.
Klestil's icy demeanor and body language at the swearing-in ceremony displayed his deep disapproval of the new Cabinet.
He barely looked at Schuessel, kept eye contact with each minister to a minimum, remained stony-faced throughout and gave the briefest of handshakes as he handed them their credentials.
It was only the second time in recent history that a far-right party had entered a European government. Rightists were in a coalition in Italy in the mid-1990s.
In a highly unusual move, the new Cabinet chose not to walk the 100 feet across the Ballhausplatz, the square that separates the president's office from the chancellery, but took an underground passage to avoid the noisy demonstration.
Police with batons charged jeering demonstrators who were shouting, "Haider is a fascist" and holding up placards reading, "Haider's Austria is not my Austria" and, simply, "Shame."
Austria's European Union counterparts planned to ostracize it diplomatically over the rise of Joerg Haider's party in the country of Adolf Hitler's birth.
Klestil swore in 12 ministers and four state secretaries -- half from Schuessel's People's Party and half from the Freedom Party, which will have the vice chancellorship and the finance, defense, justice, infrastructure and social affairs portfolios.
Social Democrats, who had led governments in the Alpine republic of 8 million people for the past 30 years, tried in vain to form a new grand coalition with the conservatives and then to find backing for a minority government, following inconclusive elections last October.
Haider's party soared to 27 percent of the vote, becoming Austria's second biggest party after the Social Democrats.
Although Haider himself will not be in the government, instead remaining governor of Austria's Carinthia province, he could bring it down at any time.
Klestil, wary of international alarm, did not approve the new government before extracting a written pledge from Schuessel and Haider to uphold democratic values and take a "self-critical" look at Austria's 1938-45 Nazi era.
Hours before the government was inaugurated, the Israeli Embassy said Ambassador Nathan Meron was being withdrawn.
"Israel cannot remain silent in the face of the rise of extremist right-wing parties, in particular in those countries which played a role in the events which brought about the eradication of a third of the Jewish people in the (Nazi) Holocaust," an Israeli Foreign Ministry statement said.
The Israeli government said it would reassess relations with Vienna. "We are calling all the free world, all the democracies, to isolate this neo-fascist government," Cabinet minister Haim Ramon told reporters in Tel Aviv.
Prime Minister Antonio Guterres of Portugal, which holds the rotating EU presidency, said in Lisbon that political sanctions would take hold from Friday to isolate Austria's new government.
In Brussels, Belgian Prime Minister Guy Verhofstadt said EU members could take further measures against Vienna but did not say what.
New Austrian Foreign Minister Benita Ferrero-Waldner, a conservative and strong supporter of the EU, which Austria joined in 1995, said Friday she would seek to defuse the furor in talks with her EU counterparts.
"I will tell them that this was an overreaction but that on the other hand I fully understand the concern expressed here," she told Austrian radio. "Give this government a chance."