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Israel announced the full reestablishment of diplomatic ties with Austria on Tuesday, saying that it plans to return its ambassador to Vienna.

The announcement came during the visit of Foreign Minister Benita Ferrero-Waldner - the first high-level official visit in the three years since Israel reduced contacts with the Austria to low-level officials.

Israel recalled its ambassador from Vienna in February 2000 when the ultra right-wing Freedom Party of Joerg Haider joined the coalition government. Government sources recently said the protest against Vienna had been "eroded" with time.

One source said: "We have closely followed Austria and what has been going on there and a lot has been done in terms of them accepting responsibility for the past, including compensation for victims."

In January 2001, Austria and the U.S. reached an agreement on an initial arrangement for $1 billion in reparations for Holocaust survivors, including payments to victims' families, payments to slave laborers, and the return of property. Austria has agreed to take more steps in this direction.

Nonetheless, a report issued by the Simon Wiesenthal center in Los Angeles says Austria is not acting to indict suspected war criminals still alive in Austria. The report says at least a dozen countries are now investigating war crime suspects or putting them on trial.

Government sources say Austria has in recent years made efforts to persuade Israel to restore diplomatic ties. They noted that Austria has adopted a pro-Israel line with regard to the Palestinians.

Israel was not the only country to withdraw its ambassador from Vienna on the inclusion of Haider's party in government - 14 EU countries did the same and applied sanctions on Austria. But seven months later the EU countries reinstated their ambassadors and dropped the sanctions.

The government sources noted earlier this week that Haider is no longer leader of the Freedom Party, which still remains in the government, but public support for it has dropped from 26 percent to 10 percent.