- guardian.co.uk, Wednesday July 5 2000 01.21 BST
The chancellor, Wolfgang Schüssel, announced the decision after six hours of deliberation by a special committee.
Austria's 14 EU partners collectively imposed an unprecedented quarantine in February when Mr Schüssel formed a coalition government with the far-right Freedom party, then led by Jörg Haider.
With France unlikely to lift sanctions during its six-month tenure of the EU presidency, Austria will use its referendum as a way of piling the pressure on a divided EU to find a way out of the impasse.
It has already threatened to delay the institutional reforms needed before the union can enlarge, and there are fears that a referendum will further increase the anti-EU feelings of Austrians.
Vienna demonstrated its capacity for disruption when it blocked a deal on the controversial withholding tax on savings at the EU summit in Feira, saying it could not sign for "constitutional reasons".
As a compromise, Portugal, then holder of the EU presidency, proposed that "three wise men" should report on Austria's commitment to "European values", an approach which infuriated domestic opinion in Austria.
Mr Haider was on the committee which made yesterday's referendum decision. EU countries have been appalled by his past comments sympathetic to aspects of Nazi rule and his party's use of xenophobic slogans in last year's parliamentary election.
The referendum will consist of six questions, starting with: "Should the federal government...ensure by all possible means that the unfairly imposed sanctions on Austria be lifted immediately?"
Subsequent questions, interpreted by observers as opposition to the EU's eastward expansion, include the future form the EU should take and whether it is fair that larger countries can override the will of other states.
Mr Schüssel denied last night that the referendum was tantamount to a veto.
"The topics covered by the questions won't end in a blockade, but quite the opposite," he said, adding that the aim was not to hinder the union. "We only want to change the union in a positive way."
He put forward two possible autumn dates on which the referendum might be held - October 29 and November 26. Parliament will make the final decision Tuesday.
A government spokesman insisted that the referendum would be abandoned if the EU lifted its sanctions before the autumn.
Mr Haider said last night: "I never believed a diplomatic solution would work." He added that he regarded the referendum as a "fair solution". But he said he was confident that the report of the "wise men" would be positive.
Mr Haider, who gave up the nominal leadership of his party, has substantially increased his popularity thanks to the wave of anti-EU sentiment in Austria.
Critics have warned that a referendum is likely to further strengthen his party's position and his future chances of becoming chancellor.
The sanctions are relatively minor measures, such as bans on cultural and sports events and secondary military cooperation accords. Even so, they have humiliated Austria and soured the atmosphere at EU meetings.
Several EU members, including Italy, Ireland, Finland and Greece, have made it clear behind the scenes that they want the sanctions lifted quickly, now that they are seen as ill-considered and hasty.
But France and Belgium, which have their own far-right parties, have taken a much tougher approach.
