By Michael Shields
VIENNA (Reuters) - The leader of Austria's far-right Freedom Party is taking a public relations beating after refusing to apologize for likening anti-fascist protesters to a Nazi mob and his supporters to Jews.
Heinz-Christian Strache's comment that "We are the new Jews" to an undercover journalist at a Vienna ball that critics say draws right-wing extremists has caused uproar and triggered at least a temporary setback for his resurgent euroskeptic party.
Freedom's bashing of euro zone bailouts has played well to Austrian voters ahead of parliamentary elections due by next year, boosting its chances for a return to power.
In the latest Gallup poll, only 11 percent of respondents picked Strache, 42, as their preferred chancellor, down five points to a personal low after a slew of negative headlines that prompted Austria's president to rescind a public-service medal that Strache was set to receive.
The poll, for the Oesterreich paper, showed Freedom (FPO) had lost three points in just a week to 24 percent support, trailing the Social Democrats (SPO) at 29 percent and their conservative People's Party (OVP) coalition partners at 25.
Strache has insisted he was only trying to express sympathy for Jews persecuted by the Nazis by describing what ball guests felt when running a tumultuous gauntlet of protesters shouting and spitting at them in an atmosphere of "mass psychosis."
Instead, his remarks reawakened images of the FPO as a party of the extreme right, a sensitive point in a country annexed by Nazi Germany in 1938 and still uneasy with its wartime past.
It is an image that Strache had sought - mostly successfully - to temper while playing up Austria-first themes.
European leaders are worried that Freedom's populism could see the Alpine nation of 8.4 million follow the path of Finland, where an anti-euro party held up a bailout package for Greece.
Strache favors splitting the euro zone, with strong members in the north and weaker ones in the south. He wants Austria to stop pumping money into debt-laden laggards like Greece.
"Our money for our people," his posters proclaim.
"Let's get into the red-white-red lifeboat before this European Union ship sinks," he said last month, referring to the colors of Austria's flag.
Already the largest opposition party, Freedom had been running neck and neck in polls with the SPO and ahead of the OVP before parliamentary elections to be held by September 2013.
Wolfgang Bachmayer, head of the OGM polling group, said gains in 2010 Vienna municipal elections in which the FPO won more than a quarter of the vote marked a turning point.
Its toning down of anti-immigrant rhetoric - Strache now praises foreigners who work hard, pay taxes and integrate into mainstream society - helped attract voters, Bachmayer said.
FPO poll numbers hit 28 percent last month, up from 19-20 percent before the Vienna elections.
"I explain this nine-point gain in 1-1/2 years with this overall change in course and style on the one hand, and on the other hand with the Europe theme, where from the start they criticized and warned. Now they are reaping the returns of saying we told you so," Bachmayer said.
He predicted the FPO would shrug off the latest flap.
Katinka Barysch, deputy director of the London-based Centre for European Reform, noted Strache's push to stop sending money to Brussels, hold referendums on rescue packages and create a two-speed euro zone resonates well with EU-skeptic Austrians.
The current coalition will hang on as long as possible but its lack of a clear EU policy opens space for the FPO, she said.
"If for any reason there is a scandal and they do fall apart and have an early election, then Austria has the capacity to throw a spanner in the works."
Strache has hardened his line of late and insisted he should be chancellor if the FPO wins the elections, dismissing talk he could be deputy to People Party's leader Michael Spindelegger.
The FPO took the deputy's role the last time the party was in a ruling coalition, when the late Joerg Haider was party chief. Haider's inclusion in a conservative-led government after elections in 1999 sparked boycotts by European countries outraged by what they saw as Austria's embrace of the far right.
(Reporting by Michael Shields; Editing by Peter Graff)