After a terrible year for Europe in 2005, Austrian Chancellor Wolfgang Schüssel, whose country takes over from Britain, started the year in harmony, attending the famous New Year's concert in Vienna in the company of his German counterpart Angela Merkel, a fellow Christian Democrat.

Aside from the traditional Strauss waltzes, the program featured pieces by Wolfgang Amadeus Mozart, whose 250th birthday this year will be another cause for celebrations in Austria.

"Austria especially wants to use its presidency to bring Europe closer to its citizens and increase confidence in the European project," Schüssel said Saturday evening in a message to his mostly euroskeptic countrymen published on the Internet.

Emphasizing "the idea of a shared and diverse continent," he said: "together, we want to bring new momentum to Europe."

Identity crisis

Vienna takes over from London an EU in the middle of an identity crisis, even if Tony Blair reached a last-minute deal on the 2007-2013 budget by giving up part of the British rebate.

But the Austrian presidency must find an institutional understanding with the European Commission and Parliament. In favor of a European tax, Schüssel has called for "radical changes" in the way the EU is funded, suggesting member states contribute 3.0 percent of gross domestic product to research funds and has proposed "measures promoting growth and employment."

A sticky subject for the group of 25 this year is what to do with the ratification process for the European constitution, after the French and Dutch rejected it in the spring of 2005.

Supportive of the constitution, Schüssel said Saturday evening without adding further details that there was "another way of proceeding." French President Jacques Chirac has also said he will propose institutional initiatives.

In an interview with the daily Die Presse this weekend, the chancellor said he hoped to see "a middle way" on the liberalization of services in Europe, while avoiding "social dumping."

He insisted on fighting the Brussels bureaucracy and demanded less interventionism by the European court of justice, which should not "quietly erode" the sovereignty of each state.

Tricky relationship with Europe

Austria is one of the EU states with the most euroskeptic population but its economy benefits the most from enlargement which saw 10 mostly central European countries join the bloc in 2004.

Its relationship with the EU, since joining in 1995, has seen ups and downs. Austria assumed the EU presidency in the second half of 1998, but suffered six months of humiliating sanctions by the other 14 member states in 2000, after it welcomed the far-right party of Jörg Haider into the government.

Enlargement will be another priority for Austria which, at a crossroads between East and West, will seek to stabilize the Balkans for the sake of the "European peace project," Foreign Minister Ursula Plassnik said.

Plassnik had to agree to the opening of EU accession talks with Turkey -- which a majority of Austrians oppose -- but obtained that talks be also opened with Croatia. Vienna will also guide the entrance into the union of Bulgaria and Romania, set for 2007.

Austria will host a major summit between Europe and Latin America in May and may host a US-EU summit with President George W. Bush.