Summer has arrived early in Vienna and the city of Strauss and Schubert has never looked lovelier. The parks are full of students, basking in the sunshine. The elegant cafes along the Ringstrasse are full of debonair businessmen and businesswomen, making contacts, doing deals. You could almost be back in the Habsburg Empire a hundred years ago, when Vienna ruled over a Reich that stretched from Trieste to Transylvania. However despite its prosperous appearance, all is not well here in the Austrian capital. The bad news for the Viennese is that Austria has become important again.

Throughout the Cold War, surrounded on three sides by the Iron Curtain, Austria looked west, not east. However this was always a historical anomaly. Österreich means Eastern Empire, and Austria’s natural hinterland always lay eastward, not westward. Metternich, Austria’s greatest diplomat, used to say that the Balkans began in Vienna’s city limits. Defeat in the First World War stripped Österreich of its eastern territories, but although they’ve been lost to Austria for a century, now the Balkans are back.

After half a century at the end of the line, Vienna is a crossroads once more. The city is buzzing with Croatian, Romanian and Hungarian voices – all part of the Habsburg Empire a hundred years ago. In past centuries it was ever thus, but many Austrians are deeply ambivalent about this historical return to form. German speaking Austrians were always in the ascendancy. Now, for lots of Austrians, it feels like the other way around.

Vienna has enjoyed a remarkable renaissance since the end of the Cold War. It used to feel like a frontier town, a dead-end at the end of a one way street. After the Berlin Wall came down, it found a new role. A political capital no longer, it became a cultural capital instead. Vienna’s old cavalry barracks were converted into a sleek new arts complex – a Teutonic version of London’s South Bank, but with better architecture and decent coffee.

Nobody outside Austria used to pay much attention to Austrian politics, and no wonder. Shorn of its old empire, here was a country only a few hundred miles across, with fewer inhabitants than Greater London. After the political catastrophes of the last century, Austrians seemed happy to keep their heads down. The government shuffled inconsequentially between centre left and centre right. Due to the inconclusive nature of Austria’s electoral system, the two main parties often ruled in tandem, and it was often difficult to tell them apart. However since last summer, that’s all changed.

Last year, the Austrian People’s Party, Austria’s natural party of government, mainly composed of what we might call Tory Wets, was in office but barely in power, in a stagnant ‘grand coalition’ with Austria’s Social Democrats. In third place in the polls, with the hard right Freedom Party in first place, and facing defeat in the forthcoming general election, they elected Sebastian Kurz, their 30-year-old foreign secretary, as their new leader.

Kurz ran an inspired election campaign, presenting himself as a kind of Teutonic Macron. His People’s Party came first, but without an overall majority, which meant yet another coalition. However instead of reuniting with the Social Democrats, he formed a controversial alliance with the hard right Freedom Party. Last time this happened, in 2000, Austria was shunned on the world stage. The EU even imposed sanctions. This time around, there’s barely been a murmur. However the Freedom Party has far more power this time, including control of the crucial Interior Ministry. Had Kurz tamed the populists, or was he supping with too short a spoon?

At first, Kurz’s gamble seemed to be paying off. He was building bridges between centrists and populists, at home and abroad. As the gulf between the EU’s eastern and western nations grows wider, here was a man who had the ear of Angela Merkel and Viktor Orban, a man who understood the western centrist and the eastern populist point of view. Yet now a growing security scandal has stoked the fears of liberals in Austria and beyond.

The Freedom Party was founded by former Nazis (among others) after the Second World War, and Austrian liberals fear it will never be normalised by the responsibilities of government. This security scandal is a case in point. The Freedom Party’s Herbert Kickl, now Austria’s Interior Minister, has caused outrage by suspending the head of Austria’s domestic intelligence agency, Peter Gridling, and sending the police to raid his home.

One of Gridling’s main responsibilities was investigating the activities of far right extremists. For Der Standard, Austria’s newspaper of record, this connection felt too close for comfort. They’re not alone. Austrian President Alexander Van Der Bellen called Kickl’s move ‘extremely unusual and disconcerting.’ Other politicians have been more forthright. Former chancellor Christian Kern said that ‘trust in the security apparatus has been drastically shaken.’ Matthias Strolz, leader of Austria’s Liberal Party, Neos, said the affair ‘stinks to high heaven.’ With the Freedom Party in government, can the centre hold?

Meanwhile in ‘Red’ Vienna, always a bastion of left-wing politics, the students bask on in the sunshine and the businessmen and businesswomen order another round of coffees. Yet Vienna is changing, and so is Austria, and there seems to be no solution which will please both the centrists in this liberal metropolis and the populists in the conservative countryside that surrounds it, let alone the centrists in Berlin and the populists in Budapest and Warsaw. Much as Kurz may try to straddle it, that gulf may be too wide.

The Treaty of Versailles reduced Austria from a multicultural empire to a Germanic rump. Now Europe, and Austria, is becoming multicultural again, and a lot of Austrians don’t like it. Which vision of Austria will prevail? The centre right vision of Kurz or the hard right vision of his new partners in the Freedom Party, a party described by Der Standard as ‘power hungry and perfidious’? Is Vienna in 2018 at all like Vienna in 1918, or 1938 for that matter? Of course not. But in a city that’s seen the best and worst of humanity, from Freud to You-Know-Who, history has always cast an especially long shadow.