AUSTRIA'S international reputation has steadily declined over the past decade. But that decline may be ending.The reports on President Kurt Waldheim's Nazi past - initially denied by Mr. Waldheim - did the most damage. He was banned from visiting the United States. Nor does he travel in Europe. The only positive headlines Waldheim received overseas last year came from the Iraqi press, when he went to Baghdad to negotiate the release of Austrian hostages. Moreover, much of the international community feels that, unlike Germany, Austria has been slow to repent of its Nazi past, its nationalistic tendencies, and its stubborn anti-Semitism. Two weeks ago, Joerg Haider, governor of Carinthia province, stated in the course of a debate over work permits for immigrants that Austria's employment policy was much better during the Third Reich. First he regretted the comment, then tried to defend it. But Austria's cloud lifted on June 21. On that day, Waldheim declared he would not seek a second term and the federal assembly voted Mr. Haider out of office for his pro-Nazi statements. These are positive developments. They come as Austria's membership in the European Community is pending. Its economy has been strong. A change of leadership can improve the national tone in Austria. Change has to go even deeper, however. Nationalism and anti-Semitism are more than shadows of the past, as recent polls conducted by Vienna University show. Of Austrians polled, 23 percent said, "Jews should not occupy influential positions in our country." This is extraordinary, not just for its intolerance, or because 60,000 Jews from Vienna alone were killed in Austria's Nazi concentration camps, but because there are hardly any Jews lef t in Austria. Still, the right initial moves are being made in Vienna. In the Europe of the 1990s, prejudice, ethnic animosity, and nationalism will contend with progress. They must be squarely opposed.