Freud in Austria: Why did Lucian finally relent and allow his paintings to be shown in Austria?

Lucian Freud's family fled to Britain to escape persecution by the Nazis, and the artist refused to allow his paintings to be shown in Austria. So what would he have made of a major exhibition of his work now being mounted in the country’s capital, just two years after his death?

In August 1935, the future painter Lucian Freud travelled to Vienna to visit his grandfather Sigmund, the founder of psychoanalysis. The 12-year-old Lucian had accompanied his father Ernst on the trip from London, where the Jewish family had been living since 1933 – the year they fled their home in Berlin to escape persecution by the Nazis.

There are few records of this visit, but it is almost certain that the young Lucian would have seen the collection of antiquities that his grandfather kept in the study of his large apartment at Berggasse 19, as well as his consulting room, complete with the famous couch. He probably met his five great aunts – Sigmund's sisters – and his aunt Anna Freud, herself an eminent psychoanalyst. He might also have visited the Kunsthistorisches Museum (KHM), one of Europe's grandest public galleries, complete with its remarkable collection of Old Masters – once the property of the mighty Habsburg emperors – including a treasure trove of canvases by Titian, Velazquez, Rembrandt and Bruegel, all painters who became life-long favourites for Lucian.

Three years later Lucian met his grandfather again, this time in London, the city to which Sigmund had escaped after Hitler's annexation of Austria in March 1938. The danger of staying had become clear when the Gestapo interrogated Anna Freud and forced her to agree that psychoanalysis was part of a Jewish conspiracy. Sigmund's passage to safety had been aided by his influential friends, including a curator at the KHM, who ensured that his collection of antiquities also travelled to England. Anna Freud also escaped, but Sigmund's sisters were not so fortunate: four of them were to die in Nazi concentration camps.

Sigmund never returned to Vienna and died the following year. Lucian visited the city just once more in his long life – he died in 2011, aged 88 – and refused several requests for his paintings to be shown in the capital of a country in which more than 60,000 Jews, including his great-aunts, had been killed by the Nazis.

It is this story that provided the poignant backdrop, as well as the seeds of some controversy, when a major exhibition of Lucian Freud's paintings opened at the KHM in Vienna last month.

A more magnificent setting for the pictures can hardly be imagined: the museum was built by Emperor Franz Joseph I in the grand baroque style and the 43 Freud paintings are displayed in its most palatial rooms. Among the exhibits are several exquisite early works, including a delicate study of bananas painted in 1953 at Goldeneye, Ian Fleming's house in Jamaica.

But the pictures that perhaps look best in these splendid surroundings are his later masterpieces, such as Benefits Supervisor Sleeping (1995), a large and fleshy picture of Sue Tilley which sold for £17m to Roman Abramovich in 2008 (a record price for a painting by a living artist at the time), and a mesmerising portrait of the performance artist Leigh Bowery, his vast back turned to the viewer, which is now owned by the Metropolitan Museum in New York. There are also nine of Freud's many self-portraits, an unflinching record of the passage of time that is widely regarded as his greatest achievement.

It is central to the way this show is conceived that Freud's paintings are displayed in rooms set between galleries filled with pictures by Titian and Raphael, and that the work of these Old Masters can be glimpsed through the open doorways: here is Freud alongside two of the greatest painters who ever lived.

'Naked Man, Back View', 1991-1992 (The Lucian Freud Archive/The Bridgeman Art Library)

The Austrian press received the exhibition with front-page pictures and rapturous reviews. In a country where the name Freud normally means only Sigmund, many people had never heard of his artist grandson, and the show is a fascinating spectacle for curious locals as well as for connoisseurs. Nevertheless, questions still remained: if Lucian had refused permission for his work to be exhibited in Vienna, how had this exhibition come about? What's more, what would the fiercely controlling artist have made of it?

During the opening celebrations in Vienna, I put these questions to Jasper Sharp, 38, the British curator of contemporary and modern art at the KHM, and the man responsible for the show. Back in 2010, it was his idea to approach Freud with a fresh request to exhibit his work in the Austrian capital and he had several trump cards to play.

First, he had a personal history with Freud that gave him an entrée. "Relatives of mine lived next door to him in Kensington Church Street, and when I was younger I would put notes through his letter box and we had a funny exchange," he recalls. "We would see him go past each day in his boots without their laces and eventually we met and I visited his studio. I still have all of his replies."

This introduction held Sharp in good stead and when he approached Freud with the idea of the KHM show, the famously private artist agreed to meet. "I was aware that he had been repeatedly invited by museums in Vienna and that for one reason or another it didn't work," explains Sharp. "Partly this is because all he wanted to do was paint, and exhibitions are a distraction. To be completely honest, I made a big deal of not saying Vienna and Austria; all I did was mention Bruegel and Velazquez.

"I wasn't kidding him that this wasn't happening in Vienna, but I knew that he had grown up with reproductions from the Kunsthistorisches around his home in Berlin, given to him by Sigmund, and that he had seen the exhibition of its treasures in London. Maybe it had something to do with the fact that I had known him, maybe the fact that I am English helped, but the most important facts are that he knew the collection and was very fond of a number of the artists and artworks in it. The other thing is that I was asking for only 30 to 40 works, and I think the idea of distilling 70 years of painting into 30 pictures was something Lucian had been thinking of for some time. Anyway, he agreed."

This blessing was only the start of the long process of putting the exhibition together. The increasingly frail artist drew up a list of paintings and the owners of the pictures were contacted and asked to loan their pictures. Such work requires a great deal of diplomacy, as half the paintings are from private collections and their owners are often reluctant to lend them. After Freud's death in July 2011, the sensitive work continued under David Dawson, his loyal assistant for the last two decades of his life and another key figure in the story of how this historic exhibition came to be staged.

When I meet Dawson, 53, it is in the haunting setting of Sigmund Freud's former apartment at Berggasse 19, now a museum. It is here, in a series of rooms converted to galleries, that Dawson is currently staging an exhibition of his photographs of Lucian, an intimate chronicle of the artist's daily life gathered over 20 years. In these pictures we see Freud painting or gazing at Velazquez's Las Meninas in the Prado and, in one touching study, hugging a fox cub. In the final room, once used as a study by Anna Freud, is a series of intimate shots of Lucian's London home – photographs which seem especially evocative here for being seen in the apartment which his grandparents were forced so hastily to abandon.

Dawson, an artist in his own right, is softly spoken, but has an air of toughness about him that Freud clearly relied on. "Lucian was 69 when I met him and I could see that he was really ambitious for his paintings; I knew what was needed to help him along," he tells me. "Having his privacy made his freedom. I wasn't a gatekeeper, but I did help take some of the interruptions away from him." Dawson managed the artist's daily life, bought his paints and regularly sat as a model. Freud's last painting, a portrait of Dawson and his dog Eli, a whippet Lucian gave him as a present, is among the works on show at the KHM. In a touching final gesture, Freud bequeathed Dawson his Kensington house. "I'm doing some repairs at the moment," he says, "but the studio will stay as it is."

On the subject of how Freud felt about his work being shown in Vienna, Dawson is clear. "Lucian was in on it; he had agreed. When he was younger he didn't want to show in Vienna; the personal history is strong so he wasn't in any rush. But in the end I think it was [being alongside] the great paintings in the Kunsthistorisches which persuaded him."

After decades of being the most celebrated painter in Britain, Freud clearly had an eye on securing his position in the broader history of art – and what better way to lay his claim than in the company of his favourite Old Masters and in the country of his illustrious ancestor?

After the opening of the exhibition at the KHM, a dinner was held in Freud's honour. Among the guests were Lucian's daughters Annie and Bella, and assorted grandchildren, including Annie's daughter May, a delicate beauty who bears a striking resemblance to Freud's 1940s portraits of his first wife, her grandmother Kitty Epstein. First to raise a toast was Francesca von Habsburg, the daughter of art collector Baron Heini Thyssen, whose portrait by Freud appears in the exhibition. k The presence of such close friends and family suggests a united front over the artist's decision to exhibit in Vienna – although one art-world insider still insisted to me that he had been very clear that his pictures should never be shown there.

Richard Calvocoressi, a former Tate curator who worked with Freud on several exhibitions, told me that Lucian often changed his mind and said different things to different people.

'Girl with a White Dog', 1950-1951: Freud's portrait of his first wife, pregnant (The Lucian Freud Archive/The Bridgeman Art Library)

This mischievous, sometimes malicious, side of Freud's character has recently been laid bare in a new biography of the artist, a book by Geordie Greig, which has divided critics as much as it has apparently caused friction among his family. The text picks over Freud's private life, speculates on the number of his offspring (14 were named in his will but some interviewees say there are more), recounts stories of his voracious sexual appetite (including youthful gay affairs), gangland connections, occasional violence and extreme gambling habits. The art historian Alastair Sooke complained of it being overloaded with "trivial details" while Brian Sewell welcomed it as "the most important book yet written on Freud… At last, I understand him."

It is with these recently revealed biographical details, together with the debate over his relationship with Vienna, that Freud's paintings have acquired a new dimension and allure. But how would this very private artist have felt about us seeing his pictures through the prism of his life? For David Dawson, the answer is clear. "He didn't agree to [Greig's] book. He wouldn't have wanted us to look at his paintings knowing these things; he wouldn't think they were important."

Jasper Sharp, on the other hand, sees the biographical approach as a legitimate way of looking at art. For this reason, and despite the fact that Freud's titles rarely name his subjects, the printed guide that accompanies the KHM show identifies the lovers and friends, family members (including Freud's mother) and models who people his pictures. "When you see the show on its own and then see the show after you've read the stories, it's completely different," says Sharp. "It's not that you need it, but there is so much that's personal in his work." According to Greig, Freud himself admitted: "My subject matter is entirely autobiographical: using the people I like and who interest me to make my pictures."

Further revelations look certain to follow Greig's book. At least two more biographies are in the pipeline: the art historian William Feaver's magisterial life, due out in 2015, and a study by the American writer Phoebe Hoban, which promises to give a female perspective on the artist's work. Freud's private papers have apparently been assigned to a museum – the recipient has yet to be announced – no doubt prompting further interest from biographers. Then there will be the centenary of the artist's birth in 2022, with all the renewed attention that will bring.

Before I left Vienna, I went back to the KHM, where I read a moving tribute on the label of one of Freud's paintings, a portrait of his lover Bernardine Coverley, pregnant with his daughter Bella. "This painting is exhibited in memory of Sigmund Freud's sisters, who were deported from Vienna and died in concentration camps: Rosa in Auschwitz, Mitzi in Theresiendstadt, Dolfi and Paula in Treblinka." In Austria, there is a sense that with this exhibition, some ghosts have finally been laid to rest. Meanwhile, back in Britain, the battle over Lucian Freud's legacy is only just beginning.