Amstetten, Austria ? Carefree children in alpine costumes danced around a maypole, and parents crowded a churchyard to snap photos of sons and daughters making their first communion.

But an unmistakable melancholy settled Thursday over this town where police say Josef Fritzl imprisoned his daughter for 24 years and fathered seven children with her in a windowless warren of soundproofed cellar rooms.

As the sheer monstrosity of his alleged atrocities sank in – less than two years after a young woman escaped her tormentor in another high-profile case – anguished Austrians questioned whether their clannish society and cherished privacy have steered them horribly wrong.

“Without question, this entire experience shows the system isn’t working,” said Wolfgang Bachmayer, who has been scrambling as one of the nation’s chief image consultants to do damage control.

“It’s a question of having a functional society,” said Bachmayer, who heads the Austrian Institute for Marketing. “The authorities can’t train their eyes everywhere and peer into every bedroom. We can only hope our politicians make the right decisions.”

Police allege that Fritzl confessed to taking his daughter Elisabeth – now 42 – captive when she was 18, repeatedly raping her, fathering seven children with her and tossing the body of one of their offspring into a furnace after the child died in infancy.

Authorities say DNA tests confirm Fritzl is the biological father of the six surviving children, three of whom he and his wife adopted and raised upstairs. The other three, along with Elisabeth, were held in the cellar and never saw daylight until they finally gained their freedom last Saturday.

Anguished Amstetten

Amstetten, reflecting shock and shame felt across Austria, has struggled to regain some kind of equilibrium since the revelations.

In a poignant reflection of how life goes on, bulletin boards displayed wedding engagements, the local soccer club’s scores and photos of firefighters burning a barn in a training exercise. Tacked to a door just around the corner from the Fritzls’ gray concrete apartment complex, a gaily painted poster proclaimed: “Hip Hip Hooray! Stella Turns 4 Today!”

Resident Maria Scheuch said she’s convinced that Austria’s closed society – a time-honored mind-your-own-business, live-and-let-live approach – will simply have to change.

“We like to say we are so child-friendly. But we must ask ourselves how child-friendly we really are,” she said.

Privacy is almost sacrosanct in Austria, where it’s not unusual for families living on the same street for many years to have little or no contact.

Witnesses have since come forward to claim they saw or heard unusual activity, such as Fritzl allegedly struggling under cover of darkness to bring large quantities of food and water into his home through a rear entrance.

Why, many Austrians now want to know, didn’t they blow the whistle years ago?

“This could happen anywhere, but the country’s image is taking a real hit. Everyone’s saying: ‘Austria, Land of Dungeons,”‘ said Karin Cwrtila. “After the Kampusch affair, we didn’t think it could get worse.”

Nazi past

Natascha Kampusch, who was a freckle-faced 10-year-old when she was kidnapped on her way to school in 1998 and held in a dungeon for nearly eight years, said she thinks Austria’s past complicity with the Nazis is at least partly to blame.

Abuse exists worldwide, Kampusch told the British Broadcasting Corp., “but I think it’s also a ramification of the Second World War.”

During the Nazi era, “the suppression of women was propagated … an authoritarian education was very important,” said the 19-year-old, whose dramatic flight to freedom in August 2006 captured the world’s attention.

Experts contend Fritzl may simply have been a wily criminal who outsmarted neighbors and police.

“To organize so many births, supply so many alibis and create an atmosphere where no one dared ask questions, he had to be very lucid and intelligent indeed,” said Reinhard Haller, a leading Austrian psychologist.

There has been widespread speculation that Fritzl, 73, may have been traumatized by the war.

Austria is still taking stock of the long-term effects of WWII, and only recently has it begun to break with decades of silence, denial and repression to confront its Nazi past.

Legal experts say postwar Austria distanced itself from the Nazi legacy by enacting laws – some of which still form the backbone of the nation’s modern criminal code – that effectively stripped police of much of their past authority to keep close tabs on citizens.