The Austrian capital with 1.7 million residents came top of the survey for the fourth year in a row, boasting of a vibrant cultural scene alongside comprehensive health care and moderate but rising housing costs. Its opulent architecture from the time of the Habsburg empire makes it a tourist magnet.

The reliable public transport system costs just 1 euro a day for an annual pass in a city governed by left-leaning Social Democrats and environmentalist Greens.

"The city is so international... I have been waiting for buses and heard over 10 languages being spoken at one stop," said American Dawn Gartlehner, 42, a law firm manager who has lived in Vienna for more than 15 years.

"The city caters to all kinds of people, all ages and all walks of life. You can have a wonderful day here spending all the money in your bank account but have an equally great time spending nothing at all."

Mercer conducts its annual survey to help companies and organisations set compensation for staff on international assignments. It uses 39 factors such as political stability, health care, education, crime, recreation and transport.

Anna Staribacher, a 24-year-old student, praised her home town's safe streets and abundance of parks and woodlands.

"Austria is a wealthy country, we have low unemployment and free university access. Living is affordable and prices are still moderate by international standards. But I wonder why people are still so grumpy all the time?"

Despite its sovereign debt crisis, Europe has 15 of the world's top 25 cities in the 2012 survey. Germany and Switzerland each have three in the top 10. The lowest-ranking city in western Europe was Athens, gripped by deep economic woes.

"Overall, European cities continue to have high quality of living as a result of a combination of increased stability, rising living standards and advanced city infrastructures," said Slagin Parakatil, senior researcher at Mercer.

"But economic turmoil, political tension and high unemployment in some European countries and high levels of unemployment have continued to be problematic in the region."

Canadian cities dominated rankings in the Americas region, with Vancouver at number five retaining the top spot and Honolulu at 28 the most pleasant U.S. urban centre.

New Zealand's Auckland at number three is still atop the Asia Pacific region's charts, while Dubai at 73 gets best marks in the Middle East and Africa.

But that region also has 15 cities in the bottom 20, including Lagos, Nigeria; Bamako, Mali; Khartoum, Sudan; and N'Djamena, Chad. Iraq's capital Baghdad was ranked lowest in the world.

"The ongoing turmoil in many countries across North Africa and the Middle East has led to serious security issues for locals and expatriates," Parakatil said. "Many countries continue to experience violence through political demonstrations that have sometimes developed into massive uprisings and led to serious instability within the region."

This is a far cry from Vienna, which has held the top spot in the Mercer rankings since 2009.

Yet the city is not without complaints.

Jennifer Stepper, an American designer who has lived in Vienna for 18 years, noted that visiting friends often comment about how unfriendly waiters and shopkeepers are. But it no longer bothers her

"Now I realise it is just the way of the Viennese. Like the rest of us, they have their quirks."

See: www.mercer.com/qualityofliving

(Reporting by Derek Brooks)

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