Baroness Thyssen and the family feud over her £700m art collection

From the outside, the art collection of Carmen Cervera, the Baroness Thyssen-Bornemisza, appears as stately and decorous as any in the world.

Streams of tourists reverently file past the 200 major works – from 17th-century Flemish masters to German Expressionists – that hang in the salmon-pink annex of Madrid's Thyssen-Bornemisza Museum, next to the artistic treasures of the Baroness's late husband. Art lovers wrap themselves in the mauve mists of Claude Monet's Charing Cross Bridge. They drift through the cloudy skies of Alfred Sisley's Flooding at Port-Marly. They get lost in the landscape of purple trees in Georges Braque's Marina à l'Estaque.

Few would imagine the turmoil, however, behind the ornate frames. The €800m (£694m) collection is locked in an ugly row – peppered with lawsuits and melodramatic tabloid interviews – between the Baroness and her son and heir, Borja Thyssen, who has laid partial claim to the paintings. This bitter family drama is raging, moreover, just as the Spanish state attempts to negotiate the future of the collection.

The Baroness, a former Miss Spain and the fifth wife of the Swiss industrialist Baron Hans Heinrich Thyssen-Bornemisza, amassed her collection with the help of her husband's inheritance. In 2004, she loaned her treasure trove, which reflects her avant-garde tastes, to the Spanish state for seven years without charge. The state-run museum spent the equivalent of $30m (£19m) on a vast annex to house them (the Baroness chose the salmon-coloured paint for the walls).

But that goodwill loan expires next February. The Baroness has hinted at offers to move the collection abroad, although she has not yet identified suitors. "I can't give any details until my speaking with my lawyers, but I am sure that we're going to reach an agreement because that is what is good for the Spanish people," she reassured reporters recently, on a delicate day in the negotiations. "My collection will still be seen in Madrid."

It had been expected that the Baroness would sell her collection to the Spanish state. Her late husband sold his world-renowned collection to Spain in 1993 for the equivalent of $350m thanks in large part to the persuasion, and negotiation skills, of his Spanish wife. At the time, auction houses had valued the Baron's collection of nearly 800 paintings from the 13th to 20th century, said to be surpassed only by that of Queen Elizabeth II, at as high as $2bn.

But this is not the best moment for the Spanish government, whipped by financial crisis, to embark on a shopping spree for art. An €800m purchase sits ill with the €50bn in cuts promised by the Socialist government of Jose Luis Rodriguez Zapatero as part of its deficit-slashing austerity plan.

Talks, therefore, have veered toward a loan agreement, with the Baroness reportedly asking for at least €10m a year, for a period of 25 years. Even this price looks expensive when the government is making the case for containing salaries and slimming civil servants' ranks. The Baroness, moreover, would reportedly leave negotiations of the final sale in the hands of her son and heir, the 29-year-old Borja Thyssen.

The Baroness has denied that this arrangement is related to the on-going feud with her son, who was born out of wedlock and adopted by Baron Thyssen when he married Ms Cervera.

"I only thought that my heirs should have something to say in the matter and I believe that after 25 years of loan would be the proper moment for them to have their say," she told El Pais.

The family troubles began when Borja Thyssen married 37-year-old Blanca Cuesta. The Baroness disapproved – she publicly suggested Ms Cuesta was after Mr Thyssen's fortune – and refused to attend the wedding. When they had a son, three-year-old Sacha, she asked for DNA tests to confirm the paternity.

Tensions peaked when Mr Thyssen sought a court order to obtain information on his father's inheritance. He then proceeded to discuss what he believed to be his rightful share of the inheritance with the magazine Hola!

"Borja reveals the magnitude of his inheritance, unknown until now, and claims to be the beneficiary, along with his mother, of the Carmen Thyssen collection, which would make him one of the Spain's largest fortunes," screamed the November edition, which featured a photo of a bearded Mr Thyssen on the cover, seated against a backdrop of legal documents. "I'm fighting for my family," he said in the interview.

This public airing of family grievances prompted the Baroness to sue her son for "revelation of secrets". Then Mr Thyssen took aim again. In late November, he issued a statement saying he was "convinced" that the Baroness wanted to damage his wife's reputation. He threatened future attacks.

"Any moral impediment that until now had stopped me from taking legal action against Mrs Carmen Thyssen-Bornemisza has disappeared," he wrote. "I've instructed my lawyer to proceed rapidly with as many actions as necessary to defend my rights." Recently Borja Thyssen announced some good news: his wife is pregnant. The Baroness told Hola! that she found out about it, naturally, in the press. The Baroness seems to take the family brawl in her stride. She does not shy away from controversy, and she can hardly be described as a discreet patron of the arts. When the Mayor of Madrid planned the leafy promenade in front of the Thyssen museum, she threatened to chain herself to tree. For the museum's recent exhibit of erotic-tinged art, The Tears of Eros, she good-humouredly announced that the gift shop would sell condoms, wrapped with images of paintings.

"We'll have children of Monet," she joked at the time. "I'm a believer, Catholic, I go to church, but we must protect youth, we can't close our eyes," she added.

Earlier this week she visited the construction site of the soon-to-open Carmen Thyssen-Bornemisza Museum of Malaga, a refurbished palace to contain her works by 19th-century Spanish artists. She joked about the fate of the Madrid collection: "If we don't reach an agreement, I'll bring it all to Malaga and we'll make another museum."