Austria

Austria A small German-speaking Alpine republic containing around 14 per cent of the territory of Austria-Hungary from which it emerged after World War I. Chancellor Renner (1918–20) sought to stabilize the new republic through social legislation, while at the same time expressing the wish for an eventual link (Anschluss) with Germany. Despite this, social unrest was a feature almost from the beginning. The state was weak, mainly as a result of a heavy debt burden from the war. It was thus unable to cope with the impact of the demobilization of troops, which resulted in large-scale social dislocation. Matters were made worse by the loss of important economic areas such as the industrial Czech lands, and of access to the sea through Trieste. An entirely new domestic economic structure had thus to be created. The final, federal Constitution became law on 1 October 1920. The reformist Social Democratic Party of Austria (SPÖ) lost power to a bourgeois party coalition in 1920. Backed by a conservative, inefficient bureaucracy, it failed to stabilize the economy, whose collapse was prevented by a series of credit agreements, mainly with the US. At the end of a period of international economic recovery, industrial production was still only at 80 per cent of the prewar levels, while unemployment remained at 25 per cent. In view of the economic and social difficulties, political differences became increasingly marked during the 1920s, and led to an upsurge in political violence between supporters of the Communists, Social Democrats, and Fascist organizations. The collapse of Austria's largest bank in the wake of the Great Depression, the Östereichische Creditanstalt für Handel und Gewerbe (May 1931), appeared to many a final admission of defeat for the republic. In response, changes to the Constitution increased the executive powers of the President.

Political polarization continued unabated and in 1932 the local and state elections were won by the Austrian Nazi Party, which was under the tutelage of its German sister party. In response, Dollfuss dissolved parliament and instituted a dictatorial regime, based on a People's Front. His Fascist policies (authoritarianism, conservative moral values, corporatism rather than democracy), which led to a brief civil war against the socialists in early 1934, were continued by Schuschnigg, who was increasingly unable to resist domestic and German pressure towards union with Germany after Mussolini had accepted it in principle in 1936.

Under Seyss-Inquart, Austria was finally ‘invited’ to join in a union with Germany, and on 12 March 1938, German troops marched into Austria to realize the Anschluss. Hitler was jubilantly received into his native country, while membership figures for the Nazi Party, which were at levels similar to those in Germany, suggest that support for the Third Reich was, indeed, very high. The levels of anti-Semitism had also been remarkably similar in both countries. As World War II dragged on, and Austrian cities were bombarded, while Austria itself was increasingly run by a German administrative elite, many people became disillusioned, and Resistance movements began to form.

In 1945, Austria was occupied in four zones by the Allies (USSR, USA, UK, and France), who encouraged the readoption of the 1920 Constitution under the leadership of Renner, and the formation of political parties. Already on 25 November 1945 the first parliament was elected, which resulted in an absolute majority for the conservative Austrian People's Party (Österreichische Volkspartei, ÖVP). Through large-scale nationalizations of heavy industry, banks, and energy suppliers, and through Marshall Aid, the economy was soon on the path to recovery. During the 1950s and 1960s, the government was made up of the country's two largest parties, the the ÖVP and SPÖ. In 1955, the country finally received full sovereignty through the conclusion of the Austrian State Treaty. However, the government was rather less successful in coming to an agreement about the status of South Tirol, which remained unresolved until 1969.

Austria was governed by the SPÖ under Kreisky during the 1970s, who carried out an ambitious programme of social and penal reform. The SPÖ lost its absolute majority in 1983, and henceforward governed with the Liberal Party (FPÖ). In 1986, the latter elected to the leadership Jörg Haider, who transformed the party into a neo-Fascist party. The SPÖ responded by forming a new coalition with the ÖVP. The two established political parties faced the challenge not only of a blossoming FPÖ, which received over 20 per cent of the vote in the 1994 and 1995 elections, but also of the fragmentation of the political system through the formation of two new small parties, the Greens and the Liberal Forum. In an attempt to revive the country's stagnant economy, in a referendum two-thirds approved membership of the European Union (effective from 1 January 1995). Austria conducted two-thirds of its trade with EU member states (40 per cent of its trade was with Germany alone).

In 2000 the FPÖ won further seats, so that with 52 seats in parliament it was as strong as the ÖVP, against 65 seats for the SPÖ. A coalition was formed under Thomas Klestil of the ÖVP, with Susanne Riess-Passer of the FPÖ becoming Vice-Chancellor. The prominence in the Austrian government of the FPÖ caused international consternation, and led to the imposition of temporary diplomatic sanctions within the EU. This was an unprecented step designed to ensure the maintenance of the EU's values on human rights. In domestic politics, the government instituted a tax reform to stimulate demand, which encouraged further economic growth at a time of rising demand for exports. As a result, GDP increased by over 4 per cent in 2000, with unemployment declining to below 6 per cent.