After World War I, Austria faced the daunting challenge of restructuring as a small, economically weakened republic from the ashes of the Austro-Hungarian Empire. Following the empire’s defeat, Austria’s military signed the Armistice of Villa Giusti in November 1918, signaling the dissolution of the Habsburg realm. Emperor Karl abdicated, and on November 12, Austria declared itself the Republic of German-Austria. Many Austrians initially viewed union with the new Weimar Republic in Germany as a path to economic viability, but the Allies explicitly forbade such a merger in the Treaty of Saint Germain in 1919, concerned over the rise of a “Greater Germany.”
With its population reduced to only German-speaking Austrians, Austria lost much of its agricultural and industrial resources. Despite attempts to claim territories with German-speaking populations in Czechoslovakia, Poland, and Italy, Austria’s appeals were rejected. As a result, Austria was left economically strained and geographically isolated, described by French leader Georges Clemenceau as simply “what’s left” of the once-massive empire. Further, the Treaty of Saint Germain obligated Austria to officially change its name to the “Republic of Austria,” dropping the “German” descriptor in an attempt to curtail future ambitions of unification with Germany.
Domestically, Austria's political landscape evolved as both left-wing and right-wing parties gained power and influence. The Christian Social Party (CS), rooted in conservative Catholicism, became a leading force, and in the early years collaborated with the Social Democrats (SDAPÖ), who commanded strong support in “Red Vienna” due to their social welfare policies. However, by 1920, the coalition dissolved, and the Christian Social Party took control with backing from the nationalist Greater German People's Party (GDVP).
Economic turmoil marked the post-war period. Hyperinflation plagued the new republic, prompting widespread poverty and political unrest. In response, the League of Nations granted a loan to stabilize Austria’s economy, and in 1925, Austria replaced its struggling currency, the Krone, with the Schilling. However, the terms required Austria to avoid any unification with Germany for at least 20 years, solidifying Austria’s isolation from German politics.
The 1920s were also marked by political polarization and the rise of paramilitary groups. Right-wing groups formed the Heimwehr, while the left-wing Republikanischer Schutzbund emerged to counterbalance them. These factions frequently clashed, leading to episodes of violence, including the 1927 July Revolt, where a protest turned deadly, leaving 89 people dead and deepening Austria’s political divisions.
By 1930, the Social Democrats emerged as the largest parliamentary bloc but faced increasing challenges from conservative parties. Political tensions reached new heights in 1932 when Engelbert Dollfuß of the Christian Social Party narrowly became Chancellor. His appointment marked the end of Austria’s fragile democratic balance, setting the stage for a shift toward authoritarianism in the years that followed.