The Austro-Hungarian Empire played a decisive role in central European history. It occupied strategic territory containing the southeastern routes to Western Europe and the north-south routes between Germany and Italy. Although present-day Austria is only a tiny remnant of the old empire, it retains this unique position.
Soon after the Republic of Austria was created at the end of World War I, it faced the strains of catastrophic inflation and of redesigning a government meant to rule a great empire into one that would govern only 6 million citizens. In the early 1930s, worldwide depression and unemployment added to these strains and shattered traditional Austrian society. Resultant economic and political conditions led in 1933 to a dictatorship under Engelbert Dollfuss. In February 1934, civil war broke out, and the Socialist Party was outlawed. In July, a coup d'etat by the National Socialists failed, but Dollfuss was assassinated by Nazis. In March 1938, Austria was incorporated into the German Reich, a development commonly known as the "Anschluss" (annexation).
At the Moscow conference in 1943, the Allies declared their intention to liberate Austria and reconstitute it as a free and independent state. In April 1945, both Eastern- and Western-front Allied forces liberated the country. Subsequently, Austria was divided into zones of occupation similar to those in Germany.
Under the 1945 Potsdam agreements, the Soviets took control of German assets in their zone of occupation. These included 7% of Austria's manufacturing plants, 95% of its oil resources, and about 80% of its refinery capacity. The properties were returned to Austria under the Austrian State Treaty. This treaty, signed in Vienna on May 15, 1955, came into effect on July 27, and, under its provisions, all occupation forces were withdrawn by October 25, 1955. Austria became free and independent for the first time since 1938.
Various political parties and people have come into the government, including controversial individuals such as Bruno Kreisky and Kurt Waldheim. Conflict has arisen over the past several years over the presence of foreigners and the high rate of unemployment, as well as the emergence of the right-wing (some say, neo-Nazi) Freedom party