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Rh system of the republic was in a state of uncertainty. On the one hand, the Austrian State, by the peace treaty of St. Germain, was made liable toward foreign countries for an amount not specifically determined. On the other, it was found neces- sary for political reasons to introduoe a system of providing the population with cheap victuals. As these had to be obtained almost exclusively against payment in foreign currency abroad, and it was desired to sell at home at the lowest possible prices, there resulted a considerable discrepancy between the expenses necessitated by this part of the State budget and the income derived. At the beginning of 1921 the deficit of the Austrian budget was estimated at hardly less than 50 milliards of kronen per annum. To cover this deficit the Austrian State, with the help of the Allied Powers, contracted loans abroad, and for the rest relied on the note-printing press. Only a small part of the expenses of the State could be covered by taxation, notwith- standing that all direct taxes were greatly increased and a new direct tax, an extraordinary property tax, was specially intro- duced in 1920. Of this property tax, the fixing of which required enormous preparation, it was permitted to make prepayments in Feb. 1920 under specially favourable conditions. Such pre- payments brought in over 7 milliards of kronen, but more than half of these prepayments were made in war loan. The situation of the Austrian State budget was therefore in 1921 a most un- favourable one. An improvement could only be expected on the one hand by doing away with the system, which could not be permanently maintained, of providing necessaries for the population below cost price at the expense of the State, and on the other by a radical reform of the many State and municipal enterprises (post, telegraph, telephone, State railways, salt- mines, tobacco manufactories, town railways, illumination and power works), (L. v. M.)

HISTORY

When in Oct. 1918 the break-up of Austria-Hungary became a matter of common knowledge (see AUSTRIAN EMPIRE), the Germans of Austria also announced their right to self-determina- tion. The impulse towards this movement came from the left wing of the Social Democrats who occupied the same standpoint as the Independent Socialists of the German Reich. They had long opposed the view that the dissolution of the Habsburg Monarchy, which was not highly industrialized, and the annexa- tion to a strongly socialistic Germany of the Austrian territories with a German population (the Alpine territories, German Bohemia, and the Sudetic territories), which would thereby be rendered possible, must necessarily involve a proletarian policy; and their views now completely gained the upper hand over the Great Austrian tendencies within the party. The " pro- visional National Assembly " of German-Austria at its first session (Oct. 21 1918) did indeed regard its connexion with the other national states of the old empire as not yet fully dissolved. But only nine days later (Oct. 30 1918) the new State was con- stituted in the fullest independence of the dynasty and of its former companion states speaking other languages. The last impulse towards this radical procedure had been given by Andrassy's overtures for a separate peace, which were regarded in wide circles in German-Austria as a betrayal by the Emperor of the German people, and gave rise to revolutionary demon- strations in Vienna. Under the influence of subsequent events in Germany the Emperor Charles was compelled to renounce, on Nov. ii 1918, the exercise of governmental functions, and henceforward to recognize whatever form of government the people might choose. The day after, under pressure from the Social Democrats, the republic was proclaimed.

In the new free State all three parties the Christian Socialists, German National party, and Social Democrats formally as- sumed a share of the responsibility of government. Thus from the outset power had passed almost entirely into the hands of the Social Democrats. The bourgeois parties acquiesced all the more willingly in this, since they were of opinion that only the Labour party would be able to conjure away the dangers which threatened from the break-up of the old army and of the old

authorities. The Social Democrats piloted the State skilfully through the first great vicissitude, though naturally in accord- ance with their own point of view. Above all, in order to check any reactionary tendencies, they disbanded all bodies of troops belonging to the old army on their return from the front, and placed the newly formed militia (Volkswehr), manned by the proletarian classes, under the leadership of councils of soldiers who were faithfully devoted to them.

But the very first two months cost the young republic serious losses of the territorial possessions which they had claimed on the basis of the " right of self-determination." The Czechs occupied not only all the Sudetic territories populated by Ger- mans, but also a few strips of land on the borders of Lower Austria. The Yugoslavs, going beyond the Slovene territories of Southern Styria, stretched out their hands towards the purely German towns of Marburg and Radkersburg. The repeated attempts which they made early in 1919 to gain a footing also in German portions of Carinthia were repulsed by the inhabitants, accustomed as they were to war. From the beginning of the Armistice German Southern Tirol with Botzen and Meran found itself in Italian hands.

The " Constituent Assembly " was elected under the in- fluence of the terrible economic consequences of the war and of the break-up of the monarchy. The Social Democrats won a " relative " majority, with 72 seats out of 170. They formed a coalition for purposes of government with the second strongest party, the Christian Socialists, who represented the peasant and lower middle-class elements. At the head of the Cabinet was the State Chancellor, Dr. Karl Renner, who had already directed the Government since the revolution. 'The secretaryships of State, which were of more political importance, were likewise occupied by Social Democrats, who also set the pace in other departments. Otto Bauer, who was followed in the Ministry for Foreign Affairs as early as 1918 by Victor Adler, strove with all his strength for a union of German-Austria with the German Reich, in which endeavours he was supported by all but a section of the Christian Socialists. The preliminary negotiations conducted with Berlin early in 1919 met with a favourable result. Bauer counted very much in his plans upon the support of the Italians, to whom the Austrian policy of union might be welcome for a variety of reasons. As to internal policy, the object was to make the republican form of govern- ment lastingly secure. The National Assembly set aside the dynasty of Habsburg-Lorraine, banished its members from the country if they did not submit entirely to the laws of the republic, confiscated a great part of its family domains, and abolished the nobility. The leading party was particularly zeal- ous in introducing numerous laws of a socialist nature, of which the early part of 1919 was especially productive.

The alarming conditions of Austria came daily more darkly into view. Famine and misery forced the State straight into the abyss of serious social shocks. Soldiers and civilians, profession- als and amateurs, seized at the means of self-protection. The several Territories (Lander), in all of whose Diets with the ex- ception of Lower Austria Christian Socialist majorities had been sitting since the elections in the summer of 1919, put up political and economic barriers against each other, and sealed themselves off even more hermetically from Vienna. Both in town and country party organizations of every sort interfered in administration generally with the best intentions and this resulted not infrequently in attacks on the freedom and property of their fellow citizens. The State Government was meanwhile powerless. The events in Budapest and Munich, where, in March and April 1919 respectively, Soviet republics had been set up, prompted to action the small Austrian Communist party, which had seceded from the Socialists of the Radical Left during the days of the revolution. In Vienna, on Easter Thursday and on June 6 1919, excesses were committed in consequence of the plots of native and foreign Communists, which led on both occasions to loss of life. If more serious consequences were avoided, this was as much due to the admirable police of Vienna as to the quiet and reasonable attitude of the Socialist leaders,