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After World War I, the victorious Western powers imposed a series of harsh treaties on the Central Powers, which included Germany and Austria-Hungary. These treaties stripped the Central Powers of substantial territories and imposed significant reparation payments. However, Austria did not pay any reparations despite being liable for them. This was due to its impoverished state after the war and the collapse of the Bank of Vienna. The Treaty of Saint-Germain-en-Laye, which was signed by Austria and the Allied Powers, acknowledged that Austria did not have the resources to pay reparations and delayed the establishment of a final figure until the Reparation Commission could determine its ability to pay. The Reparation Commission ultimately decided that Austria was unable to pay and that the credit of the property taken from Austria by the Treaty of Saint-Germain-en-Laye was sufficient payment.
| Characteristics | Values |
|---|---|
| Reason for not paying reparations | Austria was "so impoverished" after the war, and the collapse of the Bank of Vienna |
| Loss of territories | Austria lost over 215,000 square miles of land holdings, including crown lands to newly established successor states like Czechoslovakia, Poland, and the Kingdom of Slovenes, Croats, and Serbs |
| Treaty | The Treaty of Saint-Germain-en-Laye called for the creation of a Reparation Commission that would work with the Republic of German-Austria over 30 years to determine the reparations |
| Reparations paid | Austria did end up paying around $2 billion to the Soviet Union |
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What You'll Learn
The Treaty of Saint-Germain-en-Laye
The treaty included the Covenant of the League of Nations, which the United States did not sign. As a result, the US established their own treaty, the US-Austrian Peace Treaty, in 1921. The treaty also included numerous provisions dealing with Danubian navigation, the transfer of railways, and other details involved in the breakup of the Austro-Hungarian Empire.
The treaty reduced Austrian territory to the borders of Austria alone, leaving it at around 40% of its previous size. It also required Austria to refrain from compromising its independence, which meant that Austria could not enter into political or economic union with the Weimar Republic without the agreement of the council of the League of Nations. This led to a change in the country's name from German-Austria to Austria.
The Austrian Army was limited to 30,000 volunteers, with the manufacture of arms and munitions restricted to one state-owned factory. All warships and submarines were to be surrendered, and air forces were to be abolished. The treaty also addressed the establishment of war crimes tribunals and the monetary costs of the war.
Due to Austria's financial situation after World War I, the Treaty of Saint-Germain-en-Laye acknowledged that the country did not have the resources to pay reparations. The establishment of a final figure was delayed until the Reparation Commission was established. In 1921, the Commission determined that Austria was unable to pay reparations due to its poor economic state, and the credit of the property taken from Austria by the treaty was deemed sufficient payment.
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Austria's economic state
The Austro-Hungarian Empire was one of the great empires of central and eastern Europe that disintegrated after World War I. The war brought about the destruction of the empire's currency through inflation. In the summer of 1914, the currency in circulation totalled 3.4 billion crowns, but by the end of 1916, this had increased to over 11 billion crowns.
Various national groups began breaking away from the empire, with Czechoslovakia, Hungary, Slovenia, Croatia, and Bosnia declaring independence. The Romanians annexed Transylvania, the region of Galicia became part of Poland, and the Italians claimed the southern Tyrol. The new, smaller Republic of Austria found itself cut off from the other regions of the former empire, and the surrounding successor states imposed high tariff barriers and other trade restrictions on the country.
The Austrian government's policies further exacerbated the economic situation. The Social Democrats imposed artificially low price controls on agricultural products and attempted to forcibly requisition food for the cities. Food and fuel supplies were hoarded by the regions, with black-marketeers becoming the primary providers of essentials for the citizens of Vienna.
In 1921, the Reparation Commission determined that Austria was unable to pay reparations due to its economic state. The Commission decided that the credit of the property taken from Austria by the Treaty of Saint-Germain-en-Laye was sufficient payment. The Austrian part of former Austria-Hungary did have to pay reparations, but no exact figure could be found.
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Loss of territories
The collapse of the Austro-Hungarian Empire after World War I saw the loss of territories and the formation of new states. The Treaty of Saint-Germain-en-Laye (1919) and the Treaty of Trianon (1920) regulated the new borders of Austria and Hungary, reducing them to small, landlocked states.
Austria lost over 215,000 square miles of land holdings, including some of its wealthiest territories, such as those in the former Bohemian crown. The loss of these territories had a significant impact on Austria's economy, as many established industries and infrastructure elements were now disrupted or lost. The new borders also became major economic barriers, hindering the flow of goods and services.
Hungary suffered even more significant losses, losing 72% of its territory, 64% of its population, and most of its natural resources. The First Hungarian Republic was short-lived, and the country experienced political upheaval, with various groups vying for power. The Hungarian-Romanian War of 1919 resulted in Romanian troops ousting the communist government led by Béla Kun.
The remaining territories inhabited by divided peoples fell into the composition of existing or newly formed states. For example, the Czechoslovaks in Prague and the South Slavs in Zagreb declared their independence, forming the independent state of Czechoslovakia and the National Council of Slovenes, Croats, and Serbs, respectively. The German members of the Reichsrat in Vienna proclaimed an independent state of German Austria, which later became the First Austrian Republic.
The loss of territories by Austria and Hungary had long-lasting political and economic effects, reshaping the region and contributing to the rise of new nation-states. The treaties that formalised these changes sought to enable the newly emancipated independent states to claim territories containing sizeable German- and Hungarian-speaking populations.
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Vienna Bank collapse
The Austrian part of former Austria-Hungary did have to pay reparations after World War I, despite the country's impoverished state. The Treaty of Saint-Germain-en-Laye called for the creation of a Reparation Commission that would work with the Republic of German-Austria over 30 years to determine the exact amount they would have to pay and to whom. The Commission was also to consider the resources available to Austria and its capacity to pay.
In 1921, the Reparation Commission determined that Austria was unable to pay reparations due to its economic state. The Commission decided that the credit of the property taken from Austria by the Treaty of Saint-Germain-en-Laye was sufficient payment. This included the loss of over 215,000 square miles of land holdings.
Austria's economy was further weakened by the collapse of the Creditanstalt bank of Vienna in May 1931. Creditanstalt was the largest bank in Austria, and its collapse triggered a Europe-wide crisis and a deflationary spiral between 1931 and 1933. The Austrian government guaranteed all the losses of the Creditanstalt, but this meant guaranteeing 1,200 million schillings of bank liabilities when the federal budget was 1,800 million schillings.
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Property taken from Austria
The Treaty of Saint-Germain-en-Laye, Trianon, and Sèvres acknowledged that Austria did not have the resources to pay reparations and delayed the establishment of a final figure until the Reparation Commission was established. The Commission was to work with the Republic of German-Austria over 30 years to determine what they would have to pay, with an exact value to be established on May 1, 1921, after Austria had time to recover economically.
In 1921, the Reparation Commission determined that Austria was unable to pay reparations due to its poor economic state. The Commission decided that the credit of the property taken from Austria by the Treaty of Saint-Germain-en-Laye was sufficient payment. Austria lost over 215,000 square miles of land holdings, including the loss of several territories to Italy and Yugoslavia. This included the loss of Tyrol to Italy, the Bohemian and Moravian crownlands to Czechoslovakia, the Kingdom of Galicia and Lodomeria to Poland, the Kingdom of Dalmatia and the territory of present-day Slovenia to the Kingdom of Serbs, Croats, and Slovenes, and Bukovina to Romania.
Austria was also required to hand over timber, ore, and livestock to the Allied Powers, for which they would be credited. However, due to its impoverished state after the war and the collapse of the Bank of Vienna, Austria paid no reparations beyond credits for transferred property.
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Frequently asked questions
Austria was unable to pay reparations due to its poor economic state after the war. The country was "so impoverished" that it paid no reparations "beyond credits for transferred property".
Yes, Germany was liable for all material damages and had to pay substantial reparations. However, the exact amount was determined based on their capacity to pay.
After World War II, Austria only had to give 60% of the oil it produced to the Soviet Union. However, this was offset by the massive amount of aid Austria received from the United States through the Marshall Plan.
The Allies tended to view Austria as being led by Germany and not as responsible. Additionally, the collapse of the Bank of Vienna and the loss of territories further impaired Austria's ability to pay.
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