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Austria-Hungary and the European War - A Hearts of Iron IV AAR
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Austria-Hungary today is one of the principal powers of Europe, a highly-industrialized, prosperous and modern country. The krone is considered a major reserve currency, the University of Vienna is held in similar esteem to Cambridge or Harvard, and the Two Crowns are as recognizable as the Union Jack or the 51-starred American flag. Tourists regularly flock to Venice, political summits are regularly held at Budapest, and Austro-Hungarian goods are sold across the world. Yet the meteoric rise of Austria-Hungary was mired in controversy particularly for its role in the Balkan Crisis and the short-lived Hungarian-Yugoslavian war of aggression, and it was only the struggle against the Axis powers that united the western and eastern halves of Europe into a single whole. 
Refoundation
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The Kingdom of Hungary was in a precarious position in 1936. Dismembered by the Treaty of Trianon after the Great War, Hungary had seen a succession of ministers promising to restore the prestige of the diminished state from the short-lived Hungarian Soviet Republic to the ardently pro-Nazi Gyula Gömbös. With the failures of both the fascist and communist movements on full display, the Regent Admiral Miklos Horthy elected to work with the monarchist parties, approving their motion for stricter budgetary controls and supporting their call for a restoration of the Hungarian monarchy, giving a famous speech on 8 October 1936 that “a regent is a steward, not a king.” The debate raged as to who would be invited to wear the crown of Saint Stephen, with Frederich Franz of Mecklenburg-Schwerin and Carl Wilhelm of Sondermanland both suggested as candidates. The former with the nationalist Unity Party and encouraged by pro-German elements along with Adolf Hitler, the latter was championed by the liberal parties in the hopes that he would introduce a monarchy modeled upon the Swedish constitutional system. However, the monarchist voices were the most powerful, and they selected as their candidate Otto von Habsburg, to restore the previous prestige that the country enjoyed under Habsburg leadership. At his coronation ceremony on 16 December, 1936, Otto von Habsburg swore to restore the kingdom to prominence, and return the provinces lost in the war. This caused an uproar within the European diplomatic community, with President Edvard Benes of Czechoslovakia and Prime Minister Leon Blum of France providing the strongest voice against the move. When pressed to reaffirm France’s eastern commitments established in the wake of the Great War, Blum was noncommittal, domestic commitments and the weakness of his Popular Front government in the wake of rising violence between the French Communist Party and the nationalist Leagues. 
Yet despite the rhetoric, King Otto I took an unexpected policy direction. His first cabinet was dominated by industrial policy, looking to revitalize a decaying industrial structure by importing ideas from the more industrialized nations, particularly the United States, who benefitted from a large trade deal for U.S. Steel. Keenly aware of the limited natural resources, King Otto commissioned an institute to innovate synthetic materials, primarily Buna rubber and oil from coal liquefaction plants, bringing in ideas developed in Germany and the United Kingdom. Even more surprising, Otto convened the Danubian Railroad Summit, inviting Austria and Czechoslovakia to unite their railroad networks, which had suffered since the break-up of the old Austro-Hungarian empire. This move particularly impressed the Austrian people, which sparked pro-Hungarian demonstrations which sometimes descended into violence with pro-German groups who wanted to unite Austria with Germany into one Germanic nation. The pro-Hungarian movement owed much of its support to Otto von Habsburg himself, who had spent much of his time in exile writing on Austrian affairs and made a name for himself as a fierce critic of nationalist policies. While monarchist and Catholic voices were among the most loyal of his supporters, he also enjoyed the support of Austria’s Jewish population, largely concentrated within Vienna, as they had hoped that a government led by Otto could stand up to the Third Reich and a large majority of the middle classes who wanted similar industrial policies to help revitalize Austria’s economy. Even stranger, his fierce opposition to Nazi Germany earned him the support of anti-monarchist groups, most notable among them being the social democrats.
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Upon learning of the pro-Hungarian demonstrations, Otto suggested to Kurt Schuschnigg to hold a referendum on reunification with Hungary and the restoration of the Dual Monarchy. With the threat of forcible German annexation on the horizon, Austria agreed to hold the referendum provided that Austria would be seen as an equal, and not merely a junior partner. The date of the vote was scheduled for 15 July 1937, a hot summer day. The referendum was fiercely protested by local communist groups, who boycotted the election and accused the Austrian government of manipulation by foreign powers. Otto encouraged participation by funding street parties for pro-Hungarian political groups, and the results were even better than Otto could have predicted: a landslide victory for unification. The Austrian government announced the results on 16 July, and formed itself into a provincial government under the overlordship of the Hungarian monarchy. Otto assumed the title of Emperor of Austria on 22 September, and proclaimed that the Austria-Hungary of old was reborn, and that he would not rest until all of the former Habsburg territories were brought under one banner.
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The Balkans Aflame
Almost immediately, this brought a crisis to the Balkan region, with both Yugoslavia and Czechoslovakia expressing concern about Austro-Hungarian ambitions in Eastern Europe, as both provinces were formed in the collapse of the previous Empire and King Otto’s rhetoric on reclaiming lost territory meant he might be thinking of annexing their territories. Indeed, King Otto embarked on lengthy negotiations with Edvard Benes, discussing the return of Czechoslovakia into the Austria-Hungary as the province of Bohemia. The young democracy had a long struggle with balancing the monarchist and republican voices within the country and the fear of Germany demanding the Sudetenland in its goal to establish a pan-German state. Surprisingly, Otto von Habsburg offered a surprising amount of compromise, promising to respect the Czech parliament as well as the language privileges enjoyed by the region during the time of the previous Austro-Hungarian Empire. Noting the political tension between Czechs and Slovaks, Otto offered to continue Benes’s plan of shared industrial growth in order to relax ethnic tensions, a prime example of Otto’s vision of an Austria-Hungary that was a cosmopolitan, poly-ethnic nation. On 1 December 1937, Benes accepted the offered terms of Austro-Hungarian overlordship, and Otto was acclaimed as King of Bohemia. His speech following his accession was careful, stating his respect for “the young parliament and its enthusaiastic supporters,” as an olive branch to the liberal, anti-monarchist factions who opposed the move. Yugoslavia lodged diplomatic protests, stating that the control of the Czechoslovakian army violated the 35,000 man limit on the Hungarian army as stipulated in the Treaty of Trianon. Otto disagreed, noting that the army was trained in Czechoslovakia before its annexation into Austria-Hungary. Benito Mussolini agreed with Hungary’s claims, and French and British did not comment directly, stating that their primary goal has always been the preservation of peace in the region. 
With Bohemia within its borders, Austria-Hungary set its sights on the territories awarded to Romania in the aftermath of the Great War. Transylvania, or Siebenbürgen as the Hungarians named it had a large segment of ethnic Hungarians. Romania, ruled by King Carol II under royal dictatorship, refused the gesture out of hand; Hungarian aggression had caused the Great War and the territory was lawfully transferred to Romania as part of war reparations. Upon hearing his refusal, King Otto retaliated by stating that the treaty went against its stated objective of national self-determination and that the Romanians had violated the treaty due to its land confiscation and anti-Semitic policies. Both Otto and Carol moved their armies to the border, neither wishing to back down in a crisis. The news media of the day was alight with articles fearing another Great War that could start at any time, the Balkans lit aflame yet again.
Wishing to avoid a war, Otto suggested impartial mediation through diplomatic back-channels. With Germany hostile, and France already invested in the conflict with its post-war foreign policy guarantees but unwilling to enforce them, the United Kingdom and Italy were named as possible mediators. This move has been considered a foreign policy masterstroke by Austria-Hungary. By being the one to suggest mediation, it engendered goodwill toward France, Italy, and Great Britain. Neville Chamberlain, the United Kingdom Prime Minister, debated a compromise by returning North Transylvania to Hungary within his own Tory cabinet. Italy however, preferred a strong Hungary ever since coming to diplomatic blows with Germany regarding Austria, and recommended that the territory be ceded to Austria-Hungary. The Italian offer reached the Romanian government first, and believing that they would be facing the Italian and Austro-Hungarian armies combined, ceded the territories without a fight. Chamberlain, upon learning of the compromise, believed it to be a Romanian capitulation, and never sent his proposal. 
Otto turned his attention to Yugoslavia, which had been struggling with rising separatist movements among the Croats, Macedonians, and Slovenes. Yugoslavia had vociferously protested Austro-Hungarian actions in the region, but found limited support from France and Britain, particularly after Yugoslavia announced claims on Bulgarian lands in the interests of establishing a “South Slav Union” and started quietly sacking officers who opposed German interest in the Balkans. Having already been disillusioned by the failure of the British and French to prevent the re-militarization of the Rhineland, Prince Paul believed that only alignment with Germany would save Yugoslavia from being annexed by Austria-Hungary. The Jewish populations in Macedonia, Thrace, and Dobrudja were particularly anxious about the direction that Yugoslavia was taking. Citing the need to protect Bulgarian lands from Yugoslavian aggression and the need to return the favor for their assistance in the Great War, Otto declared war on Yugoslavia. Thanks in large part to the highly modernized forces produced by the Czechs and the Skoda Works, the Austro-Hungarians were quickly able to penetrate the Yugoslavian defensive perimeter on their shared border. Austrian forces swept into Slovenia, encircling and destroying isolated units. Belgrade fell in less than thirty days, and the Yugoslavian government was forced to evacuate to Skopje. Even a last minute, desperate defense in the southern theater did little to stop the advancing Austro-Hungarian troops. In less than four months, the Yugoslavian government capitulated completely. 
While there were several high-profile diplomatic protests from the League of Nations, most media at the time reported great relief that the conflict was a small, contained struggle that did not erupt into a global war. Sanctions were imposed on Austria-Hungary, but these were of limited effect, as the war had ended before major actions could be agreed upon. The United States, citing the Neutrality Act, traded with neither Austria-Hungary nor Yugoslavia, France had withdrawn its guarantee of independence, and Germany declined to help Yugoslavia, unwilling to help a Slavic power. On 24 February, 1939, King Otto, having secured the territory he had lost, proclaimed the restoration and reintegration of the Dual Monarchy, and the rebirth of Austria-Hungary.
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The Sudeten Crisis
Elsewhere in Europe, the great powers were slowly aligning against one another. In 1936, an attempted coup by the Spanish Army had failed and had erupted into a massive civil war. Benito Mussolini and Adolf Hitler quickly sent support to the armies of Nationalist Spain, providing weapons, fuel, and volunteers to assist. Republican Spain had a much harder time finding international support, with only the Soviet Union sending material shipments, while French Prime Minister Leon Blum chaired a Non-Intervention Committee with the United Kingdom, the formation of which led to renewing the Great War-era alliance between the two countries. King Otto joined the Non-Intervention Committee, considering the Spanish Civil War to be a domestic Spanish matter and that the Habsburgs had not been in Spain for over two centuries. During the Civil War, an anarchist rift formed in the Republican faction, with the Regional Defense Council of Aragon refusing to obey Manuel Azaña and starting their own rebellion. The Nationalists, however, were unable to take advantage of this, as they suffered their own coalition fracture between Emilio Mola of the Spanish Directory and Manuel Fel Conde of the Carlist faction. The two factions were driven by irreconcilable divisions over the direction of post-war Spain. In desperation as 1938 began, Azaña accepted Stalin’s offer of expanded Soviet aid. Otto’s refusal to intervene caused a diplomatic rift between Austria-Hungary and Italy, who had expected support in exchange for mediating the Transylvania conflict in Otto’s favor. The Republicans eventually won the civil war on 12 November 1938, and Stalin installed Gabriel Acuna, a retired military officer and ardent Stalinist, as President of Spain, who immediately suspended elections and fired all non-Communist ministers, and instituted emergency laws to allow him to dissolve the Chamber of Deputies in favor of regional Soviets and establish a one-party state. Manuel Azaña, despondent over the death of Spanish democracy, never recovered, and died of illness shortly after the war’s conclusion in exile in France.
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The loss of such a state to communism caused Germany and Italy to mend their diplomatic fences. In a famous speech, Mussolini declared: “France, Britain, and Austria-Hungary are unwilling to face the Bolshevik menace.” and signed the Pact of Steel, a treaty of cooperation with the German Reich. Shortly thereafter, the two announced a military alliance. Italy began to court Bulgaria as another possible member of this “Berlin-Rome axis,” Afterward, Italy demanded that Albania’s King Zog cede the country to be ruled in a personal union under Victor Emmanuel III, and Greece received a similar demand from Hitler in June 1939. King Zog of Albania submitted to Italian demands, stating that Albania did not have the manpower to resist Italian invasion and that he would not murder his citizens for pride. Greek Prime Minister Ioannis Metaxas defied the demands, and Germany declared war on 15 June 1939. The invasion of Greece was quickly condemned by United Kingdom Prime Minister Neville Chamberlain, who issued an ultimatum: leave Greece immediately or face war. When Hitler refused, the United Kingdom declared war, joined by France and the various Dominions. This was too late for Greece, which could not receive reinforcements and was forced to capitulate. The failure of the Allies to protect Greece led to a vote of no confidence in Neville Chamberlain, who was replaced by his deputy, Winston Churchill. At Stuttgart, Hitler made a grand show of turning over control of Greece to his alliance partner Mussolini. Diplomatic historians have theorized that this overture was directed at governments which were not part of the Allies, in the hopes of causing them to join the Axis powers and becoming a part of the new European order to receive similar boons of territory.
This development caused a crisis within the Austro-Hungarian cabinet. With Greece and Albania administered through Italian puppet governments, the south flank of the nation was exposed, and if Bulgaria joined the Axis powers, they would be almost completely surrounded. Austria-Hungary’s relationship with the United Kingdom had been frosty ever since the war in Yugoslavia. Several councilors suggested rapprochement with the Axis powers, or attempting to split Mussolini and Hitler to break up the Axis and align with Italy against Germany. The left suggested approaching Stalin for a defensive pact. In a defiant response to the Greek and Albanian submission, Austria-Hungary declared that the countries of eastern Europe were free and independent powers, offering independence guarantees to Romania and Poland to protect them from Axis expansionism, much to the surprise of King Carol II. Hitler began to fund pro-fascist political groups and parties within Austria-Hungary, using nationalist sentiment against the poly-ethnic nation and promoting rhetoric that Otto’s policies were causing ruination of the region, that he must be deposed and Admiral Horthy must be returned to shepherd the government, in the hopes that the 1940 elections would cause domestic unrest and Austro-Hungary distracted by concerns at home. Wehrmacht officers suggested that Hitler thought little of the Austro-Hungarian military, confident that it was full of “weak and backwards races that would crumble against German armor,” and that he wanted to maintain focus on his war with France and the United Kingdom. German groups in Austria were their prime target, but Hitler also targeted Slovaks in eastern Bohemia in an attempt to stir up the divisions that had been present in Czechoslovakia. This effort caused a rise in nativist parties in the north and south of Austria-Hungary. King Otto retaliated with a large-scale crackdown on fascist groups, typically under a flimsy excuse of violating public safety laws, but fascist sentiment grew.
Almost a year after the February Proclamation, Germany, citing the principle of ethnic self-determination and a German state for the German people, demanded that the Sudetenland be ceded to Germany. Konrad Heinlein, leader of the Sudeten German Party and a Great War combat veteran, campaigned publicly for the cession of the territory. King Otto proclaimed Konrad a traitor to the Empire, to which Heinlein responded “You lived in comfort for your nation, I lived in a prison. Which of us has given more?” Street violence followed between the Legitimist monarchist party and the Sudeten German Party, and the First Royal Army Group was positioned along the border from Tyrol to the eastern Sudeten, the Second on the border near South Tyrol, and the Third sent to Macedonia on the border with the Albania and Greece. As the deadline for the German ultimatum drew near, King Otto remained defiant, proclaiming to the emergency session of the joint National Assembly “The Germans may have their war if they dare..The Czech people gave me their trust, and I give it to every man on the border down to the lowliest private. I nor any of the citizens of this reborn nation shall sacrifice this great enterprise.” When the deadline expired, Germany issued a formal declaration of war with Italy following less than four hours later. Austria-Hungary was now at war.
Opening Gambit - The Invasion at Zara, The Greek Campaign, and a War on Two Fronts
While the Wehrmacht had hoped to push into Austria-Hungary from the north, early attempts were repulsed by the extensive fortification network in the Sudetenland and the Austrian mountains. The heavy fortifications and powerful Austro-Hungarian artillery left the theater in a precarious stalemate, neither side able to break through enemy fixed positions. The initial moves from Austria-Hungary had better luck, with the Austro-Hungarian Fifth Army pushing south, deep into enemy territory in Italian-occupied Greece. Initial records from the battle had cited the brilliance of the commander, General Lajos Verees, but later analysis of the war had shown a lack of coordination between Hitler and Mussolini on the war plans for Austria-Hungary. Mussolini’s army had been organizing the annexation and administration of the new Greek holdings, the sudden increase in territory had forced Mussolini to assign many of his forces in that region to garrisons and coordination with the new puppet government while the majority of his trained forces were stationed on the French-Italian border. Several divisions had not even shown up, delayed in transit as Mussolini had to organize an Albanian and Greek regional government. The Italians that had been mobilized had made a valiant showing, but ultimately were forced to cede territory as garrison forces were scrambled at fallback positions and artillery was airlifted to provide firepower for the reeling army. 
Hitler had originally intended to reinforce Italian holdings in Greece, but Admiral Karl Donitz suggested a bolder push, to reinforce Italian holdings at Zara and push into Austro-Hungarian territory, hoping to spark a panic. The Austro-Hungarian navy was barely functional, as the shipyards on the Dalmatian coast had only recently been acquired, and intelligence suggested that the Austro-Hungarian only had a few destroyers and submarines staffed with barely trained naval forces. Hitler gave his approval, and the Kriegsmarine launched Operation Blue Serpent. The results were astounding, the combined Italian and German naval force was able to overwhelm the patchwork Austro-Hungarian Navy and force a landing at Zara. From there, Axis forces overran Split and Rijeka in Dalmatia before a relief force under Austro-Hungarian general Fritz Lipfert was able to form a battle line in Bosnia. The loss of vital industrial facilities severely hampered Austro-Hungarian war production. President Franklin Roosevelt’s proposal to extend the Lend-Lease Act to Austria-Hungary met with resistance even from his own party, but an impassioned speech by Harry Hopkins was able to secure the passage of the bill, and Austria-Hungary was able to manage the supply shortfall. In public recognition of the material support, King Otto commissioned a statue of an American factory worker entitled: “The Hands of Freedom.”
In a surprising and stunning move, Romania elected to send volunteer detachments in support of Austria-Hungary, which constituted themselves under Lipfert’s command as the Foreign Corps. This was done at the behest of the new king Michael. Carol II, who had long irritated his government with his wild, hedonistic lifestyle, had been deposed in a bloodless coup by his son, and declaring the need to stand against Axis oppression, sent volunteer forces to fight with the Austro-Hungarians. The Foreign Corps and the Austro-Hungarian Sixth Army set up their headquarters in Ljubjlana. Michael I also offered to mediate dialogue between Otto von Habsburg and Winston Churchill. The Copenhagen Conference was productive, with Austria-Hungary and Romania both welcomed into the Allies.
Hitler was reportedly furious. Coordination between the Austro-Hungarians and the British meant that he was facing a war on two fronts. Historians speculate on Hitler’s expectations, whether he had anticipated a greater result from Konrad Heinlein, that Otto von Habsburg would cede the Sudetenland rather than risk being encircled by the Axis, that previous bad blood between Austria-Hungary and the United Kingdom regarding Yugoslavia, or that Austria-Hungary would sue for peace following the successful landings at Zara. There are no surviving written records of the strategic objectives, but military historians consider this to have been one of the greatest strategic mistakes of the 20th century.
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The Push Through Italy
With Greece re-captured and under Austro-Hungarian control, the Allied War Council met in London to discuss war strategy. Of the two Axis Powers, Germany possessed the more accomplished and capable army. France wanted to push into Italy, removing the weaker power before bringing all forces to bear on Germany. Austria-Hungary, by contrast, wanted reinforcements in Eastern Europe, to liberate Dalmatia before striking at Germany to the north. Italy, Marshall Luza, leader of the Austro-Hungarian Second Army Group, believed that the Italians were contained, argued: “If we should break the German back, Mussolini will surrender and the war will be over before autumn.” The United Kingdom agreed with France, stating that if Northern Italy were cleared, France could reinforce the battle lines in Dalmatia, while the Royal Navy could keep the Adriatic clear and prevent any reinforcements to the Axis lines. With any luck, once the Axis expedition was cut off from supply shipments from the mainland, they would surrender en masse before starvation began to bite. As an acknowledgement that Austria-Hungary had some of its territory occupied, Great Britain and France agreed to detach several divisions to help hold the battle lines in Austria-Hungary, setting up an expeditionary corps headquartered in Banja Luka.
In March 1940, the Italian campaign was kicked off in earnest. Austria Hungary ordered a push from the Second Army Group toward Venice, while France ordered a major assault toward Genoa and Milan, while sending a destroyer group to secure the Corsica-Sardinia strait and support an amphibious assault on the small Italian island. The United Kingdom prepared a naval invasion from Egypt, hoping to strike Sicily once Mussolini had sent his forces northward. By April, French forces had taken Milan, but Genoa had been reinforced by a large number of infantry and armor divisions, Mussolini’s elite. Genoa was taken, but it was hard fought. Austria-Hungary had better luck, pushing through Venice and beginning the push along the Adriatic Coast. The Second Army Group experiencing a stunning breakthrough, with Italian forces falling back to Florence and establishing a fighting position in the hilly terrain outside the city. Austro-Hungarian and French troops, along with detached British divisions, met at Bologna, and theater commanders agreed to exploit the Austro-Hungarian breakthrough, bypassing the fortified Italian fighting positions in Florence. May saw further Italian retreats as the Allied forces pushed into Ancona and the successful launch of the British invasion of Sicily and the fall of Palermo, which became the main naval staging yard for further Mediterranean operations. The Royal Navy successfully contested the Mediterranean, and by the end of May Italian ships found it incredibly difficult to leave port either in the west or the east.
Operations continued into June, although hot weather slowed the tempo. Dogged resistance in the hills of Florence had failed to dislodge the Italian positions, and Allied war planners feared a stalemate that would permit the German army to redouble production efforts, push south from Germany, and possibly threaten the war effort. British efforts to push from Sicily to the Italian mainland had similarly stalled. Bohemian Marshal Luza of the Second Army Group, always an aggressive commander, suggested pushing toward Rome instead, charging Richard Tesařík with the task. Tesařík’s idea was called Operation Saber, better known as the Corneo Needle, where an infantry force would push southeast from Ancona while the spearhead of light tanks and motorized infantry would push through the center of the Italian peninsula. The Italian field officer took the bait, dispatching a relief force from Anzio to support the defense of the east. Followed closely by French infantry, Tesařík’s forces began shelling Rome to the surprise of the Italian defenders. On 28 June, 1940, Rome fell to the advancing Allies. Disheartened, the Italians pulled further south, but the isolated Florentine hill forces were unable to regroup, digging in. The dogged Italian defenders fought for two months, during which the famous war memoir “Colline Rossa” was written. As the Italian Army began to crumble, King Victor Emmanuel seized control of the Italian Parliament, arrested Mussolini, and sought an armistice. On 27 August 1940, Italy surrendered to a joint Allied delegation. Hardline Fascist holdouts persisted, moving their provisional government to Crete, but the British Navy bottled them on their island, and they played no part in the remainder of the war.
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Hitler’s Gamble, the German Lemon Squeeze, and the Postwar Order
With Italy lost, Hitler faced a losing war. Strategists within the Nazi council debated, with many suggesting making a peace overture, but Hitler refused to consider it. Instead, he embarked upon a daring gamble, a westward push through the Low Countries, bypassing the Maginot Line and threatening Paris. The prevailing theory among military historians is that Hitler hoped a display of strength would force a general ceasefire before the Allied armies could march north from Italy to threaten Germany. A few days before the Italian Army surrendered, Hitler attacked Belgium and the Netherlands. However, British cryptologists at GCHQ led by Alan Turing had uncovered the plans. Belgian and Dutch defenders had fortified their positions, reinforced by the British Army, and had been able to repulse Hitler’s plan. Disgusted by the German actions, the United Mexican States, under President Lázaro Cárdenas, joined the Allies, and sent a small expeditionary force to supplement the Low Countries defense.
The Austro-Hungarian army, having secured Italy, began the slow march north to the central European mountains, spilling over the Austrian border and pushing slowly toward Munich. British and Dutch forces advanced from Frisia while French forces began to emerge from their Maginot defenses and attacked southwestern Germany. Hitler’s force, spread out, were significantly outnumbered, and began to take heavy losses. 
The Allies developed their plan as a broad pincer movement, for an aggressive attack moving both north and east, not stopping until they had received an unconditional surrender. General Bernard Montgomery had caused a slight diplomatic row when he wagered with Austro-Hungarian general Géza Lakatos that the British could take Berlin before the Austro-Hungarian even got there, to which he was privately censured by Churchill for antagonizing his coalition partner. 
As September came, Austria-Hungary took Munich, where the First and Second Army Groups split, with the First marching north while the Second marched west to press German divisions stationed between the French and Austro-Hungarian lines together. It was here that the combined Allied offensive received the nickname “Lemon Squeeze.” In discussion with French reporters, an unknown sergeant said “Of course we’re going until we see the French on the other side! When you squeeze a lemon, you do not stop until there is nothing left but the rind!” By November 30, the Austro-Hungarian army proved the unknown sergeant correct, as they had closed the fronts save for a holdout force of 20 German divisions near the Swiss border. At a joint session of air command, British bombers volunteered to begin all-out strategic bombing including hard-to-fly night bombing raids, where the smaller Austro-Hungarian bombers would cover tactical bombing and free up the larger British planes for more important missions.
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The Belgian-British-Dutch-French breakout in the west accomplished the most success in the German theater, sweeping through northern Germany, while the Austro-Hungarian northward attack had only reached Leipzig. General Lakatos, angered that Montgomery might win his bet, ordered a redoubled effort, and detached line troops to march across the Belgian front to Magedburg, and then to march east to attack Berlin. Three days after Christmas, Austro-Hungarian forces radioed to the joint Allied command outside Berlin that they were joining the assault, much to Montgomery’s chagrin. With 43 divisions outside the gates and Hitler out of communication, the fall of the German Reich came swiftly. On the fourth of January, 1941, Hitler’s body was found within his improvised command bunker, dead of a self-inflicted gunshot wound, and the German Reich formally surrendered. 
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While the war was devastating, the casualty count was much smaller than the Great War, with slightly over 3 million military casualties total, although this was only an 11-month conflict. At the Peace of Konigsberg, the Allied Powers set out their aims for post-war Europe. Greece was liberated and founded as the Hellenic Republic of Greece. Occupied Lithuiana was similarly reorganized, with Memel being returned. Austria-Hungary wanted to reinstate Victor Emmanuel as King of Italy and the territorial concessions of Venice, Istra, and South Tyrol, while the United Kingdom favored Ferrucio Parri and re-established borders. A compromise was hastily made, permitting the territorial concessions, but establishing Italy as a constitutional monarchy, with Victor Emmanuel having little political power. Germany was reorganized as a republic, with Konrad Adenaur becoming the first Chancellor of a newly democratic Germany. Austria-Hungary returned Albania to King Zog with much fanfare, a victory procession into his country. In less than a year, the threat of fascism was lifted from Europe, though tensions still ran high. Joseph Stalin eyed Polish territories and Bessarabia with hungry eyes, and the United Kingdom has taken a firm stand against the brutal oppression happening in Spain. Japan continues to threaten China in the Pacific, and both the United States and the United Mexican States worry about Venezuelan aggression in South America. War may come again, and the world may not be so lucky next time.
The Dual Monarchy Today in 1941
The Austro-Hungarian military is a modern and sophisticated fighting force. While not as large as the French or Red Army, the Habsburg army is a well-funded and well-equipped force with modern infantry, artillery, and armor divisions. Austro-Hungarian warfare is dominated by firepower theory, stressing a mobile defense, artillery barrages called in by forward observation units from advanced firebases, and an integrated support structure. This last notion is particularly important, as Austria-Hungary is famous for its support corps, among the most highly trained individuals in the military profession today. Austria-Hungary developed an extensive military engineering corps capable of breaching obstacles and building field fortifications to both protect its own and bypass the defenses of the enemy. The Royal Patrol School develops skilled reconnaissance squads, with its infamous “High and Low” course on mountain and forest recon being internationally notorious for its difficulty. An early adopter of military radio, the Royal Signal Corps helped to pioneer backpack-sized signals equipment and field telephones. Armor corps have dedicated maintenance divisions to keep tanks in repair, as early conflicts with Yugoslavia were littered with broken-down tanks causing delays in military timetables. Most highly prized, however, are the logistics and hospital corps, when one British general said: “If I get hurt, please let me be picked up by the Habsburgs!” These two were of special interest to King Otto, and he invested a great deal of capital into developing field surgery equipment and a highly educated logistics staff, recalling the grueling conditions suffered by Austro-Hungarian troops during the Great War. Austro-Hungarian military thinkers have emphasized the need for dedicated supply in both men and materiel, with logistics study mandatory in all officer academies. These developments came as a result of an extensive motorization program, with Otto von Habsburg famously declaring: “A modern war is a truck war,” and permitting the motorized and mechanized infantry divisions to name themselves the Hussar Corps, distinct from the Royal Hussars, a primarily ceremonial unit present at most Austro-Hungarian state functions.
Austria-Hungary also fields a small special forces program. Of particular note are the Royal Mountain Corps, based off the Alpini program in Italy. The Corps, often nicknamed the Skyscrapers or the Hold-Your-Breath Squad, often provide training and consultation to other nations on developing and maintaining a trained mountain warfare program, and inter-Allied drills on mountain warfare are often conducted in Austro-Hungarian territory. The Danubian Marine Corps primarily trains in river and marsh warfare, specializing in high-speed bridging operations. 
On the sea, the Austro-Hungarian navy is not a true blue water navy. As much of the earlier Austro-Hungarian navy was disbanded, Austria-Hungary had little in the way of development with its navy, and naval warfare was often seen as a distant third priority compared to land and air warfare, much to Austro-Hungarian chagrin when the Axis were able to land forces in Zara. His Majesty’s Navy primarily acts as a coastal and Mediterranean force, primarily destroyers and cruisers and a small but well-established submarine force. King Otto, however, is looking to modernize the navy with a focus on aircraft carriers with destroyers acting as escort and heavy cruisers providing firepower from naval guns.
In the air, Austria-Hungary boasts a well-trained and well-equipped air force. The Austro-Hungarian Air Force’s most famous planes are its RMI-8 X/V and it’s RMI-16. The former is a heavy fighter, primarily an air superiority and bomber escort, a large, twin-engine heavy fighter, while the latter is a streamlined medium bomber. The Austro-Hungarian Air Force is a relatively small service, with an operational doctrine toward flexibility. Bomber pilots are expected to be able to perform at both strategic bombing and close air support missions. Drop-out rates for its Bomb School are high due to the intense demands of the course, but the pilots who successfully complete them are among the most decorated and talented members of the Austro-Hungarian armed forces.
Imgur Links for Full-Size, images are in the same order that they are in the AAR
Austria Hungary country map
Otto Assumes the Hungarian Crown
Austria Agrees to Unite with Hungary
Restoration of Austria-Hungary
Before the War Begins
The Italian Push
The German Lemon Squeeze
The Battle of Berlin
War Score and Participation
-SLAL
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