Human settlements have existed in what is now Austria since prehistoric times. In 14 BC , the region, already overrun by various
tribes, including the Celts, was conquered by the Romans, who divided it among the provinces of Noricum, Pannonia, and Illyria. The Romans founded several towns that survive today: Vindobona (Vienna), Juvavum (Salzburg), Valdidena (Innsbruck), and Brigantium (Bregenz). After the fall of the Roman Empire, Austria became (about AD 800) a border province of Charlemagne's empire until the 10th century, when it was joined to the Holy Roman Empire as Österreich ("Kingdom of the East").
From the late 13th to the early 20th century, the history of Austria is tied to that of the Habsburg family. In 1282, Rudolf von Habsburg (Rudolf I, newly elected German emperor) gave Austria (Upper and Lower Austria, Carinthia, Styria, and Carniola) to his sons, Albrecht and Rudolf, thus inaugurating the male Habsburg succession that would continue unbroken until 1740. The highest point of Habsburg rule came in the 1500s when Emperor Maximilian I (r.1493–1519) arranged a marriage between his son and the daughter of King Ferdinand and Queen Isabella of Spain. Maximilian's grandson became King Charles I of Spain in 1516 and, three years later, was elected Holy Roman emperor, as Charles V. Until Charles gave up his throne in 1556, he ruled over Austria, Spain, the Netherlands, and much of Italy, as well as over large possessions in the Americas. Charles gave Austria to his brother Ferdinand, who had already been elected king of Hungary and Bohemia in 1526; the Habsburgs maintained their reign over Austria, Bohemia, and Hungary until 1918.
When the last Habsburg king of Spain died in 1700, France as well as Austria laid claim to the throne. The dispute between the continental powers erupted into the War of the Spanish Succession (1701–14) and drew in other European countries in alliance with the respective claimants. At the end of the war, Austria was given control of the Spanish Netherlands (Belgium), Naples, Milan, and Sardinia. (It later lost Naples, together with Sicily, in the War of the Polish Succession, 1733–35.) In 1740, after the death of Charles VI, several German princes refused to acknowledge his daughter and only child, Maria Theresa, as the legitimate ruler of Austria, thus provoking the War of the Austrian Succession (1740–48). Maria Theresa lost Silesia to Prussia but held on to her throne, from which she proceeded to institute a series of major internal reforms as ruler of Austria, Hungary, and Bohemia. After 1765, she ruled jointly with her son, Holy Roman Emperor Joseph II (r.1765–90). Following his mother's death in 1780, Joseph, an enlightened despot, sought to abolish serfdom and introduce religious freedom, but he succeeded only in creating considerable unrest. Despite the political turmoil, Austria's cultural life flourished during this period, which spanned the careers of the composers Haydn and Mozart.
During the French Revolutionary and Napoleonic wars, Austria suffered a further diminution of territory. In 1797, it gave up Belgium and Milan to France, receiving Venice, however, in recompense. In 1805, Austria lost Venice, as well as the Tyrol and part of Dalmatia, to Napoleon. Some restitution was made by the Congress of Vienna (1814–15), convened after Napoleon's defeat; it awarded Lombardy, Venetia, and Istria and restored all of Dalmatia to Austria, but it denied the Habsburgs the return of former possessions in Baden and the Netherlands.
From 1815 to 1848, Austria, under the ministry of Prince Klemens von Metternich, dominated European politics as the leading power of both the German Confederation and the Holy Alliance (Austria, Russia, and Prussia). Unchallenged abroad, the reactionary Metternich achieved peace at home through ruthless suppression of all liberal or nationalist movements among the people in the Habsburg Empire. In 1848, however, revolutions broke out in Hungary and Bohemia and in Vienna itself; Metternich resigned and fled to London. Although the revolutions were crushed, Emperor Ferdinand I abdicated in December. He was succeeded by his 18-year-old nephew, Franz Josef I, who was destined to occupy the Austrian throne for 68 years, until his death in 1916. During his reign, Austria attempted to set up a strong central government that would unify all the Habsburg possessions under its leadership. But nationalist tensions persisted, exacerbated by outside interference. In 1859, in a war over Habsburg-controlled Lombardy, French and Sardinian troops defeated the Austrians, ending Austrian preeminence in Italian politics; and in 1866, Prussia forced Austria out of the political affairs of Germany after the Seven Weeks' War. In 1867, Hungarian nationalists, taking advantage of Austria's weakened state, compelled Franz Josef to sign an agreement giving Hungary equal rights with Austria. In the ensuing Dual Monarchy, the Austrian Empire and the Kingdom of Hungary were united under one ruler. Each country had its own national government, but both shared responsibility for foreign affairs, defense, and finance. Self-government for the empire's Magyar (Hungarian) population was balanced by continued suppression of the Slavs.
On 28 June 1914, at Sarajevo, Serbian patriots, members of the Slavic movement, assassinated Archduke Francis Ferdinand, nephew of the emperor and heir to the Austrian throne. Their act set off World War I, in which Austria-Hungary was joined by Germany (an ally since 1879), Italy (a member, with the first two, of the Triple Alliance of 1882), and Turkey. They became known as the Central Powers. In 1915, Italy defected to the side of the Allies—France, Russia, the UK, and (from 1917) the United States. After the defeat of the Central Powers and the collapse of their empires in 1918, Austria, now reduced to its German-speaking sections, was proclaimed a republic. The Treaty of St.-Germain-en-Laye (1919) fixed the borders of the new state and forbade it any kind of political or economic union with Germany without League of Nations approval.
During the next decade, Austria was plagued by inflation, food shortages, unemployment, financial scandals, and, as a consequence, growing political unrest. The country's two major political groupings, the Christian Socialist Party and the Social Democratic Party, were almost equal in strength, with their own private paramilitary movements. A small Austrian Nazi party, advocating union with Germany, constituted a third group. In March 1933, Chancellor Engelbert Dollfuss, leader of the Christian Socialists, dissolved the Austrian parliament, suspended the democratic constitution of 1920, and ruled by decree, hoping to control the unrest. In February 1934, civil strife erupted; government forces broke up the opposition Social Democratic Party, executing or imprisoning many persons. Dollfuss thereupon established an authoritarian corporate state along Fascist lines. On 25 July, the Nazis, emboldened by Adolf Hitler's rise in Germany, assassinated Dollfuss in an abortive coup. Kurt von Schuschnigg, who had served under Dollfuss as minister of justice and education, then became chancellor. For the next four years, Schuschnigg struggled to keep Austria independent amid growing German pressure for annexation (Anschluss). On 11 March 1938, however, German troops entered the country, and two days later Austria was proclaimed a part of the German Reich. In 1939, Austria, now known as Ostmark, entered World War II as part of the Axis alliance.
Allied troops entered Austria in April 1945, and the country was divided into US, British, French, and Soviet zones of occupation. Declaring the 1920 constitution in force, the occupying powers permitted Austrians to set up a provisional government but limited Austrian sovereignty under an agreement of 1946. Austria made effective use of foreign economic aid during the early postwar years. The United States and the UK supplied $379 million worth of goods between 1945 and 1948; another $110 million was provided by private organizations; and Marshall Plan aid amounted to $962 million. Inflation was checked by the early 1950s, and for most of the remainder of that decade the economy sustained one of the world's highest growth rates.
As a neutral nation, Austria has remained outside the political and military alliances into which postwar Europe is divided. Economically, however, it has developed close links with Western Europe, joining EFTA in 1960 and concluding free-trade agreements with the EEC (now the EU) in 1972. Because of its location, Austria served as an entrepôt between the Western trade blocs and the CMEA, with which it also has trade relations. Austria was twice the site of US-USSR summit meetings. In June 1961, President John F. Kennedy and Premier Nikita S. Khrushchev conferred in Vienna, and in June 1979, presidents Jimmy Carter and Leonid I. Brezhnev signed a strategic arms limitation agreement in the Austrian capital. Austria joined the EU in 1995, and European economic and monetary union in 1999. On 15 May 1955, after more than eight years of negotiations, representatives of Austria and the four powers signed, at Vienna, the Austrian State Treaty, reestablishing an independent and democratic Austria, and in October all occupation forces withdrew from the country. Under the treaty, Austria agreed to become permanently neutral.
On 8 July 1986, following elections in May and June, former UN Secretary-General Kurt Waldheim was sworn in as president of Austria. During the presidential campaign, Waldheim was accused of having belonged to Nazi organizations during World War II and of having taken part in war crimes while stationed in Greece and Yugoslavia with the German army from 1942 to 1945; he denied the charges. After his inauguration, diplomats of many nations made a point of avoiding public contact with the new president, and on 27 April 1987, the US Justice Department barred him from entering the United States. To the dismay of many leaders, Pope John Paul II granted Waldheim an audience at the Vatican on 25 June.
Waldheim declined to run for a second term and in July 1992, Thomas Klestil was elected federal president and he was reelected in on 19 April 1998. Relations with Israel, which had been strained under Waldheim's presidency, returned to normal.
The growing strength of Austria's Freedom Party, headed by Jörg Haider, is evidence of a turn to the right in Austrian politics. Although the party did not capture the votes it wanted to in the 17 December 1995 legislative elections, in the elections for European Parliament on 14 October 1996 the aggressively nationalist, anti-immigrant, anti-European Freedom Party took 28% of the vote, 2% behind the Social Democrats. The People's Party and Social Democrats remained together in a coalition throughout the 1990s and prepared Austria for entry into the European economic and monetary union. Cautious reforms took place, and the administration privatized state-owned enterprises, brought down inflation to less than 1% in 1998, and reduced the budget deficit to 2%. Average growth rates between 1997 and 2000 were over 2%. Unemployment fell to 4% in 2000. However, the global economic downturn that began in 2001 caused Austria's economy to suffer; coupled with costs resulting from severe flooding in August 2002, Austria's budget deficit increased sharply.
The Freedom Party scored a triumph in the general election of October 1999, coming in second behind the Social Democrats with 27% of the vote. After the traditional coalition of Social Democrats and the conservative People's Party failed to reach agreement on the next government in early 2000, the leader of the People's Party, Wolfgang Schüssel, turned to Haider and the Freedom Party to form a new administration. President Klestil had no choice but to accept the new coalition agreement. Its installation on 3 February 2000 provoked widespread protests both within Austria and from other members of the European Union. The EU partners decided to boycott Austria in all official meetings, a decision that caused a severe crisis in the EU itself. Haider resigned as party chairman in April 2000 although he remained governor of Carinthia. His withdrawal from federal politics did not soften the views of the EU, which imposed diplomatic sanctions on Austria. (They were lifted in September 2000.) A power struggle within the Freedom Party between Haider and Austria's Vice-Chancellor and Freedom Party chair Susanne Riess-Passer in September 2002 resulted in Riess-Passer's resignation, along with that of two Freedom Party ministers. The People's Party/Freedom Party coalition government collapsed, and new elections were called for 24 November 2002. In those elections, Schüssel's People's Party made wide gains; the Freedom Party suffered a major defeat. It dropped to 10% of the vote, down from its 2000 showing of 27%. Despite these results, and after failed negotiations with the Social Democrats and Greens, Schüssel formed a coalition government with the Freedom Party, which was sworn in on 1 April 2003.
After the new government took office in 2003, it launched a series of austerity measures designed to save the government 8 billion euros. Early retirement was to be cancelled, cuts were planned in public services and the health care system was to be reformed, and, most controversially, drastic cuts were proposed in the nation's pension system. As a result, approximately 500,000 Austrians took part in nationwide strikes in May 2003, the largest in 50 years.
In January 2001, the Austrian government and several Austrian companies agreed to provide $360 million to a general settlement fund to compensate Jews who had their property and assets seized by the Nazis during World War II. Each victim of Nazi persecution was to receive $7,000. Austria also created a social fund to pay pensions to survivors no longer living in the country, in the amount of $100 million.
Following the 11 September 2001 terrorist attacks on the United States, Austria passed a Security and Defense Doctrine, representing a shift in Austria's longstanding policy of neutrality. Although Austria will not participate in military alliances requiring mutual defense commitments, the country is gradually moving towards closer integration with European security structures, which would allow for participation in the EU rapid reaction force and NATO's Partnership for Peace program. Austria contributed peacekeeping forces to the former Yugoslavia, and supported NATO strikes on Serbia during the Kosovo conflict. Austria contributed 60 soldiers to the international military protection force in Afghanistan following the US-led military campaign there.