The government decided not to draft a new constitution but to return to the constitution of 1920, as amended by the laws of 1929. In June 1946 the control agreement of July 1945 regulating the machinery of Allied political supervision was modified by restricting Allied interference essentially to constitutional matters. Denazification laws passed in 1946 and 1947 eliminated Nazi influence from the public life of Austria.
From 1945 to 1952 Austria had to struggle for survival. After liberation from Nazi rule, the country faced complete economic chaos. Aid provided by the United Nations Relief and Rehabilitation Administration and, from 1948, support given by the United States under the Marshall Plan made survival possible. Heavy industry and banking were nationalized in 1946, and, by a series of wage-price agreements, the government tried to control inflation. Interference by military commanders in political and economic affairs in the Soviet zone of occupation caused a considerable migration of capital and industry from Vienna and Niederösterreich to the formerly purely agricultural western states. This brought about a far-reaching transformation of the economic and social structure.
In 1949 former Nazis were allowed to participate in the general election. The Union of Independents (later renamed the Freedom Party), corresponding to the former German Nationalist group, won 16 seats in parliament. In subsequent elections (1953, 1956, 1959, 1962), the relationship of this party with the two main parties (the Austrian People’s Party and the Socialists) remained stable. After Renner died (December 31, 1950), Theodor Körner, the Socialist mayor of Vienna, was elected president by direct popular vote. He was succeeded in 1957 by the leader of the Socialist Party, Adolf Schärf, who was followed in 1965 by Franz Jonas, former mayor of Vienna, and in 1974 by Rudolf Kirchschläger, former minister of foreign affairs.
The influence of the Socialists in the coalition government, which had been relatively strong under Figl’s chancellorship, was reduced when the Austrian People’s Party replaced Figl with Julius Raab in the spring of 1953 and had Reinhard Kamitz appointed minister of finance. The subsequent economic reconstruction and the advance to a prosperity unknown to Austrians since the years before World War I is generally identified with the so-called Raab-Kamitz course, which was based on a modified free-market economy. The nationalized steel industry, electric power plants, and oil fields, together with the privately owned lumber and textile industries and the tourist traffic, were the major economic assets. The Austrian economy came to be dominated to a disproportionate extent by a trend toward the service sector because of the importance of tourism, which transformed the economic and social character of the rural Alpine areas. In addition, a heavy burden had been removed from the economy in 1953, when the Soviet government declared that it would pay its own occupation costs (as the United States had done since 1947). Thereupon, the British and the French followed suit.
The Berlin conference of the foreign ministers of France, Great Britain, the U.S.S.R., and the United States in January 1954 raised Austrian hopes for the conclusion of a peace treaty. For the first time, Austria was admitted as an equal conference partner, but the failure of the foreign ministers to agree on the future of Germany again prejudiced Austria’s chances. The Soviet government was not prepared to forgo the strategic advantages of maintaining forces in Austria as long as it perceived Germany to be a threat. In February 1955, however, the Soviet government suddenly extended an invitation to the Austrian government for bilateral negotiations. An Austrian delegation visited Moscow in April 1955, and an agreement was reached by which the Soviet government declared itself ready to restore full Austrian sovereignty and to evacuate its occupation troops in return for an Austrian promise to declare the country permanently neutral. Restoration of sovereignty
The State Treaty—signed in Vienna on May 15, 1955, by representatives of the four occupying powers and Austria—formally reestablished the Austrian republic in its pre-1938 frontiers as a “sovereign, independent, and democratic state.” It prohibited Anschluss between Austria and Germany as well as the restoration of the Habsburgs. It also guaranteed the rights of the Slovene and Croatian minorities in Kärnten, Steiermark, and Burgenland. Great Britain, the United States, and France relinquished to Austria all property, rights, and interests held or claimed by them as former German assets or war booty. The U.S.S.R., however, obtained tangible payment for the restoration of Austrian freedom. This included $150 million for the confiscated former German enterprises, which Austria bought back from the Administration of Soviet Property in Austria; $2 million for the confiscated German assets of the First Danube Steamshipping Company; and 10 million metric tons of crude oil as the price of Austrian oil fields and refineries that had been Soviet war booty.
The treaty came into force on July 27, 1955, and by October 25 all occupation forces were withdrawn. On October 26 a constitutional law of perpetual Austrian neutrality was promulgated. The Austrian government had never left any doubts that the pledge to neutrality could be interpreted only as a military one and never as an ideological one. Throughout the Soviet occupation, the Austrians had proved their anticommunist attitude, and the spontaneous reaction of the Austrian people during the Soviet suppression of the Hungarian Revolution in 1956 demonstrated their sympathy with Western democratic ideas (see Hungary: The Revolution of 1956). Austria preserved political stability; changes in the personal and ideological structure of the government and political parties were effected without major political crisis.
Austria became a member of the United Nations in 1955 and of the Council of Europe in 1956. Major problems in foreign relations were the conflict with Italy over Südtirol (southern Tirol; now part of the Italian Alto Adige" class="md-crosslink">Trentino–Alto Adige region) and the problem of association with the European Economic Community (EEC; later succeeded by the European Union). During the Paris Peace Conference of 1946, an agreement had been signed guaranteeing the rights of the German-speaking population of Südtirol, a region that Italy had obtained after World War I. The Austrian government, claiming that the Italians had not lived up to their obligations, initiated bilateral talks. In the early 1960s, acts of terrorism committed by German-speaking chauvinists interfered with the progress of the negotiations, but in 1969 agreement was finally reached on implementing the guarantees provided in the agreement of 1946. In 1958 Austria joined the European Free Trade Association, but a special arrangement with the EEC, accompanied by prudent dealings with the communist neighbours, maintained Austria’s status as a neutral nation. In that capacity, Austria provided for large numbers of refugees from eastern Europe; it also functioned as a transit link for Jewish émigrés from the U.S.S.R.
From 1962, disagreement over economic problems generated friction between the coalition parties. The annual budget led to grave disunity in the coalition, and in the autumn of 1965 the government resigned and called new elections. The elections, held on March 6, 1966, brought a setback for the Socialist Party, and the Austrian People’s Party was returned to parliament with an absolute majority. Negotiations for a new coalition government failed. The Socialists, led by a former foreign minister, Bruno Kreisky, went into opposition, and Josef Klaus formed the first one-party cabinet of the Second Republic. Contrary to widespread misgivings, the political stability of the country was not disturbed, and parliament was given new vigour and influence.
In ensuing provincial elections, the Socialist Party demonstrated recovery from the setback of 1966, and in the national elections of 1970 the Socialists managed to win a plurality of votes, becoming the strongest party in parliament, with 81 seats, though falling short of a majority. After negotiations for a new coalition cabinet failed, in May 1970 Kreisky was appointed chancellor, and he formed the country’s first all-Socialist cabinet. Sensing increased support for the Socialists, he called for new elections in October 1971, which gave his party a clear majority of 93 seats. In the subsequent elections of 1975 and 1979, Austrian voters demonstrated their approval of Kreisky’s policy of moderate social reform and economic stability by returning the Socialist Party to parliament in increasing strength: the elections of May 1979 gave the Socialists 95 seats, while the Austrian People’s Party, continually weakened by regional animosities and leadership squabbles, received 77 seats and the Freedom Party 11.