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After the death of Kaiser Franz Josef in 1916, the Austrian Empire was left extremely weak under the reign of Karl (Charles) I. Karl was a meek ruler, unable to keep his country together, and riots broke out in the Slavic regions of Transylvania, Croatia, Slovenia, and the Muslim region of Bosnia, occupied in 1912.
Transylvania, Croatia and Slovenia were violently put down, while Bosnia successfully gained its independence, mostly through the pressure that the Turks and Serbs put on Vienna.
Soon, however, the stress of running a large and multi-racial empire, coupled with the bloody uprisings took their toll. In 1927, Kaiser Karl I suffered a heart attack and died. For six months, a multi-national committee ran the Empire, albeit unofficially, while they debated whether to hand the crown to Karl's son, Otto von Habsburg. When the young Otto turned 16, the commune decided for the coronation of Otto, and in 1928 Otto von Habsburg was crowned Otto I of Austria.
Otto soon turned to be an excellent and just ruler. He was in no way racist against the various peoples of his empire, and granted all residents of Austria Citizenship. This, in effect, negated the 1867 unification of the Kingdom of Austria and Hungary, and the Empire's name reverted back to the Austrian Empire, and the flag of the Habsburgs once again flew, replacing the standard of the Duel Monarchy.
Otto enacted a series of reforms. All around him, the other nations of Europe were industrializing and growing, while his was stuck in the past. No more.
Otto appointed the brilliant and inventive Gustav Vranitzky, wizard of Czech industry, to the post of Minister of Heavy Industry. He immediately put reforms into place, capitalizing on Austria's immense Coal, Ore and Oil deposits to increase Industrial Output and the National Gross Domestic Product.
Minister Vranitzky worked wonders with Austrian Industry, Austria's industries were now about equivalent to those of Russia, and still growing.
The Military was also reformed. In Britain and Germany, there had been great innovations in Armoured Car technology. Some even had crude tracks for moving across mud and other hard terrain. Most of the Great Powers also were using Trucks to move their men around. The Internal Combustion Engine was supercharging warfare.
Austria's Army lacked all of this. Most of its offensive power was Infantry, with the elite Hungarian Cavalry sprinkled in like herbs in a hearty stew. With its improved industries, Austrian factories started pumping out Trucks, Automobiles and other modern equipment.
The Pride of Austria's Military was its fleets, both Naval and Airship. Croatian and Istrian naval yards had been pumping out dreadnoughts and battle cruisers since the early 1900s. Back then there had been an intensive Naval Race with Italy, it had died down some, but still remained. Austria also started to understand the value of submarines, after a demonstration put on by a German Admiral named Dönitz had shown Admiral Horthy that submarines were sometimes more deadly than a multi-million dollar dreadnought.
Austria's Airship fleet is roughly the equivalent of Britannia's, making it one of the largest in Europe.
Austria has come a very long way since the coronation of Otto, now 26. It is unknown if this will prolong Austria's existence as a great power, or greatly reduce its life span.