A reorganization of the government of the empire became inevitable, and in 1867 a compromise (Ger. Ausgleich) with Hungarian moderate nationalists established a dual state, the Austro-Hungarian Monarchy. But the realm, a land of diverse peoples ruled by a German-Magyar minority, increasingly became an anachronism in a nationalistic age. Failure to provide a satisfactory status for the other nationalities, notably the Slavs, played a major role in bringing about World War I. Important developments in Austrian society during this period were the continued irresponsibility of the nobility and the backwardness of the peasantry, the growth of a socialist working class, widespread anti-Semitism stimulated by the large-scale movement to Austria of poor Jews from the eastern provinces, and extraordinary cultural creativity in Vienna.

The disastrous course of the war led to the breakup of the monarchy in 1918. Charles I renounced power; after a peaceful revolution staged by the Socialist and Pan-German parties, German Austria was proclaimed (Nov. 12) a republic and a part of Greater Germany.

1.3 Modern Austria

The Treaty of Saint-Germain (1919) fixed the present Austrian borders and forbade (as did the Treaty of Versailles) any political or economic union (Ger. Anschluss) with Germany. This left Austria a small country with some 7 million inhabitants, one third of whom lived in a single large city (Vienna) that had been geared to be the financial and industrial hub of a large state. The Dual Monarchy had been virtually self-sufficient economically; its breakup and the consequent erection of tariff walls deprived Austria of raw materials, food, and markets. In the postwar period, starvation and influenza exacted a heavy toll, especially in Vienna. These ills were followed by currency inflation, ended only in 1924 by means of League of Nations aid, following upon chronic unemployment, financial scandals and crises, and growing political unrest.

“Red” Vienna, under the moderate socialist government of Karl Seitz, became increasingly opposed by the “Black” (i.e., clericalist) rural faction, which won the elections of 1921. The cabinet of Social Democrat Karl Renner was succeeded by Christian Socialist and Pan-German coalitions under Schober, Seipel, and others. Unrest culminated, in 1927, in violent riots in Vienna; two rival private militias—the Heimwehr of the monarchist leader E. R. von Starhemberg and the Schutzbund of the socialists—posed a threat to the authority of the state. Economic crisis loomed again in the late 1920s. National Socialism, feeding in part on anti-Semitism, gained rapidly and soon absorbed the Pan-German party.

Engelbert Dollfuss, who became chancellor in 1932, though irreconcilably opposed to Anschluss and to National Socialism, tended increasingly toward corporative fascism and relied heavily on Italian support. His stern suppression of the socialists precipitated a serious revolt (1934), which was bloodily suppressed by the army. Soon afterward a totalitarian state was set up, and all independent political parties were outlawed. In July, 1934, the National Socialists assassinated Dollfuss but failed to seize the government.

Kurt von Schuschnigg succeeded Dollfuss. German pressure on Austria increased; Schuschnigg was forced to legalize the operations of the National Socialists and to appoint members of that party to cabinet posts. Schuschnigg planned a last-minute effort to avoid Anschluss by holding a plebiscite, but Hitler forced him to resign. In Mar., 1938, Austria was occupied by German troops and became part of the Reich. Arthur Seyss-Inquart became the Nazi governor.

In 1943, the Allies agreed to reestablish an independent Austria at the end of World War II. In 1945, Austria was conquered by Soviet and American troops, and a provisional government was set up under Karl Renner. The pre-Dollfuss constitution was restored with revisions; the country was divided into separate occupation zones, each controlled by an Allied power.

Economic recovery was hindered by the decline of trade between Western and Eastern Europe and by the division into zones. Austria was formally recognized by the Western powers in 1946, but because of Soviet disagreement with the West over reparations, the occupation continued. On May 15, 1955, a formal treaty between Great Britain, France, the United States, the USSR, and Austria restored full sovereignty to the country. The treaty prohibited the possession of major offensive weapons and required Austria to pay heavy reparations to the USSR. Austria proclaimed its perpetual neutrality. In 1955 it was admitted to the United Nations.

By the 1960s unprecedented prosperity had been attained. Austria had joined the European Free Trade Association in 1959, but association with the European Economic Community (Common Market) was held back by Soviet opposition. Politically, a nearly equal balance of power between the conservative People's party and the Socialist party resulted in successive coalition cabinets until 1966, when the People's party won a clear majority. They were ousted by the Socialists in the 1970 elections, and Bruno Kreisky became chancellor. A long-standing dispute with Italy over the German-speaking population of the Trentino–Alto Adige region of Italy was dealt with in a treaty ratified in 1971.

In 1983 the Socialist government fell, and Socialists were forced to form a coalition with the far-right Freedom party. In 1986 the Socialists (now the Social Democrats) and the People's party again joined together in a “grand coalition” that retained control of the government through the 1990s. Social Democrat Franz Vranitzky was chancellor from 1986 to 1997, when he resigned and was replaced by Viktor Klima. In the Oct., 1999, elections, the People's party placed third, just barely behind the far-right Freedom party, whose leader, Jörg Haider, has been critized as demagogic. The results complicated the formation of a new government, which still was not achieved by Dec., 1999, when Klima sought to re-form the Social Democratic–People's party coalition.

Austria captured world attention in 1986 when former United Nations Secretary-General Kurt Waldheim was elected president despite allegations that he had been involved in atrocities as a German army staff officer in the Balkans during World War II. Waldheim was succeeded in 1992 by Thomas Klestil, the candidate of the People's party. Austria began a partial privatization of state-owned industries in the late 1980s and entered the European Union in 1995.

2. The tourism industry as a part of the Austrian economy

The majestic Alps, plentiful forests, 88 lakes and a considerable network of rivers all add to Austria’s natural beauty and vibrant countryside. As a popular holiday destination in Central Europe, Austria plays host to visitors from all over the world. Thus, tourism plays an important role in the Austrian economy.

2.1 The Organizational Structure

According to a federal principle of the Austrian constitution, each of the 9 Austrian Federal Provinces is responsible for its own tourism. At the provincial level, tourist boards and a special division of the provincial governments conduct tourism.

Although the constitution itself allocates responsibility for tourism to the federal provinces, the Federal Government is held accountable for the general economic policy, public transport, financing instruments and subsidies - all questions which are directly or indirectly related to tourism.

The marketing activities in Austria’s tourism industry are provided by the "Austrian National Tourist Office"(ANTO). The Austrian Federal Government, the local governments of the 9 provinces, and the Austrian Economic Chamber are affiliated to the ANTO.

With a budget of around 44,743 mio. in 2001, the Austrian National Tourist Office strives to promote Austrian tourism on both the domestic and the international levels. To this end, it maintains 24 representative offices in all major incoming-tourist countries of the world, 4 marketing offices and several representatives/tourism managers and honorary representatives in a number of other countries (approximately 80 representatives in total).

2.2 Economic Significance

Austria's tourism and leisure industry plays a vital role in the Austrian economy. In 2002, the total foreign currency earnings from tourism amounted to approximately 14,13 million € (+5.5% compared with 2001). Thus, tourism accounts for 18,6% of Austria's total export earnings, for some 6,5% of the GDP and employs some 500,000 people. In terms of the per capita income in foreign currency from tourism, Austria is at the reign with annually approximately 1,400 €.

The number of beds and the number of overnight stays are the most important statistical indicators to measure the performance of tourism. The Austrian registration system ensures accurate statistical data. In 2002, approximately 1.151 million guest beds were registered.

In the same year, the number of overnight stays amounted to 116,8 million. Visitors from abroad accounted for about 85,79 million and domestic guests for about 31,01 million (comparison to 2001: +1,5% in total). Thus, foreign visitors represented 73.4% of the total overnight stays in 2002. Austria is again among the top tourist destinations.

Another important statistical indicator is the number of arrivals: In 2002 they amounted to 27,36 million (resulting in a plus of 1.7% compared to 2001 or approximately 465,882 more than the previous year). The guests stayed an average period of 4.27 days, which resulted in a 26.6% occupancy rate of guest beds.

Number of Arrivals and Average Staying Period (1976-2002)

Foreign currency receipts amounted to about 14,13 million € in 2002, which, with + 25.3% (the 10,97 million € the Austrians spent abroad already deducted resulted in no trade balance deficit in 2002. Thus, the tourism industry, for once, completely balanced Austria's traditional trade deficit and resulted in a surplus of 170 million €.

Traditionally, the vast majority of tourists come from Germany - in 2002 they accounted for approx. 53,52 million overnight-stays (around 62.4% of the total and +/- 2% var.):

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