Outbreak of the war
End of the war

The financial consequences of the war for the new republic

Georges Clemenceau’s famous statement, “Autriche c'est ce que reste” (“What’s left is Austria”) referred to the break-up of the Danube Monarchy at the end of the First World War. The sentence can also be interpreted to mean that the Monarchy's heritage included the debts to be paid by the Republic of Austria.

One of the consequences of the 1919 peace treaties was that Austria, like Hungary, was required to assume a large part of the old national debts of the Monarchy. This aggravated the already existing economic problems. The new Austria was emphatically not a nationally economy, since many enterprises were more linked with the “new abroad” (the successor states) than focused on a cooperation with other parts of the Austrian economy.

The devaluation of the Austrian Krone on the foreign currency markets in 1919 against the background of the currency separation can also be interpreted as a symptom of the collapse of the Monarchy. As Otto Bauer wrote in his famous book, “Die österreichische Revolution”, this was the unavoidable consequence of the fact “that the value of the Austrian Krone was no longer based on the fertile plains, the coal and oil deposits, the industrial and port facilities of the old large economic territory but only on the poverty of the German-Austrian economic territory”. 

The heritage of the Monarchy also included the continuation of inflation. Up to the summer of 1921, this remained within the dimensions prevailing during the war (100 % per year). The cause of this was the further increase of the state deficit, now being used for other, ‘social’ purposes, in particular to subsidise the import of foodstuffs. In the second half of 1921, state revenue only covered 36% of expenditure.

The mechanism of war inflation, the home-made inflation, was joined by a new, imported inflation (the rise in the price of imports because of the falling exchange rate of the Krone). And this in turn had a direct effect on the state deficit because of the subsidies for foods. Nevertheless, inflation also had its good sides: Once the immediate problems of the post-war period such as the shortage of coal had been solved, the devaluation of the Krone also set business activity in motion.

By the end of 1921, the last and disastrous stage of hyperinflation was reached. Between August and December 1921, the living costs index (July 1914 = 1) rose from 124 to 661; in August 1922, finally, prices rose by 124 %, and the external value of the Krone fell by 113 %. At the end of the period of inflation, prices had risen by a factor of over 14,000 as compared with the prewar period, and the external value of the Krone against the US Dollar had fallen by roughly the same extent.

With the currency reform of 1924 (exchange of Krone into Schilling at a ratio of 10,000 Krone to 1 Schilling) and the adjustment of business accounts that had been distorted by inflation by setting up gold balances, at least an accounting closing line was drawn under the inflation period.

Translation: David Wright


Bachinger, Karl/Matis, Herbert: Der Österreichische Schilling. Geschichte einer Währung, Graz 1974

Kernbauer, Hans: Währungspolitik in der Zwischenkriegszeit. Geschichte der Oesterreichischen Nationalbank von 1923 bis 1938, Wien 1991

Weber, Fritz: Zusammenbruch, Inflation und Hyperinflation. Zur politischen Geldentwertung in Österreich 1918 bis 1922, in: Konrad, Helmut/Maderthaner, Wolfgang (Hrsg.): ... der Rest ist Österreich. Das Werden der Ersten Republik, Band II, Wien 2008, 7-32


“that the value of the Austrian Krone …“: Bauer, Otto: Die österreichische Revolution, in: Bauer, Otto: Werkausgabe, Band 2, Wien 1976, 748 (Translation)

Contents related to this chapter


  • Aspect

    After the war

    The First World War marked the end of the “long nineteenth century”. The monarchic empires were replaced by new political players. The Austro-Hungarian Monarchy disintegrated into separate nation states. The Republic of German Austria was proclaimed in November 1918, and Austria was established as a federal state in October 1920. The years after the war were highly agitated ­– in a conflicting atmosphere of revolution and defeat, and political, economic, social and cultural achievements and setbacks.