The Austro-German customs union was a project designed by Germany and Austria in 1930 and 1931 and publicly presented on March 31, 1931, which envisaged the elimination of tariffs between the two countries. Ultimately unsuccessful, the plan was justified as part of European economic recovery efforts during the Great Depression, although for the countries that opposed this goal —especially France and Czechoslovakia— it was a first step towards the political union of the two countries, which they strongly opposed. Political and economic pressures —most effective since the bankruptcy of Creditanstalt, Austria's largest bank, in May, which increased Vienna's financial needs— derailed the project, even before the Permanent Court of International Justice ruled against it and declared it incompatible with Austria's international obligations in September.
Change in German foreign policy
Three events marked the change in German foreign policy in the late 1920s and early 1930s: the two conferences at The Hague —held in August 1929 and January 1930— which changed the system for paying war reparations to the victors of World War I and brought forward the French evacuation of the left bank of the Rhine by five years —five years earlier than the Treaty of Versailles— and the death of the influential German foreign minister, Gustav Stresemann, on October 4, 1929. For Stresemann, the union with Austria, although desirable, had not been a priority; more important had been the French withdrawal from the Rhine and the possibility of regaining territory in the east.
In March 1931, with the direction of German foreign policy in the hands of less skilled officials than Stresemann, the world received with surprise the news of the Austro-German plan for a customs union. If Stresemann had concentrated on liquidating the system of war reparations and on achieving the French withdrawal from the Rhine, his successor at the head of the ministry, Julius Curtius —without great experience in foreign policy, less far-sighted than his predecessor and without the latter's skill— decided to accelerate the revision of the consequences of the peace treaties and to strengthen the Reich's relationship with the countries of central and southeastern Europe, especially with Austria.
Circumstances
Obstacles to the Anschluss
The two peace treaties, the one imposed on Germany and the one initialed by Austria, prevented in principle the absorption of the latter by the former (Anschluss). Article 80 of the Treaty of Versailles obliged Germany to respect Austrian independence; Article 88 of the Treaty of Saint-Germain committed Austria to remain independent and not to take any action that would jeopardize this without the approval of the League of Nations. The opposition of France, Czechoslovakia and Italy to such a possibility made it impossible to obtain this permission and, with it, to consummate the union, desired at that time by the majority of the Austrian and probably also of the German population.
The Geneva protocols signed on October 4, 1922, prevented Austria from entering into any economic or financial negotiations that threatened its independence and from granting privileges to any nation that posed such a threat.
Germany admitted that, according to these treaties, even a temporary customs union required the permission of the signatories to the protocols, and suspected that they would oppose the measure. Austria also understood that the project was forbidden in practice by both the peace treaties and the 1922 protocols. Annexation remained, however, a clear German foreign policy objective —along with the recovery of the Polish "corridor"—, especially after the French evacuation of the Rhine, which had hitherto taken priority over the absorption of Austria. For Austria, the two main reasons for favoring the union were both cultural and economic —it was widely believed that the small republic was not economically viable—.
The economic imbalance also led to differences in the degree of interest in the project: although Germany was Austria's largest trading partner, for the Reich the Alpine republic was only the twelfth destination for its exports and the twentieth in the list of imports. German producers were also not very willing to make sacrifices in favor of increased Austrian imports, nor did Germany have much surplus capital to invest in Austria.