GERMANY'S annexation of Austria made Hungary a neighbor of the Reich. The Munich settlement has made all the Eastern neighbors of Germany her dependents.

Hungarian history from the Middle Ages consisted of a struggle against German supremacy represented by the Hapsburgs, Emperors first of Germany, then of Austria. Hungary dreaded them as the foes of her independence, yet again and again called on them for help against a more imminent danger, the Turks. In 1867 Hungary attained equal rights with Austria inside the Dual Monarchy, and from then on antagonism toward Germany lessened. Beginning with 1918 it disappeared, for Germany was no longer a neighbor and the small Austrian Republic was no longer a competitor. For assistance against the new foes surrounding her -- the Slav states and Rumania -- Hungary could appeal only to distant Italy. With the historic events of the year 1938 all that has changed; Hungarian history assumes again the pattern of the previous three centuries.

It was not merely Germany, it was Nazi Germany, which became Hungary's neighbor on March 12, 1938. How does it affect a small state suddenly to find on her borders a great state in which the display of military power and the doctrine of expansion and race consciousness constitute the daily food of the masses? The student of history and sociology may discern four lines of effect. They will be analyzed here as they apply to Hungary, though the author believes that they also apply to other countries like Jugoslavia and even to states not directly contiguous to Germany, such as Rumania and Bulgaria.

The four effects are: (1) a dangerous growth both of Nazi propaganda from Germany and of the indigenous Nazi movement; (2) official endeavors to gain German friendship by acknowledging that the country belongs, politically and economically, in the German orbit; (3) the adoption of various points in the Nazi German program, in order to take the wind out of the sails of German propaganda; and (4) an attempt by the ruling class to oppose the German penetration. By studying these we shall come to understand most of recent Hungarian history.

Hungary felt the first effect of becoming Nazi Germany's neighbor the first day after the Anschluss -- a great intensification of Nazi propaganda. All the Central and Eastern European countries contain islands of people of German origin; German propaganda among these started many years ago. With 1937 the Nazi movement began to extend outside these minorities, but, except in Rumania, it nowhere reached the point of becoming dangerous for the ruling parties. In Hungary the various Nazi factions made slow headway at first, in spite of the well-known grievances of large parts of the populace and in spite of the obvious appeal of anti-Semitism. Even the emergence of a "Fuehrer," the former Major Ferenc Szalasi, did not change the situation. Szalasi in 1937 succeeded in outdistancing his Nazi competitors. But only after the Anschluss did his headquarters become crowded with throngs hurrying to pay the few cents necessary to procure a Nazi membership card with a low number -- a sort of insurance policy against the eventuality of a Nazi Putsch. Szalasi's party suddenly found itself very rich and began showing off with its offices, its automobiles and the uniforms of its young unemployed members. Whether the money came from Germany or from certain naïve Hungarian landowners, it was used to organize cells and district offices in every town and village, to paint arrow-crosses (a variation on the Swastika devised to satisfy Hungarian nationalist sentiment) on houses, highways and park benches, and to send out groups to molest Jews in dark corners.

Who form the bulk of Hungarian Nazis? The industrial workers in Budapest and the other cities joined Szalasi in only small numbers. Still less did support come from the landless agricultural laborers who toil on the big estates and form the country's greatest unsolved problem. As in Germany before Hitler came to power, Nazism in Hungary is primarily a movement of the "petit bourgeois." By last year the common impression in Hungary was that practically every government employee with a monthly salary of less than 200 pengoes ($40 at present exchange) and under the age of 40 had become a Nazi. And the total of low-salaried employees of the national government and of the various city administrations is enormous because of government penetration into business. In publicly-owned railroads, street cars and bus companies, public utilities, tobacco factories and iron works, in post offices, the army, police, and in innumerable government offices, the great majority of the employees earn less than 200 pengoes a month (living expenses in Hungary are low, but 200 pengoes are nevertheless not much for a family). These consider themselves members of the intelligentsia and the ruling class, but feel frustrated because few of them can hope to work their way up. They embraced the Nazi creed on the theory that any change from the routine of everyday life is for the better.

The second manifestation of the effect of the Anschluss on Hungary was the Government's dispatch of trade delegations to Berlin. In order to obtain economic advantages these stressed how much Hungary belonged politically in the German system. And in fact in the last two years Hungary has had two important customers and two important sources of supply: Germany and Austria. These industrial states were the natural markets for Hungary's agricultural products, especially after her third industrial neighbor, Czecho-Slovakia, closed its frontiers against Hungarian agricultural goods.

Thus, Hungary's trade with Germany (1936-37 average) represented 23½ percent of her exports and 26 percent of her imports; while her trade with Austria represented 17 percent of her exports and 17½ percent of her imports. In the first nine months of 1938 (six of which were subsequent to the Anschluss), the participation of "Greater Germany" in Hungarian foreign trade amounted to 44½ percent of Hungary's exports and 41½ percent of her imports. This was four times as large as Hungary's trade with Italy, the country which stood second in importance. Germany actually took no less than 61 percent of Hungary's agricultural exports in the third quarter of 1938. In addition, she paid considerably higher prices for many of these than obtained on world markets.[i] Of course, these prices were paid in marks, and thus the amounts realized could be used only for the purchase of German products; but for the Hungarian farmer that made no difference. If we further take into account Germany's enhanced military prestige and the influence exercised by the squadrons of German airplanes, military and civil, that visited constantly along the Danube, we easily understand why each recent official Hungarian utterance has begun by emphasizing the old ties, "strengthened in the World War fought shoulder by shoulder," connecting Hungary with the German Reich.

Kálmán de Darányi, a typical small official who had happened to make a great career and who was deeply impressed by the Nazi successes, was Prime Minister, having assumed office in the fall of 1936. He decided that the best way to placate Hitler was for Hungary to adopt parts of the Nazi program. Hungary could no longer afford, he believed, to suppress the domestic Nazi movement ruthlessly. He decided that it would be better to take the wind out of opposition sails by putting the opposition program into effect; the German Nazis would be appeased and at the same time the Hungarian Nazis would be checked.

Some of the measures adopted by Hungary immediately after the World War led foreign observers to describe her Government as a dictatorship. But in fact in March 1938 Hungary was the only country in Central Europe, apart from democratic Czecho-Slovakia, where opposition deputies (including a few Socialists) criticized and attacked the Government in Parliament and where the press printed those attacks without alterations and omissions. The strength of the old parliamentary traditions was such that Darányi decided not to attempt to interfere with them. But the Jewish question offered a chance for a move along Fascist lines.

Jews form only about six percent of Hungary's population; but they are concentrated in the large cities where often they constitute 20 percent of the total. They have never considered themselves a race apart. Indeed, they are proud of being Hungarians and are nationalistic to the extreme. Though they long had been discriminated against in the civil service, this had not been the case in business, which the Hungarian nobility disdained to enter. In recent decades the development of industry under Jewish initiative has modified profoundly the country's former agricultural structure. Today, industry contributes more to the national income than does agriculture. When anti-Semites stressed the fact that the boards of directors of some of the biggest banks and industrial companies were composed exclusively of Jews, they forgot to mention that these same Jews had founded them and built them up; nor did they mention that many government offices did not contain a single person of Jewish origin.

Immediately after the Anschluss, Prime Minister Darányi submitted to Parliament a bill to "solve the Jewish question." He succeeded in driving it through in record time, for both liberal and Jewish opposition was paralyzed by the events then taking place in neighboring Vienna. An opposition leader's declaration that the bill bore the trade-mark "Made in Germany" made the fight against it doubly difficult. The law states that within five years every private employer with more than ten office employees (excluding manual workers) must have 80 percent non-Jewish employees and must pay 80 percent of the total salaries of his establishment (excluding wages) to non-Jews. Compared to the anti-Jewish legislation of Germany and Italy, this is mild indeed. The law nevertheless deeply offended the nationalistic Jews because of its discriminatory features and because it introduced the concept that the Jews are a race rather than merely Hungarians of Jewish religion.

But in addition to intensifying Fascist tendencies and influences, the Anschluss also strengthened the hand of the anti-Nazis. The two most important events in Hungary during the summer of 1938 stemmed directly from the Anschluss: the fall of the pro-Nazi Darányi Government in May, and the Bled Agreements in August, which put relations between Hungary and the Little Entente countries on a better basis than at any time since the World War.

The Magyar ruling class, reared either in liberal or in Catholic traditions, and cherishing the ideal of Hungarian independence, was deeply alarmed by the events in Austria. Particularly moved was the 70-year-old Regent, Admiral Nicholas Horthy, who in his youth served in the Hapsburg capital as adjutant to the Emperor Francis Joseph. The appearance of a large German army on Hungary's undefended western frontier, simultaneously with pro-German demonstrations in Budapest by the Hungarian Nazis, was the signal for secret conferences between those Hungarian leaders who stood to lose by a Nazi Putsch.

Moreover, in the first few weeks after the Anschluss, the general anti-German feeling in the country grew still stronger; for though Germany denounced the Versailles Treaty she did not propose to give the Burgenland back to Hungary.[ii] The uninformed Hungarian masses, who had been taught that their country's thousand-year-old frontiers were inviolable, were bitterly disappointed. The sentiment against Darányi was further intensified by the economic recession, which deepened simultaneously with the rise of Nazi activities. Between February and April of 1938 the volume of notes in circulation jumped from 444 to 585 million pengoes as people withdrew their bank deposits in a fear of a political upheaval. Retail trade (especially in luxuries) and building activities came to a stop. When Darányi, despite much urging, failed to prevent the Nazis from painting arrow-crosses all over the Hungarian countryside, he lost the support of aristocrats and conservatives in the Upper Chamber and with it the backing of the Regent.[iii] Immediately after Parliament had approved his anti-Jewish law, Darányi's Cabinet was superseded by one headed by Dr. Béla Imrédy. Except for the Nazis, the country joyfully hailed the Regent's act and the new Prime Minister was unanimously elected leader of the majority party of the Lower Chamber in Darányi's place.

Imrédy was chosen because a strong man was needed to restore order and reëstablish confidence. He was regarded as a man of real convictions, willing to fight for his program. Apart from his nationalistic and racial opinions, he is a pious Catholic and a scholar. Formerly he was known chiefly as a student of economics, then as a successful manager of currency: he had established foreign exchange regulations as effective as Dr. Schacht's in Germany without resorting to the complete severance of Hungarian finances from the rest of the world.

Imrédy believed that the day of liberal capitalism was past, but that nevertheless it was unnecessary to subordinate business completely to the state. In politics, similarly, he thought democratic rights must be restricted but not completely destroyed. He wanted Hungary to live on good terms with both the authoritarian and the democratic countries: he went to Rome and Berlin to pay his respects, but at the same time he suppressed the Nazis at home. A law was passed forbidding government employees to join the Nazi Party, street demonstrations were stopped, and the masses ceased to consider a Nazi upheaval inevitable. After Imrédy became prime minister enlistments in the Nazi Party fell off.[iv] Then in the summer Major Szalasi was sentenced to three years in prison for subversive agitation. Feuds between the various Nazi groups thereupon revived.

Aside from dealing with the Nazi problem, Imrédy's principal tasks were economic. In 1937 the Hungarian business situation had been considered fairly satisfactory. Agricultural prices were still low in comparison with those of 1929, but industrial production had risen rapidly from the low of 1932 and by 1937 had attained an all-time high.[v] This rise had been stimulated by a tax schedule favorable to housing construction and by a tariff which protected industries turning out goods formerly imported. But in both fields the saturation point had nearly been reached by the end of 1937. And of course the threat of depression was increased by the Anschluss. The Government therefore decided on a five-year plan of rearmament, public works and social improvements. A few months later Imrédy supplemented it with a land reform project. He proposed to divide a part of the entailed estates, which covered much of the country, into small leaseholds. In November 1938 the necessity for this became particularly urgent, following Hungary's reacquisition of extensive agricultural territories in which the Czechs had carried through a radical plan of land partitionment. Imrédy therefore suggested a great step -- the distribution of over one million acres, i.e., about 6 percent of Hungary's total farm land, among landless peasants. But the question of how to finance the undertaking, which wrecked many previous projects, remains unsettled.

Rearmament and the reintroduction of conscription were forbidden under the military clauses of the Trianon Treaty. In spite of the German example, Hungary was reluctant to denounce this treaty unilaterally. Foreign Minister Kánya, an experienced and much-travelled diplomat, put forth great efforts to arrive at a better understanding on this subject with the Little Entente countries. Tension between these countries and Hungary lessened when one of them, Jugoslavia, signed a treaty of friendship with Italy, champion of Hungarian aspirations. With Italy's blessing a plan was launched for Hungary to renounce any but peaceful means to regain her lost provinces, while in return the Little Entente agreed to accord her equal military rights. No decision in this matter had been reached by the end of August when Regent Horthy, Premier Imrédy and Foreign Minister Kánya, acting upon a most urgent German invitation, left for a state visit to Germany. While they were in Berlin the foreign ministers of the Little Entente, meeting in Bled, Jugoslavia, initialed a non-aggression pact between themselves and Hungary and released Hungary from the military provisions of Trianon. This visit to Germany was timed to coincide with the Bled meeting in order to show that Hungary was not a mere pawn in the German game.

The Hungarian public awaited with forebodings the upshot of the visit of their statesmen to Germany. Schuschnigg's trip to Berchtesgaden was recalled and both government partisans and opposition liberals were suspicious as to what was back of so elaborate a welcome for the representatives of a small country. Germany was rumored to be demanding that Hungary adopt the Nazi socio-economic order and that she accept German instructors. After Horthy's return all Hungary breathed more freely: he and his ministers had given Germany no political pledges.

The political situation in Hungary at the beginning of September, before the Sudeten crisis reached its most acute phase, struck a visitor as entirely different from what it had been a few years earlier. Then national mourning over the lost territories and incessant demands for treaty revision prohibited anything like friendly relations with the neighboring Slav countries. Now a Czech football team could be greeted warmly in Budapest. On many sides there were indications that reciprocal esteem at last had come into being. The shadow of the German colossus, stretching down the Danube, had changed the attitude of the peoples in all the so-called Succession States. Optimists dreamed of repairing Hungary's territorial grievances in a peaceful manner.

Did the Hungarian Government and ruling classes share this popular change of heart? Here just one bit of evidence suffices. In the London Daily Telegraph of September 2 a correspondent summarized the impressions gained after conversations with Imrédy and other leading Hungarians. He wrote:

Statements made to me in the highest official quarters prove the error of rumors in London and Prague that Admiral Horthy's visit to Germany was made the occasion for some kind of pact between Berlin and Budapest. . . . I was assured that no understanding was attempted for any kind of future coöperation between Herr Hitler and the Hungarian Government. . . . Imrédy said to me, the key words of Hungary's foreign policy were peace and justice and if any conflict broke out in Europe Hungary's aim would be to remain neutral.

A few days later the European situation changed drastically. Mr. Chamberlain's journey to Berchtesgaden demonstrated to Central Europe that the man who sat in his Bavarian mountain lodge and waited for even the Prime Minister of Great Britain to come to him was the one who could distribute and withhold favors. The feeling was confirmed when Mr. Chamberlain approved of the cession of the Sudetenland to Germany. Hungary of course asked for her share of Czecho-Slovak territory. Since Germany appeared to be the Power likely to grant it, Horthy and Imrédy again went to Germany. This time the public was not informed as to what promises were given and obtained. But evidently it could no longer be said, as the Daily Telegraph correspondent had reported only three weeks earlier, that no arrangements existed between Germany and Hungary or that Hungary would remain neutral in a Central European conflict.

In the trying period which now opened there were two engrossing and interconnected questions. The first was how to recover without undue risk some of the territories ceded to Czecho-Slovakia after the World War. The second was how to curb the Hungarian Nazis without incurring German displeasure. It was the general impression that a Nazi Putsch would be inevitable if the middle-of-the-road cabinet proved unable to obtain frontier revision promptly. Yet time went by without Imrédy achieving any success in this direction. Four weeks after Germany's demands for all Czecho-Slovak lands inhabited by Germans had been fully met, Hungary still had obtained nothing. But in the end reliance on Germany and Italy proved the right policy. Late in October the new Czech Government accepted those two Powers as sole arbitrators, and in Vienna on November 2 Herr von Ribbentrop and Count Ciano completed the partition of Czecho-Slovakia.

By the Vienna award Hungary obtained all she had demanded in the various notes sent to Prague in October (her claims were based on prewar population statistics), with the exception of three cities which for good reasons were not severed from Slovakia or Carpatho-Ukraine. Hungary's population was enlarged by 11.7 percent and her territory by 13.3 percent. The land added to the Hungarian plains was mainly agricultural, a fact which will force her to redouble her efforts to find means of exporting wheat; but a wider market for Hungarian industries was also acquired, as well as badly needed forests and mineral deposits.

In addition to her territorial claims, Hungary in October also demanded that the Slovaks and the Ruthenians should be entitled to decide by plebiscite whether they wanted to belong to Czecho-Slovakia, as had been the case since the World War, or to Hungary, as in preceding centuries. Germany and Italy refused. But the refusal cannot in reality be considered a severe blow. Reports from eastern Czecho-Slovakia indicate that the popular vote would not have gone in favor of Hungary, despite the economic advantages of reuniting poor mountain districts with fertile lowlands. In any case, Hungary exaggerated the importance of securing Carpatho-Ukraine. It was a mistake to suppose that a bloc might be formed to resist German expansion if Poland and Hungary secured a common frontier, but that this would be impossible if the two countries were separated by a strip of territory less than 30 miles wide. Polish diplomacy had made the Hungarian public believe this, however, and it was generally rumored that Italy would back Hungary's claim. Both Hungarian revisionists and anti-Nazis were disappointed, while the Hungarian Government had to face the fact that Germany's political and strategic desires were the supreme law in Central Europe.

The partition of Czecho-Slovakia produced much the same effects as followed the Anschluss. Imrédy decided to suppress the indigenous Nazi movement by adopting a pro-German orientation in foreign policy and to copy the Nazis in certain phases of domestic policy. In other words, he attempted to check the first effect of Nazi influence by promoting the second and third effects. Nazi propaganda for the overthrow of the Government was stopped and domestic order was maintained. But friends of Germany and advocates of the mythology of race were admitted to the Government. Darányi became President of the Chamber Kánya, whose policy had included an effort to reach understandings with the Little Entente countries, retired as Foreign Minister. His successor, Count Csáky, a man of Italian leanings, visited Germany shortly after his appointment. He decided to adhere to the Rome-Berlin Axis and the anti-Comintern pact.

In the domestic field, the enhanced influence of Germany was first of all seen in the treatment of the Jews. Within six months after Darányi's assertion that the law which had just been passed had solved the Jewish question in Hungary, a new bill was submitted to Parliament adopting the German (and more recently Italian) principle that the Jews are of an alien race and must be eliminated alike from public and from business life. The official explanation of the bill stated frankly that since the enactment of the previous law the position of Jewry in Europe had altered in a way that must influence Hungarian policy. In other words, Italy's adoption of racism and the November pogrom in Germany were being taken into account. As a result, it was proposed that within four years the number of Jewish office workers should be reduced to a maximum of 12 percent in every private business, whether owned by Magyars or Jews.[vi] Jewish physicians, lawyers, engineers, etc., already established in practice were not to be affected, but all professions were to be closed to new Jewish entrance. In line with the German and Italian formulæ, a "Jew" was defined by his Jewish blood, whereas the previous law exempted most baptized Jews. The bill, if enacted in unchanged form, would in the course of the next four years deprive about one-third of the more than 600,000 Jews in Hungary of their livelihood.

Humane considerations aside, there is doubt whether the Hungarian economy can afford the disruptions of anti-Semitism. Business life in Hungary has suffered severely in the last few months, and the average of securities on the Budapest Stock Exchange at the time these lines are written is 60 percent below the high of the previous cycle. The actual shrinkage in values is even greater than this would indicate, for concurrently with the decline of these values the pengo has also depreciated.[vii]

But even after Munich the traditional Hungarian political forces were still powerful. Along with increased Nazi activities in Hungary and pro-German governmental measures, a reaction against German penetration was also discernible. The first conspicuous demonstration of the power of the old political forces occurred at the end of November when the Chamber by a majority of 19 voted against Imrédy and forced him to resign. Many reasons were reported for the rift between the Prime Minister and a large group of his followers, among them his failure in Ruthenia and the opposition of certain great landowners to land reform. More potent was the old parliamentary tradition of the country. Public opinion had been especially aroused when the rumor spread that Imrédy meant to introduce a one-party system and govern without Parliament. The revolt against this was labelled as being anti-Imrédy rather than as anti-German, and it succeeded. After protracted negotiations Imrédy declared that he would not attempt to amend the rules of parliamentary procedure and would not reduce the rights of the Chamber. He withdrew his resignation and with the support of a new but smaller majority continued in office.

In February 1939, however, Imrédy retired from public life. The Nazis found out (what he himself seems never to have known) that he had Jewish blood. This placed the whole racial notion in a rather ridiculous light. Apart from that, Imrédy's replacement by a former member of his Government, Count Teleki, did not indicate a modification in basic political conditions. The policy of the Government remained unchanged. Teleki took fresh measures to suppress domestic Nazi agitation, but like his predecessor he declared himself in favor of the anti-Semitic law. His policy is under attack both by conservatives and liberals; but these are hampered by the fact that they cannot attack the basic reason why that policy is what it is; namely, Hungary's dependence on Germany.

A passing visitor to Hungary today may get the impression that Government, Parliament and public opinion are all delighted at being a "friend of the great German nation." The fact is merely, of course, that Germany's help is badly needed. It is needed for economic reasons; without it Hungary cannot sell her wheat surplus at prices guaranteeing a decent standard of living to the Hungarian farmer. It is needed for political reasons; without it Hungary can never recover the former Hungarian territories in western Rumania and northern Jugoslavia when, as is expected, Central Europe is reorganized under German auspices. Italy by herself is looked on as too weak an aid, and the Western Powers are considered wholly disinterested. But privately almost everybody regrets that there is no alternative to German "friendship." Germany does not give anything for nothing. The easiest price to pay to Germany is anti-Jewish legislation. But even this may prove an excessive price since it causes Hungary to lose the esteem of many influential Western friends, and produces economic troubles. When it comes to make payment also by abandoning parliamentary traditions, by granting further privileges to the German minority in Hungary, and by accepting German dictation in foreign politics -- then the latent Hungarian opposition is stirred to much greater depths. Whether Hungary's actions are ultimately to reflect these repressed but dynamic forces will depend on the degree of aggressiveness shown by Germany, and that will depend in turn on the policies of other Great Powers and on the development of world politics.

[i] Germany paid as much as 60 percent above world prices in the case of her recent purchases of wheat.

[ii] Burgenland is a small strip of land along the western border of Hungary, inhabited largely by Germans, severed from Hungary and given to Austria in 1919 by the Paris Peace Conference. On Liberty Square in Budapest there stands a monument depicting the lost Burgenland longing to return to Hungary.

[iii] The close connection between Darányi and the Nazis was demonstrated a few months later when he was found to be one of the few Hungarians who had received and accepted an invitation to the Nazi Congress in Nuremberg.

[iv] In September, after Chamberlain's visit to Berchtesgaden, they picked up again.

[v] The index of industrial production, taking that for 1927 as 100, was 142 in 1937.

[vi] In a few exceptional cases the limit was set at 15 percent.

[vii] In Switzerland, the only free market, 100 pengoes with an official value of $20 declined from $16 in the summer of 1938 to $9 in February 1939.

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