Austro-Hungarian economic relations go back many centuries. Geographical proximity, long historical coexistence and differences in natural resources could account for close economic ties. Austria had been the most important partner in Hungarian foreign trade at least from the nineteen century until the 1930s. About 75 per cent of Hungarian trade was conducted with the western part of the Austro-Hungarian Monarchy before 1918. Even in the inter-war years Austria absorbed a significant portion of Hungarian exports. Only the expansion of Nazi Germany pushed Austria back to second place in Hungarian foreign trade from 1934 on. Economic ties, however, become insignificant in the years following the Second World War. Centuries-old relations were reduced to a minimal level, to simple barter. From the 1950s to the 1980s Austria's share in Hungarian foreign trade hardly exceeded 3–5 per cent, while Hungary's share in Austrian commerce was even smaller: it stagnated around 1.2–1.5 per cent (see table 9.1).

This chapter describes the most important stages of improving political, commercial and financial relations after 1945. In the 1950s and 1960s foreign trade became subordinated to the needs of forced industrialization of the planned economy. Imports from the capitalist countries had to supply the missing resources, advanced technology and investment goods that were not to be obtained trough CMEA co-operation. From the 1970s increasing liquidity problems made Hungary more dependent on Austria as a credit and investment source.

The reconstruction of bilateral relations, 1945–64

The scope of action in Hungarian foreign policy was broadened only very slowly in the first years after the Second World War, with the country having diplomatic relations only with thirty-two states even in 1954.