During the Belle Epoque, Europe sat on a powder keg of frustrated socialist platforms, national alliances, and conflicting colonial ambitions. The Austro-Hungarian Empire was linked by the Triple Alliance to both Germany and Italy. Europe leapt headfirst into armed conflict when Franz Joseph's nephew and designated heir, the Archduke Ferdinand, was shot to death by a Serbian terrorist as he and his wife, Sophie, rode through Sarajevo on June 28, 1914. Within 30 days, the Austro-Hungarian Empire declared war on Serbia, signaling the outbreak of World War I. An embittered Franz Joseph died in 1916, midway through the conflict. His successor, Charles I, the last of the Habsburg monarchs, was forced to abdicate in 1918 as part of the peace treaty.
The punitive peace treaty concluded at Versailles broke up the vast Austro-Hungarian territories into the nations of Hungary, Poland, Yugoslavia, and Czechoslovakia. The new Austria would adhere to the boundaries of Charlemagne's Ostmark. This overnight collapse of the empire caused profound dislocations of populations and trade patterns. Some of the new nations refused to deliver raw materials to Vienna's factories or, in some cases, food to Vienna's markets. Coupled with the effects of the Versailles treaty and the massive loss of manpower and resources during the war, Vienna soon found itself on the brink of starvation. Despite staggering odds, the new government -- assisted by a massive loan in 1922 from the League of Nations -- managed to stabilize the currency while Austrian industrialists hammered out new sources of raw materials.
