With traditional sources of food and coal located across new national borders, Austria suffered extreme economic dislocation, and the country's economic viability was in doubt. Moreover, having settled the immediate questions of the peace treaty and constitution, the SDAP and CSP found it increasingly difficult to cooperate. Unfortunately, the October 1920 parliamentary elections did not provide the basis for a stable government. The CSP increased its share of the vote to 41.8 percent, while the SDAP declined to 36.0 percent and the Nationals to 17.2 percent. Seipel tried to form an antisocialist coalition with the Nationals, but that party was not yet prepared to set aside its own ideological differences with the CSP. Weak, neutral governments guided the country for the next two years.

In 1922 Seipel assumed the office of chancellor (prime minister). By adroitly manipulating the European political situation and accepting renewed prohibitions on union with Germany, he managed to obtain foreign loans to launch an economic stabilization plan. Although the plan stabilized the currency and set state finances on a sound course, it provided no solution to the underlying economic problems and dislocation, and it extracted a high social cost by cutting government social programs and raising taxes.

Otto Bauer, leader of the SDAP, kept the party in self-imposed isolation after the collapse of the initial SDAP-CSP coalition in the belief that the natural role for a socialist party in a bourgeois democracy was opposition. Thus, Seipel remained the key public figure in Austrian national politics throughout the 1920s, even though he did not continuously serve as chancellor. Nevertheless, the CSP was not able to win an outright majority in the Nationalrat, and the SDAP registered steady gains among voters, polling 41 percent of the vote in 1927 against 55 percent of the CSP-National coalition. Vienna, which was given the status of a province under the 1920 constitution, was the SDAP stronghold. Vienna's city government of Social Democrats purposely sought to make health and housing programs and socialist-inspired "workers' culture" of "Red Vienna" a model for the rest of Austria.

Although the CSP had secured the suppression of the SDAPcontrolled Volkswehr in 1922 when a more traditional army was established, the SDAP responded by forming the Republikanischer Schutzbund (Republican Defense League). Well armed and well trained, it numbered some 80,000 members by the early 1930s. Of even greater political significance, however, were the provincial-based homeland militias, variously called the Heimwehr (Home Guard) and the Heimatschutz (Homeland Defense). Independently organized, these militias initially lacked any overarching political ideology except anti-Marxism. Until 1927 they were not an effective political force and were viewed by many, including Seipel, as a military reserve supplementing inadequate military and police forces. In the late 1920s, however, the Heimwehr gained greater ideological coherence from contact with Italian fascism. But with the exception of the Styrian branch, the Heimwehr was unable to bridge differences with Austrian Nazis. For this reason, the Heimwehr leader, Prince Ernst Rüdiger von Starhemberg, founded a Heimwehr political wing, the Heimatbloc (Homeland Bloc), in 1930.

In the parliamentary election of 1930, the CSP experienced a severe setback, winning only sixty-six seats to the SDAP's seventy-two. The Heimatbloc picked up the seven seats lost by the CSP. Although the CSP-National coalition had broken down in the late 1920s, a new government was formed that combined the CSP with the Nationals and the peasant-based Landbund. Eager for a political success to bolster its popular support, the government began negotiations with Germany for a customs union in March 1931. When France learned of the negotiations, however, it immediately denounced the proposal as a violation of the international ban on Austrian-German unification. Under severe diplomatic pressure, Austria and Germany were forced to drop their plans, but not before France's economic retaliation had led to the collapse of Austria's largest bank, the Creditanstalt, in June 1931.

In the wake of this foreign policy and economic disaster, Seipel sought a new coalition between the CSP and the SDAP but was rebuffed. With no other alternative, Seipel resurrected the CSP-National coalition. The growing political strength of the Nazis in Germany and the worsening economic conditions marked by the rise in unemployment from about 280,000 in 1929 to nearly 600,000 in 1933, however, were effecting a political realignment in Austria. In the spring of 1932, the Austrian branch of the Nazi Party registered important gains in local elections. Although the CSP lost important segments of its constituency to the Nazis, the parties in the nationalist camp suffered greater defections, especially after Nazi triumphs in Germany in early 1933. Austrian elections were increasingly three-way contests among the CSP, the SDAP, and the Nazi Party.

Data as of December 1993