Claim: Austria was defeated by Prussia.

Austria -LRB- listen -RRB- , is a federal republic and a landlocked country of over 8.7 million people in Central Europe . It is bordered by the Czech Republic and Germany to the north , Hungary and Slovakia to the east , Slovenia and Italy to the south , and Switzerland and Liechtenstein to the west . The territory of Austria covers 83879 km2 . The terrain is highly mountainous , lying within the Alps ; only 32 % of the country is below 500 m , and its highest point is 3798 m . The majority of the population speaks local Bavarian dialects of German as their native language , and Austrian German in its standard form is the country 's official language . Other local official languages are Hungarian , Burgenland Croatian , and Slovene .   The origins of modern-day Austria date back to the time of the Habsburg dynasty , when the vast majority of the country was a part of the Holy Roman Empire . From the time of the Reformation , many northern German princes , resenting the authority of the Emperor , used Protestantism as a flag of rebellion . The Thirty Years War , the influence of the Kingdom of Sweden and Kingdom of France , the rise of the Kingdom of Prussia , and the Napoleonic invasions all weakened the power of the Emperor in the north of Germany , but in the south , and in non-German areas of the Empire , the Emperor and Catholicism maintained control . During the 17th and 18th centuries , Austria retained its position as one of the great powers of Europe and , in response to the coronation of Napoleon as the Emperor of the French , the Austrian Empire was officially proclaimed in 1804 . Following Napoleon 's defeat , Prussia emerged as Austria 's chief competitor for rule of a greater Germany . Austria 's defeat by Prussia at the Battle of Königgrätz , during the Austro-Prussian War of 1866 , cleared the way for Prussia to assert control over the rest of Germany . In 1867 , the empire was reformed into Austria-Hungary . After the defeat of France in the 1870-1 Franco-Prussian War , Austria was excluded from the new German Empire , although in the following decades , its politics , and its foreign policy , increasingly converged with those of the Prussian-led Empire . During the 1914 July Crisis that followed the assassination of Archduke Franz Ferdinand of Austria on June 28 , Austria-Hungary , emboldened by a pledge of German support , on July 28 declared war on Serbia because that country had not fully complied with an Austrian ultimatum . Austria was thus the first to go to war in the July Crisis , which would ultimately escalate into World War I.   After the collapse of the Habsburg -LRB- Austro-Hungarian -RRB- Empire in 1918 at the end of World War I , Austria adopted and used the name the Republic of German-Austria -LRB- Deutschösterreich -RRB- , later changed to Österreich , in an attempt at union with Germany , but this was forbidden under the Treaty of Saint-Germain-en-Laye -LRB- 1919 -RRB- . The First Austrian Republic was established in 1919 . In 1938 Nazi Germany annexed Austria in the Anschluss . This lasted until the end of World War II in 1945 , after which Germany was occupied by the Allies and Austria 's former democratic constitution was restored . In 1955 , the Austrian State Treaty re-established Austria as a sovereign state , ending the occupation . In the same year , the Austrian Parliament created the Declaration of Neutrality which declared that the Second Austrian Republic would become permanently neutral .   Today , Austria is a parliamentary representative democracy comprising nine federal states . The capital and largest city , with a population exceeding 1.7 million , is Vienna . Other major urban areas of Austria include Graz , Linz , Salzburg and Innsbruck . Austria is one of the richest countries in the world , with a nominal per capita GDP of $ 43,724 . The country has developed a high standard of living and in 2014 was ranked 21st in the world for its Human Development Index . Austria has been a member of the United Nations since 1955 , joined the European Union in 1995 , and is a founder of the OECD . Austria also signed the Schengen Agreement in 1995 , and adopted the euro currency in 1999 .