In early history the Baiuvarii established the Duchy of Bavaria ruled by Francia of West Germanic Franks from 555 to 843 and including the March of Pannonia that would become Austria in c. 970.

At various times, throughout the Middle and Early-modern Ages, the Holy Roman Empire (HRE) encompassed the bulk of present territories of Germany, Austria, Bohemia (Czech Republic), Slovenia, northern Italy and western Poland.

Austria and Prussia co-operated in the Partitions of Poland and the Second Schleswig War, which resulted in annexations of Polish and Danish territory.

As a result, dualism within the German Confederation laid foundation to the diplomatic tension between Prussia and Austria, who had ambitions to create a unified Germany under their different proposals.

The Austrian Empire was dissolved into the Dual Monarchy of Austria-Hungary, with the loss of their influence over southern German states (Baden-Württemberg and Bavaria).

After Prussia's victory in the Franco-Prussian War in 1870, in which Prussian army entered and marched over Paris, Bismarck announced the creation of the German Empire and excluded Austria-Hungary solely in this unified Germany.

Austria-Hungary then turned its imperial ambitions to the Balkan Peninsula; whereas the German Empire focused on building armaments in a race against the United Kingdom (Britain and Ireland).

The 1914 Septemberprogramm authorized by German Chancellor Theobald von Bethmann Hollweg proposed the creation of a Central European Economic Union, comprising a number of European countries, including Germany and Austria-Hungary, in which, as the Chancellor secretly stressed, there was to be a semblance of equality among the member states, but in fact it was to be under German leadership to stabilize Germany's economic predominance in Central Europe, with co-author Kurt Riezler admitting that the union would be a veiled form of German domination in Europe (see also: Mitteleuropa).

Austria lost over 60% of its pre-war territory (mostly settled by non-Austrians) and was hugely reduced to a rump state, The Republic of German-Austria.

[4] Both countries, however, faced severe economic hardships, hyperinflation, mass unemployment and constant riots after the war.

This was initially blocked by the Italian Fascist government under Benito Mussolini, who cooperated with his Austrian counterparts Engelbert Dollfuss and Kurt Schuschnigg, fearing retrospective territorial demands from Hitler on Südtirol (South Tyrol) (lost to Italy in 1919).

Hitler used the Nazi Party of Austria to influence public opinions and staged a coup against the Austrian Fascist government in 1938.

When Hitler decided to refrain from reclaiming South Tyrol, Mussolini abandoned his pledge to protect Austria's independence.

However, the coup failed: it was foiled by loyal police and army units, as well as Italian support for Austrian independence.

A provisional Austrian government, led by Karl Renner, declared the country's regained independence in the context of after the fall of Third Reich.

Germany, however, was occupied by the Allied Powers and divided into four governing zones: British, French, American and the Soviet.

Austria began to develop a separate national identity from Germany, although both countries continued to co-operate closely in economic and cultural fields during the Cold War.

This effectively removed the physical land-border between Germany and Austria and allowed both countries to further consolidate their already strong links.

According to reporting in Der Standard and profil, the Bundesnachrichtendienst engaged in espionage in Austria between 1999 and 2006, spying on targets including the International Atomic Energy Agency, the Organization of the Petroleum Exporting Countries, the Austria Press Agency, embassies, and Austrian banks and government ministries.