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Churchill's South German State

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This map - designed in the style of The Economist - elaborates on the idea that has been put forward by Winston Churchill as part of his plans to divide up Germany after WW2. Initially labelled as the 'South German State', Bavaria, Baden and Württemberg (as well as the statelet of Hohenzollern) were to be detached from the former German Reich and to be united with Austria and Hungary. The remaining territories were to form two other states, the Rhineland and the North German State, which are only shown on this map as neighbouring countries.
Churchill believed in the necessity of a balancing power between Germany and and the Soviet Union in Central Europe and thus supported the plan of resurrecting the Austrian monarchy. The South German State, officially called the Danubian Federation, is considered to be the successor of the defunct Austro-Hungarian Monarchy. Otto von Habsburg-Lothringen, the son of the last Emperor of Austria-Hungary was invited to assume the merely ceremonial role of Head of State as emperor-king of the Confederation. The former royal and princely families of Bavaria, Wuerttemberg and Baden were also secured a ceremonial role as heads of their member states. 

Following the war, the confederation, established by the Allies, was under the military occupation of the UK, the US, France and the Soviet Union. The occupation ended with the signing of the Vienna State Treaty in 1955, in which the DC pledged 'eternal political and military neutrality' and thus escaped inclusion into the Warsaw Pact. 

Since its establishment, the DC is a federal constitutional parliamentary monarchy consisting of 5 member states, four of German, one of Hungarian majority. The federal capital, Vienna is home to the two federal chambers of the federation, as well as to the federal ministries.

In accordance with the Vienna State Treaty, there are plebiscites to be conducted in 5 areas with large German and/or Hungarian-speaking minorities about the inclusion of these areas into the DC: in Southern Tyrol (Italy), Southern Slovakia (Czechoslovakia), the Carpathian Rus (Soviet Union), Northern Transylvania and the Saxon Lands (both in Rumania).     
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The Palatinate region that was part of Bavaria up until 1946 that is now part of the German federal state Rhineland-Palatinate should be part of the Danubian Confederation in my opinion as well as the Italian Autonomous Province of Trentino because of historical reasons. I can easily see Southern Tyrol becoming part of the Confederation easily. Everything else...probably not if the Soviet Union has anything to say about it. I'm surprised that Northern Vojvodina, which is predominantly Hungarian, wasn't part of the plebiscites about joining the DC.

Here's what I think would probably happen after the plebiscites: Southern Tyrol votes in favor of joining the DC while everything else doesn't because of Joseph Stalin rigging the results. After the referendums, the USSR deports all ethnic Germans and Hungarians living in Czechoslovakia, Romania, the USSR, and Yugoslavia to the DC, with some Germans going to the Prussian Democratic Republic (I'm assuming that's what the North German State is called) along with those deported from the former East Prussia.

So what about Croatia and Slovenia after the collapse of Yugoslavia? I personally like the idea of the two former Yugoslav republics becoming part of the DC not too long afterwards. If Croatia and Slovenia did join the DC, does this result in the reestablishment of the Kingdom of Croatia-Slavonia and the Duchy of Carniola or are the two former Yugoslav republics being combined into the Kingdom of Illyria? Would it/they be in personal union with the Empire of Austria and the Kingdom of Hungary or would they have their own royal family?

In regard to the Kingdom of Hungary, I personally think it should be under the Hungarian branch of the House of Habsburg-Lorraine so that Hungary would still be a constitutional monarchy even in the event of independence from the confederation.