Otto was made king of Hungary by a referendum, though one with the British and Italians putting a finger on the scales. Otto and the new Hungarian government seem to be using neutrality as insulation to drive for a western style democracy, like the post Authoritarian government in Romania.
Austria is a Fascist state, the former Austrian Dictator has been recovered from Nazi custody and it back in power. it seems to be setting up like the Warsaw Pact states of OTL. The Austrian Fascists will run the local affairs de facto, and de jure the foreign policy; but Italy is the senior partner and reserves a right to meddle if Austria seems to be leaving the Fascist line. Italy wants Austria string though as both a market for them, and to add a credible military to its assets for the expected next round with the Soviets.
I could see some resurgent Habsburg support in Austria here. Namely that if the Hungarian experiment succeeds certain antiFascists could see the dynasty as Antifascist, allies of democracy, and absence of excessive foreign influence. Had to say how the Hungarians will feel; by the time the Cold War ends. Though there will be no reborn AH i am intrigued at the concept of some kind of Danubian confederation between some of the former Habsburg possessions.
