In March 1944, Hungary was occupied by the Wehrmacht. This invasion was formally known as Operation Margarethe (Unternehmen Margarethe).Andreas Hillgruber, Helmuth Greinert, Percy Ernst Schramm, Kriegstagebuch des Oberkommandos der Wehrmacht (Wehrmachtführungsstab) 1940-1945, Band IV: 1. Januar 1944 – 22. Mai 1945 (Bernard & Graefe, 1961)Carlile Aylmer Macartney, October Fifteenth: A History of Modern Hungary, 1929–1945, 2 vols. (Edinburgh University Press, 1956–57), II, 226.
Course of events
Hungarian Prime Minister Miklós Kállay, who had been in office from 1942, had the knowledge and the approval of Hungarian Regent Miklós Horthy to secretly seek negotiations for a separate peace with the Allies in 1943. Kállay's Finance Minister, Lajos Reményi-Schneller, worked as a spy for Germany, going to the German Legation after every cabinet meeting to sell the minutes of the meeting. As a result, the German minister-plenipotentiary Dietrich von Jagow was always well informed of the decision-making in the Kállay government, and Jagow knew very well that Kállay was seeking to sign an armistice with the Allies. Moreover, Hungarian officials proved themselves to be far too gossipy and it was quite impossible to keep state secrets in Budapest. In February 1943, Kállay contacted the diplomat György Barcza to go on a peace mission to the Holy See in Rome with the aim of having Pope Pius XII serve as an intermediary for contacting the Allies about signing an armistice. Barcza complained that despite being a supposed secret that everyone in Budapest seemed to know about his peace mission, including his own barber whom casually asked him if he thought his mission in Rome would be a success. At the first conference at the Schloss Klessheim palace held between 17-18 April 1943, Adolf Hitler told Horthy and Kállay that he knew all about Barcza's peace mission in Rome and warned them that he would not tolerate such "treason" again in the future.
On 3 September 1943, Italy signed the Armistice of Cassibile with the Allies, which led Adolf Hitler to order the occupation of Italy along with the Italian occupation zones in the Balkans and France. On 9 September 1943, on abroad a yacht in the Sea of Marmara, just outside of Istanbul, the British ambassador to Turkey, Sir Hughe Knatchbull-Hugessen secretly signed an armistice with the Hungarian diplomat László Veress under which Hungarian forces would surrender to British, American and Polish forces the moment they arrived in Hungary. After the Italian armistice, Hitler ordered the Oberkommando der Wehrmacht (OKW) to begin planning for Operation Margarethe I for the occupation of Hungary and Operation Margarethe II for the occupation of Romania. On 30 September 30, 1943, Field Marshal Wilhelm Keitel of the OKW reported to Hitler that both plans were complete and the Reich was ready if either Hungary and/or Romania signed an armistice as the Italy had just done.
Beginning in November 1943, Elyesa Bazna, the Albanian valet to Knatchbull-Hugessen, obtained access to his ambassador's safe, photographed secret British diplomatic documents within, and sold them to the Germans. The Germans paid Bazna with counterfeit British pounds, which thereby ruined his dreams of getting rich from his treachery. One of the documents Bazna sold to the Germans was the secret armistice Knatchbull-Hugessen had signed with Veress, which was received with much interest in Berlin. Under the terms of the secret armistice, the Hungarians were to destroy their transport infrastructure and cut the Reich off from its oil supplies in Romania in the event of a German invasion of Hungary. On 14 December 1943, the officers responsible for the Újvidék massacre during the "Cold Days" of January 1942 went on trial in Budapest for war crimes. As most of the people killed during the "Cold Days" massacre were "undesirables" such as Jews and Serbs, the decision to try the officers responsible "enraged the Germans" and became a major sore point in German-Hungarian relations. On 17 January 1944, General Ferenc Feketehalmy-Czeydner, Colonel László Deák and Major General József Grassy of the Honvéd along with Captain Márton Zöldy of the Royal Hungarian Gendarmerie were convicted of their roles in the Újvidék massacre and fled to Germany on 18 January 1944 to avoid their sentences.
By early 1944, the Red Army had advanced into the Ukraine and almost reached the foothills of the Carpathians. As Germany obtained most of its oil from Romania, Hitler was determined to defend his principal source of oil, which in turn made Hungary crucial to the German war effort as the Romanian oil had to cross Hungary to reach Germany. Owing to his concerns about maintaining access to oil, Hitler believed that Hungary would bolt from the Axis the moment the Red Army reached the Carpathians. Hitler wanted to prevent the Hungarians from deserting Germany. On 4 March 1944, the German Propaganda Minister, Dr. Josef Goebbels wrote in his diary: "Treason had to be punished, the Führer will invade the Kingdom of Hungary". Goebebels went to quote Hitler as saying to him: "There are 700 thousand Jews in Hungary, we will not let them slip through our fingers." On 7 March 1944, Hitler decided to activate Operation Margarthe I. As Romania under Marshal Ion Antonescu, Croatia under Ante Pavelić and Slovakia under Father Jozef Tiso all had territorial claims against Hungary, Hitler's first plan was to erase Hungary from the map by partitioning Hungary between Romania, Croatia and Slovakia. Wilhelm Höttl, a SS officer was opposed to the partition plan, believing that the Hungarians would fight to the death if faced with such a threat. As crossing Hungary was the fastest and easiest route for Romanian oil to reach the Reich, it was likely that the Hungarians would destroy their transport infrastructure such as railroads and bridges under the terms of the secret armistice, which would temporarily cut Germany off from the Romanian oil at a time when the Wehrmacht was being badly pressed by the Red Army on the Eastern Front. Höttl wrote up a memo calling for a political solution under which Germany would occupy Hungary, but keep Horthy as regent in order to prevent any sabotage of the Hungarian transport infrastructure and ensure the co-operation of Hungarian officials. Horthy was the subject of an immense personality cult from 1919 onwards with the entire apparatus of the Hungarian state seeking to glorify him. Horthy's personality cult portrayed him as a God-like figure on a mission to undo the Treaty of Trianon and restore all of the Lands of the Crown of St. Istvan. Most Hungarians accepted Horthy's self-image at face value and as such any government in Budapest appointed by Horthy would be accepted by both Hungarian civil servants and the Hungarian people as legitimate. Given the power of the Horthy personality cult, Höttl tactfully argued that his political solution was the best solution to Hungarian attempts to leave the war as he sought to persuade Hitler away from his preferred military solution. Höttl had to struggle to get the memo placed on Hitler's desk in the Reich Chancellery, forcing him to bribe an aide-de-camp to leave the memo on Hitler's desk. After reading Höttl's memo, Hitler decided to try the political solution first and if Horthy refused to co-operate, would opt for his initial military solution. Hitler had decided to co-opt the Horthy personality cult to his own ends as he believed that if Horthy could persuaded to accept the occupation of his kingdom, there would be no resistance and he would have the full co-operation of the Hungarian state. On 12 March 1944, German troops received orders by Hitler to capture critical Hungarian facilities. As part of the preparations for Margarethe I, the Reichsführer-SS Heinrich Himmler gave orders to SS-Obersturmbannführer Adolf Eichmann to go to Hungary to "sweep out the Jews from the country in the direction from east to west, and deport every Jew to Auschwitz as quickly as possible. To start in the eastern counties which the Russians are approaching and to take care that no event similar to the Warsaw Ghetto uprising takes place".
The American historian Deboarh Cornelius wrote that in March 1944 was "the carnival season. Life in Hungary went on as if there was no cloud in the sky". György Barcza, the former Hungarian minister-plenipotentiary to Great Britain recalled in his memoirs that March 1944 that "never was the season so filled withi dinners, déjeuners, teas and cocktail parties...Jews occupied the best tables in the restaurants and the best seats in the theaters". Rafi Benshalom, a Slovak Jewish leader who fled to Hungary in January 1944 stated that compared to Slovakia Hungary was a far more friendly place for a Jew to be in: "For me, in Europe of 1944, this seemed like a fantasy...Jews seeking entertainment could still visit coffee houses, cinemas and theaters while the whole world lived in fear." The Hungarian historian Laszlo Borhi noted that the three Jewish laws passed between 1938-1941 had caused serious economic hardship for Hungarian Jews while the third anti-Jewish law of 1941 had banned marriage and sex between Hungarian Gentiles and Jews, but that compared to other places in Axis Europe, Hungary under the Kállay government was a relatively benign place. Most notably, under Kállay, Hungarian Jews did not have to wear armbands with the yellow star of David, which was mandatory in Nazi Germany and in all of the nations occupied by Germany such as Poland and France. To escape genocide, Polish, Slovak and Croat Jews often fled to Hungary. The armband with the yellow star of David was considered by most Jews to be a humiliating symbol that marked them out as a people apart, and those Jews who fled into Hungary were often amazed that the requirement to wear the armband did not exist in Hungary. Most Hungarians believed that the Allied armies advancing slowly up Italy would reach Hungary before the Red Army did and that the war would soon be over. Kállay had relaxed the level of police repression, and the opposition parties, namely the Social Democrats on the left and the Smallholders on the right, held large rallies, promising universal suffrage and land reform after the war. Kállay was supposed to give a speech on 20 March 1944 to mark the 50th anniversary of the death of Lajos Kossuth in 1894 and popular rumor had it he would be announcing an armistice along with the arrival of Anglo-American airborne divisions.
Hitler invited Horthy to the Palace of Klessheim, near Salzburg. On the evening of 15 March 1944, when Admiral Horthy was watching a performance of the opera Petofi, he received an urgent message from the German minister-plenipotentiary (ambassador) Dietrich von Jagow, which stated that he had to see Horthy immediately at the German Legation.Cornelius, Deborah S Hungary in World War II: Caught in the Cauldron. New York: Fordham University Press, 2011 p. 273 When Horthy arrived, von Jagow gave him a letter from Hitler inviting him to a face-to-face meeting at Schloss Klessheim in Austria on 18 March. On 16 March 1944, Horthy met with Kállay who advised him not to go to Schloss Klessheim, saying that as "Supreme Warlord" the Honved (Royal Hungarian Army) would be leaderless in his absence and he suspected a trap. Kállay told Horthy he should send the chief of the general staff, General Ferenc Szombathelyi instead. Szombathelyi agreed to go, but insisted that Horthy come along as well as he felt it would be "madness" for Hitler to spring a trap. On 17 March 1944, Horthy along with Szombathelyi, the Defense Minister Lajos Csatay and the Foreign Minister Jenő Ghyczy left for Schloss Klessheim via train and arrived early on the morning of 18 March.