The interwar Kingdom of Hungary, referred to retrospectively as the Regency and the Horthy era, existed as a country from 1920 to 1946 under the rule of Miklós Horthy, Regent of Hungary, who officially represented the Hungarian monarchy. In reality there was no king, and attempts by King Charles IV to return to the throne shortly before his death were prevented by Horthy.
Hungary under Horthy was characterized by its conservative, nationalist, and fiercely anti-communist character; some historians have described this system as para-fascist. The government was based on an unstable alliance of conservatives and right-wingers. Foreign policy was characterized by revisionism: the total or partial revision of the 1920 Treaty of Trianon, which resulted in the loss of 72% of Hungary's historical territory, 58% of its population, 32% of its ethnic Hungarian population, and much of its economic resources and industrial capacity. As a consequence, more than three million ethnic Hungarians found themselves outside the country's new borders, primarily in territories transferred to the Kingdom of Romania and the newly created states of Czechoslovakia and the Kingdom of Serbs, Croats and Slovenes (Yugoslavia). A significant Hungarian population also remained in Székely Land, within the greatly enlarged Romania. Republican Austria, the successor of the former other half of the dual monarchy also received some minor territory from Hungary. Thus the post-1918 kingdom can be described as a rump state. Hungary's interwar politics were dominated by a focus on the territorial losses suffered from this treaty, with the resentment continuing until the present.
Nazi Germany's influence in Hungary has led some historians to conclude that the country increasingly became a client state after 1938. The Kingdom of Hungary was an Axis power during World War II, intent on regaining Hungarian-majority territory that had been lost in the Treaty of Trianon, which it mostly did in early 1941 after the First and Second Vienna Awards and after joining the German invasion of Yugoslavia. By 1944, following heavy setbacks for the Axis, Horthy's government negotiated secretly with the Allies, and also considered leaving the war. Because of this Hungary was occupied by Germany and Horthy was deposed. The extremist Arrow Cross Party's leader Ferenc Szálasi established a new Nazi-backed government, effectively turning Hungary into a German-occupied puppet state. As the Soviet Union reached Hungary, its anti-fascist parties found it possible to create a counter-government which sided with the Soviet Union in the last months of the war and began progressive reforms and the transition towards a republic.
After World War II, the country fell within the Soviet Union's sphere of influence. It changed its name to the Hungarian State (Hungarian: Magyar Állam) and the Second Hungarian Republic was soon thereafter proclaimed in 1946, succeeded by the communist Hungarian People's Republic in 1949.
Upon the dissolution of Austria-Hungary after World War I, the Hungarian Democratic Republic and then the Hungarian Soviet Republic were briefly proclaimed in 1918 and 1919, respectively. The short-lived communist government of Béla Kun launched what was known as the "Red Terror", involving Hungary in an ill-fated war with Romania. In 1920, the country fell into a period of civil conflict, with Hungarian anti-communists and monarchists violently purging the communists, leftist intellectuals, and others whom they felt threatened by, especially Jews. This period was known as the "White Terror". In 1920, after the pullout of the last of the Romanian occupation forces, the Kingdom of Hungary was restored.
After the collapse of the short-lived Communist regime, according to historian István Deák:
Between 1919 and 1944 Hungary was a rightist country. Forged out of a counter-revolutionary heritage, its governments advocated a "nationalist Christian" policy; they extolled heroism, faith, and unity; they despised the French Revolution, and they spurned the liberal and socialist ideologies of the 19th century. The governments saw Hungary as a bulwark against Bolshevism and Bolshevism's alleged "instruments": Socialism, Cosmopolitanism, and Freemasonry. They perpetrated the rule of a small clique of aristocrats, civil servants, and army officers, and surrounded with adulation the head of the state, the counterrevolutionary Admiral Horthy.
On 29 February 1920, a coalition of right-wing political forces united and returned Hungary to being a constitutional monarchy. However, it was obvious that the Allies would not accept any return of the Habsburgs. Earlier, Archduke Joseph August had declared himself regent, but he stood down after two weeks when the Allies refused to recognize him.
It was thus decided to choose a regent to represent the monarchy until a settlement could be reached. Miklós Horthy, the last commanding admiral of the Austro-Hungarian Navy, was chosen for this position on 1 March. Sándor Simonyi-Semadam was the first prime minister of Horthy's regency.
In 1921 Charles returned in Hungary and tried to retake its throne, even trying to march on Budapest with some rebel troops in October 1921; however, his attempts failed as much of the Royal Hungarian Army remained loyal to Horthy and thus Charles was arrested and exiled to Madeira.
On 6 November 1921 the Diet of Hungary passed a law nullifying the Pragmatic Sanction of 1713, dethroning Charles IV and abolishing the House of Habsburg's rights to the throne of Hungary. Hungary was a kingdom without royalty. With civil unrest too great to select a new king, it was decided to confirm Horthy as Regent of Hungary. He remained in that powerful president-like status until he was overthrown in 1944.
Horthy's rule as Regent possessed characteristics such that it could be construed a dictatorship. As a counterpoint, his powers were a continuation of the constitutional powers of the King of Hungary, adopted earlier during the federation with the Austrian Empire.
As Regent, Horthy had the power to adjourn or dissolve the Hungarian Diet (parliament) at his own discretion; he appointed the Hungarian prime minister. Horthy’s powers were similar to those of an enlightened absolute monarch.
The succession after Horthy's death or resignation was never officially established; presumably the Hungarian Parliament would have selected a new regent, or possibly attempted to restore the Habsburgs under Crown Prince Otto. In January 1942, Parliament appointed Horthy's eldest son István as Deputy Regent and expected successor. Whether this represents an attempt to gradually re-establish monarchy in Hungary is unclear; at any rate, István was killed in an airplane crash in August that year, and a new Deputy Regent was not appointed.
During his first ten years, Horthy led increased repression of Hungarian minorities. In 1920, the numerus clausus law formally placed limits on the number of minority students at university, and legalized corporal punishment for adults in criminal cases. Although the law seemingly applied in equal measure to all minorities, the ethnicity quota system was never fully introduced and the law acted largely to conceal anti-Jewish action from foreign observers. Limitations were relaxed in 1928. Racial criteria in admitting new students were removed and replaced by social criteria. Five categories were set up: civil servants, war veterans and army officers, small landowners and artisans, industrialists, and the merchant classes. Under István Bethlen as prime minister the electoral system was changed to reintroduce an open vote system outside Budapest and its vicinity and cities with county municipal rights. Bethlen's political party, the Party of Unity, won repeated elections. Bethlen pushed for revision of the Treaty of Trianon. After the collapse of the Hungarian economy from 1929 to 1931, national turmoil pushed Bethlen to resign as prime minister. In 1938 the changes to the electoral system were reversed.