Although Maniu's government instituted a series of reforms intended to improve general economic and social conditions, its efforts were largely offset by the adverse effects of the worldwide depression of the early 1930s. Also, early dissatisfaction with the regency resulted in the return of Carol II from exile and his assumption of the crown in late 1930. His agreement to sever relations with Magda Lupescu was not kept, however, and in protest Maniu resigned the premiership. In the unstable conditions that followed, King Carol II emerged as the chief political figure in the country, and his rule evolved into a royal dictatorship.

King Carol's assumption of power was aided initially by the rise of a fanatical fascist and anti-Semitic group known as the Iron Guard. This group was strongly pro-German and employed tactics similar to those of the Nazi party, which was then emerging as the dominant political force in Germany. The fascist movement, with financial and indirect support from Germany, increased the influence of the Iron Guard, which was reflected in the 1937 elections. The coalition government that resulted supported King Carol but was later overthrown, bringing to power a new coalition of right-wing extremists.

In order to halt the increasing threat to his power, Carol proclaimed a personal dictatorship in 1938 and promulgated a new constitution that abolished all political parties and instituted censorship and other control measures. This action was followed by the suppression of the Iron Guard, whose leader, Corneliu Codreanu, was shot. Absolute authority was maintained by the king, who was supported by the army and by the National Renaissance Front, a monopoly party that he founded later in the same year.

Internal instability and uncertainty were aggravated by rapidly developing international events that threatened the security of the state. The swift rise of Germany under Adolf Hitler resulted in the annexation of Austria in 1938 and the subsequent dismemberment and absorption of Czechoslovakia. These actions, unopposed by the Western powers, were early warnings of weakness in the Western-oriented collective security system on which Romania had depended since World War I. The lessening of confidence in the West led Romania in 1939 to conclude a treaty of economic collaboration with Germany. This agreement greatly increased German influence in the country and placed the extensive Romanian oil and other resources at Germany's disposal for later wartime use.

Although Romania's territorial integrity had been guaranteed by both Great Britain and France after the fall of Czechoslovakia, these assurances were nullified by the early German military successes achieved following the outbreak of World War II. After the conclusion of a nonaggression pact with the Soviet Union in August 1939, Germany invaded and occupied Poland and, by mid-1940, had defeated France and forced the evacuation of the European mainland by British forces. Faced with the loss of its two strongest partners in the alliance system and with the aggressive ambitions of the two strongest totalitarian powers on the European continent—Germany and the Soviet Union—Romania had little chance of continued independent survival.

WORLD WAR II

The first claims against Romania were made by the Soviet Union, which in June 1940 demanded the immediate cession of Bessarabia and northern Bukovina. Under German pressure Romania acceded to these demands, as well as to the later loss of northern Transylvania, which Germany and Italy transferred to Hungary at a joint conference held in Vienna on August 30, 1940. A third loss of territory, also under German pressure, followed one week later with the return of southern Dobruja to Bulgaria, which had already entered the war on the side of Germany.

The crisis caused by these territorial losses had a serious impact within the country. King Carol was forced to appoint a pro-German cabinet, and the government was heavily infiltrated with members of the Iron Guard, most of whom were released from custody under German pressure. A national protest against the king in early September culminated in his abdication in favor of his son, Michael. A new government under General Ion Antonescu was formed, composed almost entirely of members of the Iron Guard, whose leader was made vice premier. German troops entered the country under the pretext of protecting the oilfields, and on November 23, 1940, Romania joined Germany, Italy, and Japan in the Anti-Comintern Pact.

In January 1941 members of the Iron Guard, attempting to seize full control of the government, initiated a terroristic campaign that was suppressed with much bloodshed by the Romanian army, which had remained loyal to the government. With the continued support of the Germans, Antonescu dissolved the Iron Guard and formed an almost exclusively military dictatorship. After stabilization of the government, Romania entered the war against the Soviet Union and incurred heavy losses in the prolonged fighting on the eastern front.

After the defeat of the German and Romanian forces at Stalingrad in early 1943, the Soviets mounted a counteroffensive, which by mid-1944 had liberated the southwestern portions of the Soviet Union and had advanced deep into Romania and threatened Bucharest. On August 23, 1944, King Michael, with the support of the major political and military leaders, overthrew the regime of Antonescu, halted all fighting, and installed a new, moderate, coalition government. Under the terms of the armistice that followed, Romania reentered the war on the side of the Allies, agreed to reparation payments, and accepted the military occupation of the country until the conclusion of a final peace settlement.