In 1938, after five years of relative calm (see this speech), Adolf Hitler's Germany suddenly ran amok. The Anschluss and, more importantly, the question of Sudetes, had led to a situation were war seemed unavoidable.

And yet European democracies wanted to avoid war. They wanted to avoid war at any price. The memories of WWI (and of its horrors) were still painfully acute. Thus, in September 1938, a summit between France, Britain, Germany and Italy was held in a castle near Munich.

The result was an outright capitulation of old democracies : Basically, Hitler obtained everything he wanted. The western parts of Czechoslovakia were given to Germany, Poland and Hungary. The Anschluss was definitely accepted. In return, Hitler commited himself to respect the new borders, calling the Sudetes his "last territorial claim in Europe" (Poland was invaded a few months later).

Back in their home countries, Neville Chamberlain from Britain and Edouard Daladier from France were acclaimed as heroes. When Chamberlain arrived in London, he announced that he had secured "Peace in our time". He told people just what they wanted to hear. They believed him.

There is a famous prophecy attributed to Winston Churchill, which goes : "You had choice between shame and war, you chose shame, and you will have war" (I have not been able to find the exact transcription anywhere, and I even doubt the authenticity of this declaration - more info, anyone ?) Anyway, Churchill was one of the rare politicians in Europe who foresaw the catastrophe of WWII - see this speech.

The Munich Pact has become common synonymous to pact with the Devil in international diplomacy. To give you an idea of its legacy, when European leaders tried to promote the NATO war in Kosovo, they evoked the "Spirit of Munich" to warn their fellow citizens against the temptation of appeasement. Equating Slobodan Milosevic with Adolf Hitler was a bit rude, but the message ("We won't let ruthless dictators do whatever they want any more") was perfectly heard.

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