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German immigrants began settling in Siebenbürgen (Transylvania) in 1143. The German-speaking enclave that formed in the Carpathians as a result was the easternmost such area in the Middle Ages. The new arrivals were referred to as 'Saxons', but in fact they came from the valleys of the Rhine and Moselle, from Flanders, Lorraine, Alsace and Luxembourg. The first Germans to settle here were, like others who came to inhabit the Zips (Spiš) region, invited by King Géza II of Hungary to live on crown territory and were awarded privileges. Royal charters, among them the Andreanum issued by Andreas II in 1224, granted the settlers more rights than any other German group in eastern Europe had ever received before. The newcomers were supposed to secure Hungary's eastern borders and to develop the rural economy. They established almost 300 villages, most centred on the characteristic fortified church, as well as a number of towns that served as staging posts for long-distance trade. Among the latter were Hermannstadt (Sibiu), Kronstadt (Braşov), Schäßburg (Sighişoara) and Bistritz (Bistriţa). Transylvania is the easternmost part of Europe to have towns of a visibly central European character.

The country's fortunes were determined by its three largest ethnic groups: the Hungarians, the Germans and the Romanians. Another large ethnic group was the gypsies, who were, however, excluded from state administrative positions. The long-established Siebenbürger Saxons, who since the Reformation had been strictly Lutheran, were joined in the 18th century by the Landler, Protestants who had been deported from their Austrian homeland. From 1867 onwards, official policy encouraged assimilation to Hungarian culture. After 1918, when the Siebenbürger Saxons voted to join Romania, they faced a policy of assimilation to Romanian culture. This was successfully resisted by the economically strong and politically and culturally well-organised minority. In around 1910, there were some 250,000 'Saxons' living in Transylvania, rising to almost 300,000 by the beginning of the Second World War.