As the Great War came to an end, Italian Prime Minister Vittorio Emanuele Orlando met with British Prime Minister David Lloyd George, Prime Minister of France Georges Clemenceau, and United States President Woodrow Wilson in Versailles, to discuss how the borders of Europe should be redefined to help avoid a future European war.

The talks provided little territorial gain to Italy because Wilson, during the peace talks, promised freedom to all European nationalities to form their own nation states. As a result, the Treaty of Versailles did not assign Dalmatia and Albania to Italy, as had been promised in the Treaty of London (1915). Furthermore, the British and French decided to divide the German overseas colonies into mandates of their own, with Italy receiving none of them. Despite this, Orlando signed the Treaty of Versailles, which caused uproar against his government.

Civil unrest erupted in Italy between nationalists who supported the war effort and opposed the " mutilated victory" (as nationalists called it) and leftists who were opposed to the war. At the time, Fiume had 22,488 (62% of the population) Italians in a total population of 35,839 inhabitants. Furious over the peace settlement, the Italian nationalist poet Gabriele D'Annunzio led disaffected war veterans and nationalists to form the Free State of Fiume in September 1919. His popularity among nationalists led him to be called Il Duce (The Leader) and he used blackshirted paramilitary in his assault on Fiume, the leadership title of "Duce" and the blackshirt paramilitary uniform would later become synonymous with the Fascist movement of Benito Mussolini.

The demand for annexation of Fiume spread to all sides of the political spectrum, including Mussolini's Fascists. D'Annunzio's stirring speeches drew Croatian nationalists to his side. He also kept contact with the Irish Republican Army and Egyptian nationalists. Italy annexed territories that included not only ethnically mixed ones, but also exclusively ethnic Slovene and Croatian ones, especially within the former Austrian Littoral and the former Duchy of Carniola. They included 1/3 of the entire territory inhabited by Slovenes at the time and 1/4 of the entire Slovene population who were during the period of Italian Fascism (1922–1943) subjected to forced Italianization alongside with 25,000 ethnic Germans. According to author Paul N. Hehn, ‘the treaty left half a million Slavs inside Italy, while only a few hundred Italians in the fledgling Yugoslavia.’

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