Carol was the eldest son of Ferdinand I and became crown prince upon the death of his grand-uncle, King Carol I in 1914. He was the first of the Hohenzollern kings of Romania to be born in the country (both of his predecessors were born and grew up in Germany and only came to Romania as adults). Carol, by contrast, spoke Romanian as his first language and was the first member of the Romanian royal family to be raised in the Orthodox faith.
He possessed a hedonistic personality that contributed to the controversies marring his reign, and his life was marked by numerous scandals. Among them, marriages to Zizi Lambrino and Princess Helen of Greece and Denmark, daughter of King Constantine I of Greece. His continued affairs with Magda Lupescu obliged him to renounce his succession rights in 1925 and leave the country. Princess Helen eventually divorced him in 1928. King Ferdinand died in 1927 and Carol's five-year-old son ascended the throne as Michael I.
Carol returned to Romania in 1930 and replaced the regency that had been in place. His reign was marked by re-alignment with Nazi Germany, adoption of anti-semitic laws and ultimately evolved into a personal dictatorship beginning with 1938. On 6 September 1940, he was forced by his Prime Minister Ion Antonescu to leave the country and withdraw abroad into exile. He was succeeded by his son Michael.
Carol was born in Peleș Castle. Carol grew up under the thumb of his dominating great-uncle King Carol I, who largely excluded his parents, the German-born Crown Prince Ferdinand and the British-born Crown Princess Marie from any role in bringing him up. Romania in the early 20th century had a famously relaxed "Latin" sexual morality, and in this environment, Princess Marie pursued a series of love affairs with various, predominantly Romanian men who offered her more emotional and sexual satisfaction than her husband Ferdinand could. For his part, Ferdinand fiercely resented being cuckolded. The stern Carol I felt that Marie was unqualified to raise Prince Carol because of her love affairs and her young age, as she was only seventeen when Carol was born, whereas Marie regarded the king as a cold, overbearing tyrant who would crush the life out of her son. The childless Carol I (who had always wanted a son) treated Prince Carol as his surrogate son and thoroughly spoiled him by indulging his every whim. Ferdinand was a rather shy and weak man who was easily overshadowed by the charismatic Marie, who would become a much-loved member of the Romanian royal family. Growing up, Carol felt ashamed of his father, whom both his great-uncle and mother pushed around. Carol's childhood was spent caught up in an emotional tug-of-war between Carol I and Marie, who had very different ideas about how to raise him. The Romanian historian Marie Bucur has described the battle between Carol I and Princess Marie as one between traditional 19th-century Prussian conservatism, as personified by Carol I, and the 20th-century liberal values of a modernist and sexually-liberated "New Woman," as personified by Princess Marie. Aspects of both Marie's and Carol I's personalities were present in Carol II. Largely as a result of the battle between the king and Marie, Carol ended being both spoiled and deprived of love. From Carol I, he certainly acquired a "profound love of German militarism" (in the words of the American historian Margaret Sankey) and the idea that all democratic governments were weak governments, but he was also influenced by the intense Francophilia that prevailed in Romania of his day. Romania in the early 20th century was perhaps the most Francophile nation in the entire world; the Romanian elite obsessively embraced all things French as the model for perfection in everything.
During his teenage years, Carol acquired the "playboy" image that was to become his defining persona for the rest of his life. Carol I expressed some concern at the direction that Prince Carol's personal development was taking. His only serious interest was stamp collecting, and the young prince spent an inordinate amount of time drinking, partying, and chasing after women. Carol rapidly become a favorite of gossip columnists around the world owing to the frequent photographs that appeared in newspapers showing him at various parties holding a drink in one hand and a woman in the other. In order to teach the prince the value of the Prussian virtues, the king had him commissioned as an officer into a Prussian guards regiment in 1913. His time with the 1st Prussian Guards regiment did not achieve the desired results, and Carol remained the "playboy prince". In November 1914, Carol joined the Romanian Senate in accordance with the provisions of the 1866 Constitution of Romania, which guaranteed him a seat in the Senate upon reaching maturity.
Known more for his romantic misadventures than for any leadership skills, Carol was first married in the Cathedral Church of Odessa, Ukraine, to Joanna Marie Valentina Lambrino on 31 August 1918. Lambrino, known as "Zizi", was the daughter of a Romanian general, Constantin Lambrino. The fact that Carol had technically deserted to marry Lambrino (as he left his post at the Army without permission) caused immense controversy at the time. The marriage was annulled on 29 March 1919 by the Ilfov Suburban Court. Carol and Zizi continued to live together after the annulment. Their only child, Mircea Gregor Carol Lambrino, was born 8 January 1920.
Carol next married Princess Helen of Greece and Denmark (who was known in Romania as Crown Princess Elena) in Athens, Greece, on 10 March 1921. Helen had known Carol's indissolute behaviour and previous marriage, but was undeterred, being in love with Carol. They were second cousins, both of them great-grandchildren of Queen Victoria, as well as third cousins in descent from Nicholas I of Russia. The intention behind this arranged marriage was to help organise a dynastic alliance between Greece and Romania. Bulgaria harbored territorial disputes with Greece, Romania and Yugoslavia and all three of the latter states tended to be close during the period between World War I and World War II due to their shared fears of the Bulgarians. Their only child, Michael was born seven months after Helen and Carol's marriage, sparking rumours that Michael was conceived out of wedlock. Apparently close at first, Carol and Helen drifted apart and he frequently engaged in extramarital affairs. The elegant Helen found Carol, with his love of heavy drinking and constant partying, rather too wild for her tastes. Carol disliked women of royal and aristocratic background, whom he found too stiff and formal for his tastes, and displayed an extremely marked preference for commoners, much to the chagrin of his parents. Carol found low-born women to have the qualities he sought in a woman, such as informality, spontaneity, humor and passion. The marriage with Princess Helen collapsed completely in the wake of Carol's affair with Elena "Magda" Lupescu, the Roman Catholic daughter of a Jewish pharmacist and his Roman Catholic wife. Magda Lupescu had formerly been the wife of the army officer Ion Tâmpeanu. As a result of her husband's open infidelity, Helen divorced Carol in 1928.
The National Liberal Party, which dominated Romania's politics in this era, made much of Carol's relationship with Lupescu to argue that he was unqualified to be king. One of the leading figures of the National Liberals was Prince Barbu Știrbey, one of Queen Marie's lovers, whom Carol despised for the way his father had been humiliated by his affair with his mother. Because of the way that Știrbey had disrupted his family relationships, Carol despised the National Liberals generally. Knowing that Carol was ill-disposed towards them, the National Liberals waged a sustained campaign to keep him from the throne. As a result of the scandal surrounding Lupescu, Carol renounced his right to the throne on 28 December 1925 in favour of his son by Crown Princess Helen, Michael (Mihai), who became king in July 1927. After renouncing his right to throne, Carol moved to Paris, where he lived openly in a common-law relationship with Madame Lupescu.
The National Liberal Party largely served as a political vehicle for the interests of the powerful Brătianu family. After the National Liberal Prime Minister Ion I. C. Brătianu died in 1927, the Brătianus were unable to agree upon a successor, which caused the National Liberals to fall into decline. In the 1928 elections, the National Peasant Party under Iuliu Maniu won a resounding victory, taking 78% of the vote. As the chief of the Regency Council that governed for King Michael, Prince Nicolae was known to be friendly with the National Liberals, thus the new prime minister was determined to dispose of the regency council by bringing back Carol.
Returning to the country on 7 June 1930, in a coup d'état engineered by National Peasant Prime Minister Iuliu Maniu, Carol was recognized by the Parliament as king of Romania the following day. For the next decade, he sought to influence the course of Romanian political life, first through manipulation of the rival Peasant and Liberal parties and anti-Semitic factions, and subsequently by choosing a ministry of his own in January 1938. To compensate for his rather negative and well-deserved "playboy king" image, Carol created a lavish personality cult around himself that grew more extreme as his reign went on, which portrayed the king as a Christ-like being "chosen" by God to create a "new Romania". In the 1934 book The Three Kings by Cezar Petrescu, which was intended for a less educated audience, Carol was constantly described as being almost god-like, the "father of the villagers and workers of the land" and the "king of culture" who was the greatest of all the Hohenzollern kings, and whose return from exile from France via airplane in June 1930 was a "descent from the heavens". Petrescu depicted Carol's return as the beginning of his God-appointed task of becoming "the maker of eternal Romania", the start of a glorious golden age.
A colorful character, his persona has been described by the Romanian historian Maria Bucur in these terms:
"Of course, he loved luxury; being born to privilege he expected nothing less than the grand lifestyle he saw in the other courts of Europe. Yet his style was not outlandish or grotesque like Nicole Ceausescu's unique brand of kitsch. He liked things large but relatively simple-his royal palace testifies to that trait. Carol’s true passions were Lupescu, hunting and cars and he spared no expense on them.
Carol liked to present an impressive and populist persona to the public, wearing garish military uniforms adorned with medals, and to be the benefactor of every philanthropic endeavor in the land. He loved parades and grandiose festivals and watched them closely, but he was not taken in by these events as more than shows of his power; he did not take them as a show of sincere popularity as Ceaușescu did during his later years.
Carol had a populist style, depicting himself as the defender of the common man against the corrupt Francophile elites (especially the National Liberals) who was also an exponent of nationalism and Eastern Orthodoxy. Carol's tendency to throw together populism, authoritarianism, nationalism and Orthodoxy superficially resembled the style of the right-wing Iron Guard movement, even though Carol's message was far less extreme than that of Corneliu Zelea Codreanu, the leader of the Iron Guard, who preached a message of ferociously xenophobic ultra-nationalism, intense Orthodox mysticism, violent anti-Semitism, a populist disdain for all the elites in Romanian society and a glorification of death in the service of the cause as the most noble experience in the entire world.
In his coronation oath, Carol swore to uphold the Romanian constitution of 1923, a promise he had no intention of keeping. From the start of his reign, he meddled in politics to increase his own power. Carol was an opportunist with no real principles or values other then the belief he was the right man to rule Romania and that what his kingdom needed was a modernizing dictatorship. Carol ruled via an informal body known as the camarilla, which was made up of courtiers together with senior diplomats, army officers, politicians and industrialists who were all in some way dependent upon royal favor to advance their careers.
The most important member of the camarilla was Carol's mistress Magda Lupescu, whose political advice Carol greatly valued. The "Red Queen," as Lupescu was known to the Romanian people on the account of the color of her hair, was the most hated woman in 1930s Romania, a woman whom ordinary Romanians saw in the words of the British historian Rebecca Haynes as "the embodiment of evil". Carol's ex-wife Princess Helen was widely viewed as a wronged woman, while Lupescu was seen as the femme fatale who had stolen Carol away from the loving arms of Helen. Lupescu had been brought up as a Roman Catholic, but because her father was a Jew, she was widely viewed as Jewish. Lupescu’s personality antagonized many Romanians, as she was arrogant, manipulative and extremely greedy with an insatiable taste for buying the most expensive French clothing, cosmetics and jewellery. At a time when many Romanians were suffering from the economic effects of the Great Depression, Carol’s habit of indulging Lupescu’s expensive tastes caused much resentment. Further adding to Lupescu’s immense unpopularity was her habit of exploiting her connections to the Crown to engage in dubious financial transactions that usually involved the transfer of large sums of public money into her own pocket. The contemporary view that Carol was a mere puppet of Lupescu is incorrect, however, and Lupescu's influence on political decision-making was much exaggerated at the time. Lupescu was primarily interested in enriching herself to support her extravagant lifestyle and had no real interest in politics beyond protecting her ability to engage in corruption. Unlike Carol, Lupescu took no interest in social policy or foreign affairs and was such a self-absorbed narcissist that she was unaware of just how unpopular she was with ordinary people. Carol, by contrast, was keenly interested in affairs of the state, and though he never sought to deny his relationship with Lupescu, he was careful not to display her too much in public, as he knew that this would risk making him unpopular.
Carol sought to play off the three major political forces in his country against each other (the National Liberals, the National Peasant Party and the Iron Guard) with the ultimate aim of making himself master of Romanian politics and disposing of all the political parties in Romania. Carol had no intention of permitting the Iron Guard ever to come to power, but insofar as it was a disruptive force that weakened both the National Liberals and the National Peasants, Carol welcomed its rise in the early 1930s and sought to use it for his own ends. On 30 December 1933, the Iron Guard assassinated the National Liberal Prime Minister Ion G. Duca, which led to the first of several bans placed on its political activities. The assassination of Duca, Romania's first political murder since 1862, shocked Carol, who saw the willingness of Codreanu to order the assassination of a prime minister as a sign that he was getting out of control and that he would not play the role Carol hoped for as a disruptive force threatening the National Liberals and National Peasant alike. In 1934, when Codreanu was brought to trial for ordering Duca's assassination, he used as his defense his belief that the entire Francophile elite in Romania was completely corrupt, and Duca, as a member of it, was just another corrupt National Liberal politician who deserved to die. The jury acquitted Codreanu, an act that worried Carol as it showed that Codreanu's revolutionary message was winning popular approval. In the spring of 1934, after Codreanu was acquitted, Carol, together with the Bucharest police prefect Gavrilă Marinescu and Magda Lupescu, was involved in a half-hearted plot to kill Codreanu by poisoning his coffee. The effort was abandoned before being attempted. Until 1935, Carol was a leading contributor to the "Friends of the Legion," a group that collected contributions to the Iron Guard. Carol only stopped contributing after Codreanu started calling Lupescu a "Jewish whore" (see below). In 1935, he set up a paramilitary youth organization known as Straja Țării to help counter the influence of the Iron Guard.
Carol often encouraged splits in the political parties to encourage his own ends. In 1935, Alexandru Vaida-Voevod, the leader of the Transylvanian branch of the National Peasants, broke away to form the Romanian Front with Carol's encouragement. During the same time, Carol developed close contacts with Armand Călinescu, an ambitious National Peasant leader who founded a faction opposed to the leadership of Carol's archenemy Iuliu Maniu and wanted the National Peasants to work with the Crown. In the same way, Carol encouraged the "Young Liberal" faction headed by Gheorghe Tătărescu as a way of weakening the power of the Brătianu family who dominated the National Liberals. Pointedly, Carol was willing to allow the "Young Liberal" faction under Tătărescu to come to power, but excluded the main National Liberal faction under the leadership of Dinu Brătianu from obtaining power; Carol had not forgotten how the Brătianus had excluded him from the succession in the 1920s.
In February 1935, Codreanu, who until then had regarded as an ally of Carol, for the first time attacked the king directly. At this time, he organized demonstrations outside of the royal palace attacking Carol after the Romanian scientist Dimitrie Gerota had been imprisoned for writing an article exposing the corrupt business dealings of Lupescu. Codreanu in his speech before the Royal Palace called Lupescu a "Jewish whore" who was robbing Romania blind. This led an insulted Carol to call on one of the members of his camarilla, the Bucharest police prefect Gavrilă Marinescu, who sent the police out to break up the Iron Guard rally with much violence.
Carol had little understanding or interest in economics, but his most influential economic advisor was Mihail Manoilescu, who favored an etatist model of economic development with the state intervening in the economy to encourage growth.
To his credit, Carol was very active in the cultural realm, a generous patron of the arts who actively supported the work of the Royal Foundation, an organisation given a broad mandate to promote and study Romanian culture in all fields. In particular, Carol supported the work of the sociologist Dimitrie Gusti of the Social Service of the Royal Foundation, who in the early 1930s started to bring social scientists from disciplines such as sociology, anthropology, ethnography, geography, musicology, medicine and biology to work together in a "science of the nation." Gusti took teams of professors from the various disciplines to the countryside to study an entire community from all vantage points every summer, after which they would produce a lengthy report about the community.
For most of the period between the world wars, Romania lay within the French sphere of influence, and in June 1926, a defensive alliance was signed with France. This alliance, together with an alliance signed with Poland in 1921 and the "Little Entente" that united Romania, Czechoslovakia and Yugoslavia were the cornerstones of Romanian foreign policy until the late 1930s. Starting in 1919, the French sought to create a cordon sanitaire that would keep both Germany and the Soviet Union out of Eastern Europe. Carol did not seek to replace the foreign policy he had inherited in 1930 at first, since he regarded the continuation of the cordon sanitaire as the best guarantee of Romania's independence and territorial integrity. As such, his foreign policy was essentially pro-French. At the time that Romania signed the alliance with France, the Rhineland region of Germany was demilitarized. It was believed in Romania that if Germany should commit any act of aggression anywhere in Eastern Europe, the French would begin an offensive into its territory. Starting in 1930, when the French began to build the Maginot Line along their border with Germany, some doubts started to be expressed in Romania about whatever the French might actually come to its aid in the event of German aggression. In 1933, Carol appointed Nicolae Titulescu, an outspoken champion of collective security under the banner of League of Nations, as foreign minister with instructions to use this principle as the building block for the creation of some sort of security structure to keep both Germany and the Soviet Union out of Eastern Europe. Carol and Titulescu personally disliked one another, but Carol wanted Titulescu as foreign minister as he believed he was the best man for strengthening ties with France and bringing Great Britain into the affairs of Eastern Europe under the guise of the collective security commitments contained in the Covenant of the League of Nations.
The process of Gleichschaltung ("coordination"), a means in Nazi Germany to exert totalitarian control over all aspects of society, did not extend only to internal affairs, but was rather thought of by the Nazi leadership as a worldwide process in which the Nazi Party would take control over all of the ethnic German communities around the entire world. Starting in 1934, the Foreign Policy Department of the Nazi Party headed by Alfred Rosenberg attempted to take over the volksdeutsch (ethnic German) community in Romania, a policy that greatly offended Carol, who regarded this as outrageous German interference in Romania's internal affairs. As Romania had about a half-million volksdeutsch citizens in the 1930s, the Nazi campaign to take over the German community in Romania was a real concern for Carol, who feared that the German minority might become a fifth column. In addition, Rosenberg's agents established contracts with the Romanian extreme right, most notably with the National Christian Party headed by Octavian Goga, but also less substantial links with the Iron Guard headed by Codreanu, which further annoyed Carol. The fact that the first foreign leader to visit Nazi Germany (albeit not in an official capacity) was the Hungarian Prime Minister Gyula Gömbös (who signed an economic treaty that placed Hungary within the German economic sphere of influence during his visit to Berlin in October 1933) was a source of much alarm to Carol. For the entire interwar period, Hungary refused to recognize the frontiers imposed by the Treaty of Trianon after the end of World War I and laid claim to the Transylvania region of Romania. Carol, like the rest of the Romanian elite, was worried by the prospect that Germany would support Hungary's claims to Transylvania. Hungary had territorial disputes with Romania, Yugoslavia and Czechoslovakia, all of which happened to be allies of France. Accordingly, Franco-Hungarian relations were extremely bad during the interwar period, and so it seemed natural that Hungary would ally itself with France's archenemy Germany.
In 1934, Titulescu played a leading role in creating a Balkan Entente that brought together Romania, Yugoslavia, Greece and Turkey in an alliance intended to counter Bulgarian revanchism. The Balkan Entente was intended to be the beginning of an alliance that would bring together all of the anti-revisionist states of Eastern Europe (i.e., that states that did not want to reverse territorial losses agreed to by Germany, Hungary, Austria, and Russia in peace treaties signed at the end of World War I). Like France, Romania was allied to both Czechoslovakia and Poland, but because of a dispute over territories surrounding Teschen in Silesia, Czechoslovakia and Poland were bitter enemies. Carol was exasperated by the Polish-Czechoslovak dispute, just like the French diplomats were, arguing that it was absurd for anti-revisionist Eastern European states to be feuding with one another in the face of the rise of German and Soviet power. Several times, Carol attempted to mediate the Teschen dispute and end the Polish-Czechoslovak feud, but he encountered little success.
Reflecting his early pro-French orientation, Carol organized lavish celebrations to welcome the French foreign minister Louis Barthou to Bucharest in 1934, when he visited in June to meet with the foreign ministers of the Little Entente of Romania, Czechoslovakia and Yugoslavia. The celebrations were intended to symbolize the enduring Franco-Romanian friendship between the two "Latin sisters". The German minister to Romania, Count Friedrich Werner von der Schulenburg, complained with disgust in a report to Berlin that everyone in the Romanian elite was an incurable Francophile who told him that Romania would never betray its "Latin sister" France. At the same time, Carol also considered the possibility that if Romanian-German relations were improved, then perhaps Germany could be persuaded not to support Hungary in its campaign to regain Transylvania.
Further pressing Carol towards Germany was the desperate state of the Romanian economy. Even before the Great Depression, Romania had been an extremely poor country and the depression hit Romania hard. Romanians found themselves unable to export many goods owing to the global trade war set off by the American Smoot–Hawley Tariff Act of 1930, which in turn led to a decline in the value of the Romanian leu as the country's reserves of foreign exchange were being used up. In June 1934, the Romanian finance minister Victor Slăvescu visited Paris to ask the French to inject millions of francs into the Romanian treasury and lower their tariffs on Romanian goods. When the French refused both requests, an annoyed Carol wrote in his diary that the "Latin sister" France was behaving in a less than sisterly way towards Romania. In April 1936, when Wilhelm Fabricius was appointed German minister in Bucharest, the Foreign Minister Konstantin von Neurath in his instructions to the new minister described Romania as an unfriendly, pro-French state, but suggested that the prospect of more trade with Germany might bring the Romanians out of the French orbit. Neurath further instructed Fabricius that while Romania was a not a major power in a military sense, it was a state of crucial importance to Germany because of its oil.
The doubts about the French willingness to undertake an offensive against Germany were further reinforced by the Remilitarization of the Rhineland in March 1936, which had the effect of allowing the Germans to start building the Siegfried line along the border with France, something that considerably lessened the prospect of a French offensive into western Germany if the Germans would invade any of the states of the cordon sanitaire. A British Foreign Office memo from March 1936 stated that the only nations in the world that would apply sanctions on Germany for remilitarizing the Rhineland if the League of Nations should vote for such a step were Britain, France, Belgium, Czechoslovakia, the Soviet Union and Romania. In the aftermath of the remilitarization of the Rhineland, and once it was clear that no sanctions were going to be applied against Germany, Carol started to voice his fears that the days of French influence in Eastern Europe were numbered, and Romania might have to seek some understanding with Germany to preserve its independence. While continuing the alliance with France, Carol also began a policy of attempting to improve relations with Germany after March 1936. In August 1936, Carol had Tituelscu fired as foreign minister and in November 1936, Carol sent the renegade National Liberal politician Gheorghe I. Brătianu to Germany to meet with Adolf Hitler, the Foreign Minister Konstantin von Neurath and Hermann Göring to tell them of Romania's desire for a rapprochement with the Reich. Carol was much relieved when Brătianu reported that Hitler, Neurath and Göring had all reassured him that Germany had no interest in supporting Hungarian revanchism, and were neutral on the Transylvania dispute. The decoupling of Germany’s campaign to overthrow the international system created by the Treaty of Versailles from Hungary’s campaign to overthrow the system created by the Treaty of Trianon was welcome news to Carol, creating possibility that a greater Germany would not mean a greater Hungary. Göring, the newly appointed chief of the Four Year Plan organization designed to have Germany ready to wage a total war by 1940, was especially interested in Romania's oil, and talked much to Brătianu about a new era of German-Romanian economic relations. Germany had almost no oil of its own, and throughout the period of Nazi rule, control of Romania's oil was a key foreign policy goal. Reflecting the changed emphasis, Carol February 1937 vetoed a plan promoted by France and Czechoslovakia for a new alliance that would formally unite France with the Little Entente and envisioned more much closer military ties between the French and their allies in Eastern Europe. Because of its oil, the French were keen to keep the alliance with Romania strong, and Romania's manpower created a way of compensating the French for their lower population in comparison to Germany (the French had 40 million people while Germany had 70 million). Additionally, it was assumed in France that if Germany invaded Czechoslovakia that Hungary would also attack Czechoslovakia to regain Slovakia and Ruthenia. French military planners envisioned the role of Romania and Yugoslavia in such a war as invading Hungary to relieve the pressure on Czechoslovakia.
Right up until 1940, Carol's foreign policy teetered uneasily between the traditional alliance with France and an alignment with the newly-ascendant power of Germany. Concerning the claim of the American historian Larry Watts that it was Carol that allied Romania to Nazi Germany and that Marshal Ion Antonescu had unwillingly inherited an alliance with Germany in 1940, the Canadian historian Dov Lungu wrote:
"The author's [Watts] claim that Romania's de facto alliance with Germany under Antonescu was the work of Carol, who began laying its foundations for it as early as 1938, is wide off the mark. Carol's concessions to Germany were made half-heartedly and delayed as much as possible in the hope that the western powers would regain the initiative on the political-diplomatic front and, from September 1939, the military one. He finally did change his country's external economic and political orientation, but only in the spring of 1940, when German hegemony on the Continent seemed imminent. In addition, there is more than a subtle distinction between Carol's request in the last weeks of his rule for the dispatch of a German military mission to train the ill-prepared Romanian Army and Antonescu's decision almost immediately after assuming power to fight on Germany's side until the very end. In fact, in his desire to regain the province of Bessarabia, Antonescu was keener than the Germans' in Romania's participation in an anti-Soviet war".
On 9 December 1937, a German-Romanian economic treaty was signed that placed Romania within the German economic sphere of influence, but which left the Germans unsatisfied as Germany's enormous demand for oil to power its increasingly large war machine was not fulfilled by the 1937 treaty. Germany had a seemingly endless need for oil, and no sooner had the 1937 agreement been signed than the Germans asked for a new economic treaty in 1938. At the same time that the German-Romanian treaty was signed in December 1937, Carol was receiving the French Foreign Minister Yvon Delbos to show that the alliance with France was not yet dead.
In the summer of 1937, Carol paid an extended visit to Paris, during which he predicated to the French Foreign Minister Yvon Delbos that Romanian democracy would soon end. In November 1937 in a campaign speech for the general elections due that December, Codreanu of the Iron Guards gave a speech in which called for an end to the alliance with France and stated: "I am for a Romanian foreign policy with Rome and Berlin. I am with the states of the National Revolution against Bolshevism...Within forty-eight hours of a Legionary movement victory, Romania will have an alliance with Rome and Berlin". Without realizing it, Codreanu had sealed his doom with that speech. Carol had always insisted that control of foreign policy was his own, exclusive royal prerogative that nobody else was allowed to interfere with. Despite the constitution, which stated that the foreign minister was responsible to the prime minister, in practice the foreign ministers had always reported to the king. By challenging Carol's right to control foreign policy, Codreanu demonstrated unacceptable audacity in the king's eyes, and from that time onward, Carol was committed to the destruction of the arrogant upstart Codreanu and his movement. In the December 1937 elections, the National Liberal government of Prime Minister Gheorghe Tătărescu won the largest number of seats, but less than the 40% required to form a majority government in parliament. After assassinating Prime Minister Duca in 1933, the Iron Guard had been banned from participating in elections, and to get around the ban, Codreanu founded the All for Fatherland party as a front for the Iron Guard. The All for Fatherland party won 16% of the vote in the 1937 election, marking the highpoint of the Iron Guard's electoral success.
On 28 December 1937, Carol swore in the radical anti-Semitic poet Octavian Goga as prime minister. His party was the National Christian Party, which only won 9% of the vote in elections that month. Carol's reasons for appointing Goga prime minister were partly motivated by the hope that his anti-Semitic policies would bring would win him support from the All for Fatherland voters and thus weaken the Iron Guard. He also hoped that Goga would prove so incompetent as prime minister that a crisis would develop to make it possible for him to seize power for himself. Carol wrote in his diary that the markedly stupid Goga could not possibly last long as prime minister, and that Goga's failure would allow him to "be free to take stronger measures which will free me and the country from the tyranny of party interests". Carol agreed to Goga's request to dissolve parliament for new elections on 18 January 1938. As leader of the fourth party in parliament, Goga's government was certain to be defeated on a vote of no-confidence when parliament convened, since the National Liberals, National Peasants and the All for the Fatherland Party had all come out against Goga, albeit for very different reasons. The 1938 election was one of the most violent elections in Romanian history as the Iron Guard and Lăncieri para-military wing of the National Christian Party battled one another for control of the streets of Bucharest while seeking to establish their anti-Semitic creditations by assaulting Jews. As the Romanian parliament never convened during the Goga government, the prime minister had to pass laws via emergency degree, all of which had to be countersigned by the king.
The harsh anti-Semitic policies of the Goga government impoverished the Jewish minority and led to immediate complaints from the British, French and American governments that Goga's policies were going to lead to a Jewish exodus out of Romania. Neither Britain, France nor the United States had any wish to take in the Jewish refugees that Goga might create, and all three governments pressed for Carol to dismiss Goga as a way of stopping the developing humanitarian crisis. The British minister Sir Reginald Hoare and French minister Adrien Thierry both submitted notes of protest against the Goga government's anti-Semitism, while President Franklin D. Roosevelt of the United States wrote a letter to Carol complaining about the anti-Semitic policies he was tolerating. On 12 January 1938, Goga stripped all Romanian Jews of their Romanian citizenship, a preparatory move towards Goga's ultimate goal of the expulsion of all Romanian Jews. Carol was personally not an anti-Semite, but was simply indifferent to the sufferings of his Jewish subjects caused by Goga's oppressive anti-Semitic laws. The opportunistic Carol did not believe in anti-Semitism anymore than he believed in anything else other than power, but if toleration of an anti-Semitic government was the price to be paid for power, Carol was quite prepared to sacrifice the rights of his Jewish subjects. At the same time, Goga proved himself a better poet than politician, and there was a crisis atmosphere in early 1938 as the Goga government, obsessed with solving the "Jewish Question" to the exclusion of everything else, was clearly floundering. As Carol had expected, Goga proved to be such an inept leader as to discredit democracy while his anti-Semitic policies ensured that the none of the democratic great powers would object to Carol proclaiming a dictatorship.
Coming to realize belatedly that he was being used by Carol, Goga had a meeting with Codreanu on 8 February 1938 at the house of Ion Gigurtu to arrange for a deal under which the Iron Guard would withdraw its candidates from the election in order to ensure that the radical anti-Semitic right would win a majority. Carol quickly learned of the Goga-Codeanu pact and used it as the justification for the coup d'état he had been planning since late 1937. On 10 February 1938, Carol proclaimed martial law and suspended all civil liberties under the grounds that the violent election was running the risk of plunging the nation into civil war.
Deciding that Goga had outlived his usefulness, Carol sacked him in favour of Patriarch Elie Cristea, the head of the Romanian Orthodox Church, a man whom Carol knew would command wide respect in a country where the majority of the population was Orthodox. Ten days later, Carol had the constitution recast into a severely authoritarian/corporatist document that concentrated virtually all governing power in his hands and turned his government into a de facto legal dictatorship. The new constitution was approved at a referendum in which voting was not secret. Instead, voters were required to appear at their election bureau and verbally state whether they approved the constitution; silence was deemed as a "yes" vote. Under these conditions, an implausible 99.87 percent were reported as having approved the new charter.
At the time of his coup in February 1938, Carol informed the German minister Wilhelm Fabricius of his wish for closer ties between his country and Germany. Thierry told Carol in a meeting after the coup that his new government was "well received" in Paris, and the French would not allow the end of democracy to affect their relations with Romania. The new government of Patriarch Cristea did not introduce new anti-Semitic laws, but did not repeal the laws passed by Goga, either. Still, Cristea was less extreme about enforcing these laws. When asked by a Jewish friend if his citizenship would be restored now that Goga was gone, the Interior Minister Armand Călinescu, who detested the Iron Guard and anti-Semitism, replied that the Cristea government had no interest in restoring citizenship back to the Jews.
In March 1938, the Interior Minister Armand Călinescu demanded that the Iron Guard finally be destroyed. In April 1938, Carol moved to crush the Iron Guard by having Codreanu imprisoned for libeling the historian Nicolae Iorga after Codreanu had published a public letter accusing Iorga of dishonest business dealings. After Codreanu's conviction on 19 April 1938, he was convicted of high treason in a second trial on 27 May 1938 at which he was accused of working in the pay of Germany to effect a revolution. He was sentenced to 10 years in prison.
In October 1938, the Iron Guard began a terrorist campaign of assassinating police officers and bureaucrats and staging bombings of government offices as part of an effort to overthrow Carol. Carol struck back hard, ordering the police to arrest without warrant Iron Guardsmen and to summarily execute those found with weapons.
Carol had initially planned to keep Codreanu in prison, but after the terrorist campaign began in October 1938, Carol agreed to Călinescu's plan drawn up in the spring to murder all of the Iron Guard leaders in custody. On the night of 30 November 1938, Carol had Codreanu and 13 other Iron Guard leaders murdered with the official story being that they were "shot while trying to escape". The killings on the night of 30 November 1938, which saw much of the Iron Guard's leadership wiped out, have gone down in Romanian history as "the night of the vampires".
Carol was deeply shocked by the Munich Agreement of 30 September 1938. He interpreted the abandonment of Czechoslovakia to German expansionism by the western powers as a sign that all of Eastern Europe would soon fall within the German sphere of influence. Since Romania had long been one of the most Francophile nations in the world, the effects of the Munich Agreement were felt especially strongly there, since France was viewed as having capitulated in cowardice to German demands.
In view of Germany's desperate need for oil and the repeated German requests for a new economic agreement which would allow for more Romanian oil to be shipped to Germany, Carol met Fabricius to tell him that he wanted such an agreement to create a lasting understanding between Germany and Romania. At the same time in October and November 1938, Carol was playing a double game by appealing to Britain for help and offering to place Romania within the British economic sphere of influence. He visited London between 15 and 20 November 1938 to hold unsuccessful talks on that subject. On 24 November 1938, Carol visited Germany to meet with Hitler in order to improve German-Romanian relations. During the talks for the new German-Romanian economic agreement that was signed on 10 December 1938, Carol made concessions to German interests, but drove a very hard bargain. Carol was able to exert leverage through his control of the oil that Germany needed so badly. The Germans were willing to pay a very high price for Romanian oil, without which their military could not function.
During his summit with Hitler, Carol was much offended when Hitler demanded that Codreanu be freed and appoint prime minister. Carol believed that as long as Codreanu lived, there was a possible alternative leadership in Romania for Hitler to back, and that if this possibility was eliminated, Hitler would have no other choice other to deal with him. The Germans were much offended by the murder of Codreanu, and for a period in late 1938 waged a violent propaganda campaign against Carol. Germans newspapers regularly ran stories casting doubt about the official version of events and labeled Codreanu's murder "a victory for the Jews". But ultimately economic concerns, especially the German need for Romanian oil, caused the Nazis to get over their outrage over the killings of the Iron Guard leaders by early 1939, and relations with Carol soon went back to normal.
In December 1938, the National Renaissance Front, a political party of Carol's own personal creation, was established as the country's only legal party. That same month, Carol appointed Grigore Gafencu, a friend since childhood and another member of the camarilla, as foreign minister. Gafencu was appointed foreign minister partly because of his friendship with Colonel Józef Beck, the Polish foreign minister, as Carol wanted to strengthen ties with Poland. Gafencu was to prove himself something of an opportunist as foreign minister, the man who always wanted to take the path of least resistance, in marked contrast to Armand Călinescu, the tough Interior Minister (and soon to be Prime Minister), who proved himself a consistent opponent of fascism both in Romania and abroad and encouraged Carol to stand with the Allies. Carol's foreign policy in 1939 was to strengthen Romania's alliances with Poland and the Balkan Entente, work to avoid conflicts with Romania's enemies Hungary and Bulgaria, and encourage Britain and France to get involved in the Balkans while trying to avoid giving offense to Germany. On 6 March 1939, the Patriarch Cristea died and was replaced as prime minister by Călinescu.
In February 1939, Göring dispatched his deputy Helmuth Wohlthat to Bucharest with instructions to sign yet another German-Romanian economic treaty that would allow Germany total economic domination of Romania, especially its oil industry. Carol had resisted German demands for more oil in the December 1938 agreement, and had succeeded by early 1939 in placing Romania to a certain extent within the British economic sphere of influence. To counterbalance the increasingly powerful German influence in the Balkans, Carol wanted closer ties with Britain. At the same time, the Goring's Four Year Plan was running into major difficulties by early 1939, and in particular, Göring's plans to have synthetic oil plants make oil from coal were well behind schedule. It was painfully obvious to Göring in the first months of 1939 that the German economy would not be ready to support a total war by 1940 as the Four Year Plan of 1936 had envisioned, while at the same time his economic experts were telling him that Germany needed to import 400,000 tons of oil per month while Germany had in fact imported only 61,000 tons of oil per month in the last four months of 1938. Hence Wohlthat demanded during his talks with the Romanian Foreign Minister Grigore Gafencu that Romania nationalize their entire oil industry to be controlled henceforth by a new corporation owned jointly by the German and Romanian governments. He also demanded that Romania "respect German export interests" by only selling their oil to Germany besides a host of other measures that would have converted Romania into a German economic colony for all practical purposes. As Carol had no intention of giving in to these demands, the talks in Bucharest went very badly. It was at this point that Carol began what become known as the "Tilea affair" when on 17 March 1939 Viorel Tilea, the Romanian minister in London, burst unexpectedly into the office of the British Foreign Secretary Lord Halifax in an agitated state to announce that his country was faced with an imminent German invasion. He asked Halifax for British support. At same time, Carol mobilized five infantry corps on the Hungarian border to guard the supposed invasion. The British "economic offensive" in the Balkans was causing Germany very real economic pain as the British bought up Romanian oil that the Germans badly needed, hence their demands for control of the Romanian oil industry that so offended Carol. As the British believed in Tilea's claims, the "Tilea affair" had an immense impact of British foreign policy and led to the government of Neville Chamberlain to change its policy from appeasement of Germany to a policy of "containing" Germany. Carol unconvincingly denied knowing anything about what Tilea was up to in London, but the British warnings to Germany against invading Romania in March 1939 led to the Germans to relax their demands with the result that the latest German-Romanian economic treaty signed on 23 March 1939 was, in the words of Watt, "very vague".
As part of their new policy of seeking to "contain" Germany starting in March 1939, the British sought the construction of "peace front" that was to comprise Britain, France, Poland, the Soviet Union, Turkey, Romania, Greece and Yugoslavia. For his part, Carol was obsessed with fears in the first half of 1939 that Hungary would soon attack his kingdom with German support. On 6 April 1939, a cabinet meeting decided that Romania would not join the "peace front", but would seek Anglo-French support for its independence. The same meeting decided that Romania would work to strengthen ties with other Balkan nations, but would seek to prevent the Anglo-French efforts to link the security of the Balkans to the security of Poland. On 13 April 1939, the British Prime Minister Neville Chamberlain, speaking in the House of Commons, and the French Premier Édouard Daladier speaking in the Chamber of Deputies, announced a joint Anglo-French "guarantee" of the independence of Romania and Greece. Carol promptly accepted the "guarantee". On 5 May 1939, the French Marshal Maxime Weygand visited Bucharest to meet with Carol and his Prime Minister Armand Călinescu to discuss Romania's possible participation in the "peace front". Both Carol and Călinescu were supportive, but evasive, saying that they would welcome the Soviet Union fighting against Germany, but would never allow the Red Army to enter Romania, even if Germany should invade. Carol told Weygand: "I do not wish to let my country be engaged in a war which would result, in a few weeks, in the destruction of its army and the occupation of its territory...We do not wish to be the lighting conductor for the coming storm". Carol went on to complain that he had enough equipment for only two-thirds of his army, which also lacked tanks, anti-aircraft guns, heavy artillery and anti-tank guns, while his air force had only about 400 antiquated aircraft of French manufacture that were no match for latest German aircraft. Weygand reported to Paris that Carol wanted Anglo-French support, but would not fight for the Allies if war came.
Despite his formal opposition to joining the "peace front", Carol did decide to strengthen the Balkan Entente, and especially to strengthen ties with Turkey. Since Britain and France were working for an alliance with Turkey while holding talks with the Soviet Union at the same time, Carol reasoned that if Romania was to be firmly allied to Turkey, that this would be a way of associating Romania with the emerging "peace front" without actually joining it. In July 1939, Carol heard rumors that Hungary, supported by Germany, was planning on invading Romania following a new crisis in Romanian-Hungarian relations caused by complaints from Budapest that the Romanians were mistreating the Hungarian minority in Transylvania. The king ordered general mobilization of his military while taking off in the royal yacht to Istanbul. During his unexpected trip to Istanbul, Carol held talks with the Turkish President İsmet İnönü and the Turkish Foreign Minister Şükrü Saracoğlu, during which the Turks promised him that Turkey would immediately mobilize its military in the event of an attack from Germany and Hungary on Romania. The Turks in their turn pressed Carol to sign an alliance with the Soviet Union, something that Carol said very reluctantly he might do if the Turks were to serve as the middlemen and if the Soviets were to promise to recognize the border with Romania. The show of Romanian resolve supported by Turkey had the effect of causing the Hungarians to back off on their demands against Romania.
The news of the Molotov-Ribbentrop Pact in August 1939,a non-aggression agreement between Germany and the Soviet Union, was received with horror by Carol. In August 1939, Carol sought to play off both sides against each other. Carol allowed Călinescu to tell Thierry that the Romanians would destroy their oil fields if Germany and Hungary should invade, while at the same time Gafencu told the German Foreign Minister Joachim von Ribbentrop of his firm friendship with Germany, his opposition to the "peace front" and of his desire to sell more oil to the Germans. After the signing of the German-Soviet non-aggression pact, Călinescu advised Carol: "Germany is the real danger. An alliance with it is tantamount to a protectorate. Only Germany's defeat by France and Britain can ward off the danger". On 27 August 1939, Gafencu told Fabricius that Romania would declare neutrality if Germany invaded Poland, and that he wanted to sell to Germany some 450,000 tons of oil per month in exchange for 1 million and half Reichsmarks plus a number of modern German aircraft for free. Carol met with the German air force attaché on 28 August 1939 to congratulate the Germans on the great diplomatic success they had gained in concluding the pact with the Soviet Union. Unknown to Carol, the Molotov-Ribbentrop pact contained "secret protocols" that assigned the Romanian region of Bessarabia to the Soviet Union. In the short run, the German-Soviet pact was a blessing for Carol, since Germany now had access to Soviet oil, which reduced the pressure on Romania.
When World War II began with the German and Soviet invasion of Poland on 1 September 1939, followed up by British and French declarations of war on Germany on 3 September 1939, Carol proclaimed neutrality. In doing so, Carol violated the letter of the treaty of alliance with Poland signed in 1921 and the spirit of treaty of alliance signed with France in 1926. Carol justified his policy on the grounds that neutrality provided the only hope of preserving the independence of Romania in light of the alliance between Germany and the Soviet Union established in the Molotov-Ribbentrop Pact of August 1939 and French unwillingness to mount an invasion of Germany. As usual with Carol, he sought to play a careful balancing act between competing major powers, on one hand signing a new economic treaty with Germany, while on the other hand allowing for a considerable period of time for the Polish troops to cross into Romania without interning them, as international law required. The Poles instead were allowed to travel to Constanța to board ships to take them to Marseille to continue the fight against Germany from France. The Romanian Bridgehead remained a key escape route for thousands of Poles in the desperate days of September 1939. It was only after receiving a number of furious complaints from Fabricius about the passage of Polish soldiers across Romania that Carol finally started to intern the fleeing Poles.
On 21 September 1939, Prime Minister Călinescu was assassinated by the Iron Guard in a plot organized out of Berlin, thus silencing the strongest pro-Allied voice within Carol's camarilla. The next day, the nine assassins of Călinescu were publicly shot without the benefit of a trial, and during the week of 22–28 September 1939, 242 Iron Guards were the victims of extrajudicial executions. Because of its oil, control of Romania's allegiance was considered to be highly valued by both sides in World War II. During the Phoney War of 1939-40, the German government did everything within its power to secure as much Romanian oil as possible, while the British and French governments did as much as they could to deny Romanian oil to Germany. The British in particular launched an unsuccessful campaign to sabotage Romanian oil fields and the transportation network that took Romanian oil to Germany.
In January 1940, Carol gave a speech on the radio in which he proclaimed that it was his brilliant handing of foreign policy that kept Romania neutral and safe from danger. In the same speech, Carol announced that he was going to be building a gigantic defense line around the kingdom and as such, taxes would have to rise to pay for it. Romanians called the proposed line the "Imaginot Line," as the line was considered to be a purely imaginary version of the Maginot line. Many of Carol's subjects suspected that the money raised by higher taxes would go to the king's Swiss bank accounts.
Carol had hedged his bets about whatever to choose between the Allies and the Axis powers competing in World War II. It was only in late May 1940, when France was clearly losing the war, that Carol swung decisively over to the Axis side. During the later period of the Phoney War, after waging a campaign of bloody repression against the Iron Guard, which reached its peak after Călinescu's assassination, Carol began a policy of reaching out to the surviving Iron Guard leaders. Carol felt that a "tamed" Iron Guard could be used as a source of popular support. In April 1940, Carol reached an agreement with Vasile Noveanu, the leader of the underground Iron Guard in Romania, but it was not until early May 1940 that Horia Sima, the leader of the Iron Guards in exile in Germany, could be persuaded to support the government. On 26 May 1940, Sima returned to Romania from Germany to begin talks with General Mihail Moruzov of the secret service about the Iron Guard joining the government. On 28 May 1940, after learning of the surrender of Belgium, Carol told the Crown Council that Germany was going to win the war, and Romania accordingly needed to realign its foreign and domestic policies with the victors. On 13 June 1940, an agreement was reached to allow the Iron Guard to join the National Renaissance Front (which was renamed the Party of the Nation) in exchange for harsher anti-Semitic laws. On 21 June 1940, France signed an armistice with Germany. Romania's elite had been so obsessively Francophile for so long that France's defeat had the effect of discrediting that elite in the eyes of public opinion and led to an upswing of popular support for the pro-German Iron Guard.
In the midst of this turn toward the Iron Guard and Germany, there came a bombshell from the Soviet Union. On 26 June 1940, the Soviet Union submitted an ultimatum demanding that Romania hand over the Bessarabia region and the northern part of Bukovina (which had never been Russian) to the Soviet Union. It threatened war within two days if the ultimatum was rejected. Carol at one moment considered following the example of Finland in 1939 when faced with a similar Soviet ultimatum, but the outcome of the Winter War was scarcely an inspiring example. Carol at first considered rejecting the ultimatum, but upon being informed that the Romanian Army would be no match for the Red Army, he agreed to cede Bessarabia and northern Bukovina to the Soviet Union. Carol appealed to Berlin for support against the Soviet ultimatum, only to be told to comply with Stalin's demands. The loss of the regions without any fighting to the Soviet Union was felt to be a national humiliation by the Romanian people and was a huge blow to Carol's prestige. By 1940, Carol's personality cult had reached such extreme heights that the withdrawal from Bessarabia and northern Bukovina without any resistance revealed that Carol was a mere man after all.
On 28 June 1940, Sima entered the cabinet as Under-Secretary of State at the Ministry of Education . On 1 July 1940, Carol renounced both the 1926 alliance with France and the 1939 Anglo-French "guarantee" of Romania in a radio speech, saying that henceforth Romania would seek in its place in the German-dominated "New Order" in Europe. The next day, Carol invited a German military mission to train the Romanian Army. On 4 July 1940, Carol swore in a new government headed by Ion Gigurtu with Sima as Minister of Arts and Culture. Gigurtu had been a leading figure in the anti-Semitic National Christian Party in the 1930s, was a millionaire businessman with many connections to Germany and was a well-known Germanophile. For all these reasons, Carol hoped that having Gigurtu as prime minister would win him Hitler's goodwill, and thus prevent any further loss of territory. Along the same lines, Carol signed a new economic treaty with Germany on 8 August 1940 that finally gave the Germans the economic domination of Romania and its oil that they had been seeking all through the 1930s.
Immediately afterwards, inspired by the Soviet example in gaining Romanian territory, the Bulgarians demanded the return of Dobruja, a territory they lost in the Second Balkan War of 1913, while the Hungarians demanded the return of Transylvania, which was lost to Romania after World War I. Romania and Bulgaria opened talks that led to the Treaty of Craiova, which provided for the cession of southern Dobruja to Bulgaria. On the other hand, Carol proved unwilling to cede Transylvania, and had it not been for the diplomatic intervention of Germany and Italy, Romania and Hungary would have gone to war with each other in the summer of 1940. Hitler was alarmed about the possibility of a Hungarian-Romanian war, which he feared might result in the destruction of Romania's oil fields or might lead to a Soviet seizure of all of Romania. At this time, Hitler was already seriously considering invading the Soviet Union in 1941, and if he were to take such a step, he would need Romanian oil to power his military.
The Axis solution to the Hungarian-Romanian conflict was the Second Vienna Award of 30 August 1940. In this agreement, the German Foreign Minister Joachim von Ribbentrop and the Italian Foreign Minister Count Galeazzo Ciano ruled that northern Transylvania was to go to Hungary while southern Transylvania would stay with Romania. This was a compromise that left both Budapest and Bucharest deeply unhappy. For economic reasons, Romania was far more important to Hitler than was Hungary, but Romania had been allied to France since 1926 and had flirted with joining the British-inspired "peace front" in 1939, so Hitler, who personally disliked and distrusted Carol, felt that Romania deserved to be punished for waiting so long to align with the Axis. After the fall of Paris in June 1940, the Germans captured the archives of the French Ministry of Foreign Affairs and were thus well-informed about the double-line that Carol had pursued until the spring of 1940. Extracts from the captured French documents were translated into German for Hitler's reading (Hitler knew no other language other than his native German), who was not impressed with Carol's efforts to forge closer ties with France at the same time proclaiming his friendship towards Germany. Along with the Vienna award, Hitler offered Carol a "guarantee" of the rest of Romania against further territorial losses, which Carol promptly accepted.
In the meantime, Carol had General Ion Antonescu imprisoned on 9 July 1940 after the latter had criticized the king, charging it was the corruption of the royal government that was responsible for the military backwardness of Romania, and hence the loss of Bessarabia. Both Fabricius and Hermann Neubacher, the man in charge of the Four Year Plan's operations in the Balkans, intervened with Carol, saying that Antonescu's "accidental death" or being "shot while trying to escape" would "make a very bad impression on the German headquarters," as Antonescu was known to be a leading advocate of an alliance with Germany. On 11 July 1940, Carol had Antonescu freed, but kept under house arrest at the Bistrița Monastery.
The acceptance of the Second Vienna Award completely discredited Carol with his people, and in early September 1940, enormous demonstrations broke out all over Romania demanding that Carol abdicate. On 1 September 1940, Sima, who had resigned from the government, gave a speech calling upon Carol to abdicate, and the Iron Guard contributed to the effort to force the king's abdication through demonstrations. On 2 September 1940, Valer Pop, a courtier and important member of the camarilla, first advised Carol to appoint General Ion Antonescu as prime minister to solve the crisis. Pop's reasons for advising Carol to have Antonescu appointed as prime minister were partly due to Antonescu's sympathy with the Iron Guard and his imprisonment under Carol, which lent him credibility as an opposition figure. Pop also knew that Antonescu, in spite of his affinity with the ideals of the Iron Guard, was a member of the Romanian elite and would never turn against it. As increasingly large crowds started to assemble outside of the royal palace to demand the king's abdication, Carol considered Pop's advice, but was reluctant to have Antonescu as prime minister. Pop feared that Romania was on the verge of a revolution that might not only sweep away the king's regime, but also the elite who had dominated the country since the 19th century. To apply further pressure on Carol, Pop met with Fabricius on the night of 4 September 1940 to ask him to tell Carol that Germany wanted Antonescu as prime minister. This led Fabricius to call Carol to tell him to appoint the general as the prime minister. For his part, the ambitious General Antonescu, who long coveted the prime ministership, now suddenly started to downplay his long-standing antipathy to Carol and suggested that he was prepared to forgive past slights and disputes. On 5 September 1940, Antonescu became prime minister, and Carol transferred most of his dictatorial powers to him. As prime minister, Antonescu was acceptable to both the Iron Guard and the traditional Romanian elite. Carol planned to stay as king after appointing Antonescu and initially Antonescu did not support the popular demand for Carol's abdication. But when Antonescu became Prime Minister, he had a weak political base. As an army officer, Antonescu was very unpopular with his fellow officers, above all for his arrogance and very bad temper. Antonescu's relations with the politicians were no better, and Antonescu was initially unwilling to move against the king until he had some political allies. Carol ordered Antonescu and General Dumitru Coroamă, who commanded the troops in Bucharest, to shoot down demonstrators in front of the royal palace, an order that both refused to obey. It was only on 6 September 1940, when Antonescu learned of a plot to murder him organized by another member of the camarilla, General Paul Teodorescu, that Antonescu joined the chorus demanding Carol's abdication. With public opinion solidly against him and with the Army refusing to obey his orders, Carol was forced to abdicate.
Forced under Soviet and subsequently Hungarian, Bulgarian, and German pressure to surrender parts of his kingdom to foreign rule, Carol was finally outmaneuvered by the pro-German administration of Ion Antonescu and abdicated in favour of his son Michael in September 1940. He went into exile with Lupescu, initially in Mexico, but ultimately settled in Portugal. In Mexico City, he purchased a house in one of the city's more expensive districts. During World War II, Carol tried to set up a Free Romania movement based in Mexico to overthrow General Antonescu. Carol had hopes that his Free Romania movement would be recognized as a government-in-exile, and would ultimately lead to his restoration as king. But the closest Carol ever came to having his Free Romania movement recognized came in 1942, when President Manuel Ávila Camacho allowed Carol to stand besides him while reviewing his troops. Carol would have liked to operate out of the United States, but the American government refused him permission to enter. Carol was in contact nonetheless with two Eastern Orthodox priests living in Chicago who organized an unsuccessful campaign in the Romanian-American community to pressure the American government to recognize the "Free Romania" committee as the legitimate government of Romania. To advance his cause, Carol published a magazine in America called The Free Romanian and published several books in both Romanian and English.
A major problem for Carol's efforts to mobilize the Romanian-American community in the United States was the Immigration Control Act of 1924, which drastically limited immigration from Eastern Europe. As such, the majority of Romanian-Americans in the 1940s were either people who immigrated prior to 1924 or their children. In either case, Carol did not mean much to them. Furthermore, many Romanian-Americans were Jews who had not forgotten that it was Carol who had appointed the anti-Semitic fanatic Goga as prime minister in 1937. To improve his image with Jews, Carol persuaded Leon Fischer, the former vice-president of the United Romanian Jews of America, to write articles on his behalf in American Jewish magazines that portrayed the former king as the friend and protector of the Jews and an enemy of anti-Semitism. The reaction to Fischer's articles was overwhelmingly negative, with a flood of letters to the editor who complained bitterly that it was Carol who signed in all of Goga's laws that took away Romanian citizenship from Jews, made it illegal for Romanian Jews to own land and shares in public companies, and work as lawyers, doctors, teachers, etc. Furthermore, the writers of the letters noted that Carol allowed these laws to remain on the statute books after dismissing Goga.
Carol's offers to have his Free Romania committee recognized as a government-in-exile was hindered by his unpopularity in his own homeland with many British and American diplomats arguing that supporting the former king was likely to increase public support for General Antonescu. Beyond that, there was a rival Free Romania committee headed by Viorel Tilea and based in London that wanted to have nothing to do with Carol's committee in Mexico City. Tilea had supported the Iron Guard as a university student in the 1930s, but he changed his views after attending Cambridge University in England as an exchange student and broke with the Iron Guard. When General Antonescu was sworn in as prime minister in Romania in 1940, Tilea resigned as Romanian minister in London in protest. Later in 1940, Tilea formed his Free Romania committee in London that attracted support from a number of Romanians who fled the Antonescu regime into exile. Tilea's Free Committee was not officially recognized by the British government, but was known to have the support of Britain and to be very close to the Polish government-in-exile, a major reason why the British spurned the Carol's rival Free Romania committee based in Mexico City, which tended to attract support only from those Romanians who been closely associated with the king's camellia. Tilea's committee had an office in Istanbul that regularly sent couriers to a safe house in Bucharest, where messages were exchanged with one of Carol's former prime ministers, Constantin Argetoianu, who in turn acted as an emissary for those opposed to Antonescu. Argetoianu reported that King Michael was opposed to the Antonescu regime and wanted to stage a coup d'état to depose Antonescu, waiting only for the Allies to invade the Balkans. General Antonescu was the dictator, but Romanian army officers took their oath of loyalty to the king, so there was reason to believe in London that the Romanian Army would side with the king against the prime minister if the two came into conflict. From the British viewpoint, associating themselves with Carol's campaign to once again depose his own son would only complicate their dealings with King Michael.
Carol and Magda Lupescu were married in Rio de Janeiro, Brazil, on 3 June 1947, Magda calling herself Princess Elena von Hohenzollern. In 1947, after the Communist take-over of Romania, a Romanian National Committee was set up to oppose the Communist regime. Carol's efforts to join the Romanian National Committee were rebuffed as all the factions were opposed to him, and Romanian monarchists on the committee made it clear that they regarded King Michael, not his father, as the legitimate king of Romania. Carol remained in exile for the rest of his life. He was never to see his son, King Michael, after his 1940 departure from Romania. Michael could see no point in meeting his father who had humiliated his mother so many times via his open affairs and did not attend his father's funeral.
Carol died in Estoril, Portugal in 1953. His coffin was placed inside the Braganca family pantheon in Lisbon. His remains were finally returned to the Curtea de Argeș monastery in Romania in 2003, the traditional burial ground of Romanian royalty, at the request and expense of the government of Romania. They lie outside the cathedral, the burial place of Romanian kings and queens, as Elena was not of royal blood. Neither of his sons participated in either ceremony. King Michael was represented by his daughter, Princess Margarita, and her husband, Prince Radu of Romania.
Carol Lambrino was forbidden (since 1940) from entering Romanian territory, but a Romanian court declared him a legitimate son in 2003. Carol visited Bucharest in November 2005, shortly before his death.
Carol appears as a character [as Prince Carol] in the final episode of the third season of Mr Selfridge, where he is played in a cameo appearance by British actor Anton Blake.