In June 1934, Hitler and Mussolini had their first meeting. Mussolini defended his support of the Austrian chancellor, Engelbert Dollfuss, while Hitler denied any intent to annex Austria but made clear his desire to see Austria in Germany's sphere of influence. Austrian Nazis, however, were embarked on a more radical course. They conspired to seize top government officials and force the appointment of a Nazi-dominated government.
The Dollfuss government learned of these plans before the putsch began on July 25 but did not make adequate preparations. Although the army and the Heimwehr (the armed militia originally associated with the CSP*) remained loyal and the coup failed, Dollfuss was killed. German intervention was stymied by the mobilization of Italian and Yugoslavian forces on the border. Adolf Hitler disavowed connection with the murder and repudiated his Austrian followers. Hitler's goal remained the eventual annexation (Anschluss) of Austria.
Dollfuss was succeeded as chancellor by Kurt von Schuschnigg; his political survival directly depended on Italian support for an independent Austria. By 1935 Mussolini was already moving toward accommodation with Hitler and began to advise Schuschnigg to do the same.
*CSP -- Christian Social Party (Christlichsozial Partei)