Well, I'm somewhat limited in what I can do at the moment due to not having access to my game PC, but I've always found the Hungarian back story in Kaiserreich to be really...lacking, so I came up with this new version (modifying what I found on the Kaiserpedia). Parts between [] are optional, since I'm not sure if that's too much information or not.
Between the Ausgleich of 1867 and the Weltkrieg in 1914, the Kingdom of Hungary was focused entirely on it's own internal development and experienced what might be termed it's Golden Age. Although a time of growth and progress in every area imaginable, long-term problems like the minorities question remained. The Hungarian millennium celebrations in 1896 represented the height of this Golden Age, but in a few short years, the bloodbath of 1914 would be waiting. Although Prime Minister Tisza István debated about the wisdom of an ultimatum and an eventual war with Serbia for several weeks after the assassination, he eventually agreed and within a few weeks the Weltkrieg began. On the front lines, Hungary paid a heavy price in blood, with 600,000 dead out of the total 1,016,000 losses suffered by the Austro-Hungarian forces during the war, and the home front was brought to near collapse by the labor strikes and socialist agitation which limited industrial output and notably reduced the supply of coal, which had to be imported from Germany. [Prime Minister Tisza István, by virtue of being seen as the architect of the war, was assassinated in 1918 by radical socialist elements, being replaced by the reformer Wekerle Sándor.] By virtue of being the Empire's granary, Hungary was spared the effects of near-starvation felt by the other participants, but all still breathed a large sigh of relief at war's end in 1921.
With victory in the war and territorial gains at the expense of Serbia and Romania, the new elections saw Károlyi Mihály's socialist/peace party swept into power with promises of now winning the peace. Internally, he instituted a program of reform, namely expansion of the voting franchise, land reform, development of industry and a social security system of free healthcare/education and pensions, largely continuing the plans of Wekerle Sándor. These reforms were financed by the extremely inflated price of agricultural goods in Europe following the war, from which Hungary emerged as a relatively unharmed large producer and the upgrading of the Budapest-Fiume railroad to handle the larger export traffic to the rest of Europe only added to the profits. Militarily, Károlyi appointed Linder Béla, an avowed pacifist as Chief of Staff of the Hungarian Homeland Defense Forces (the third branch of the A-H military, answering only to Budapest), who proceeded with a program of demobilization and reduction of military spending to drastic levels, maintaining a small core of officers and a system of reserve units existing on paper that would in theory be effective in wartime as well. As part of these cutbacks, and after the loss of the expensive SMS Szent István in 1918, naval spending was significantly reduced, and Hungarian military innovators such as Horthy István (son of famous admiral Horthy Miklós) called for increased airforce spending to take up the slack, without success.
The Ausgleich negotiations of 1927 represented what Prime Minister Károlyi called a victory and his detractors called a truce for 10 years. The Austrian portion of the Empire, shaken by ethnic strife in Bohemia was both weak and divided with the infant Emperor Otto on the throne, and so the demands put forward by the Hungarians were nothing short of revolutionary: Full independence of Hungary from the Austro-Hungarian Empire with a common monarch and economic union remaining but no common military or foreign policy. The Austrians, furious though unable to do much were forced to rely on German mediation to resolve the question, which resulted in the reduction of the Hungarian contributions to the common military from 36% in funding to 15% in both funding and manpower, imposing a new limit on the common army's ability to conscript Hungarians and enhancing the gains made from military cutbacks already implemented in the Hungarian branch of the military.
The prosperity of this period bought by the neglect of the military soon suffered from the realities of the unanswered minorities question and following the example of the western parts of the Empire, the Hungarian minorities rebelled in 1929 after the coup in Romania, posing a serious threat to a Hungarian government with few forces to restore order and an unwilling (and no doubt amused) Austrian partner. Only the intervention of officer militias composed of now-unemployed officers and led by the cashiered officer Gömbös Gyula managed to restore and highlighted the need to rebuild a Hungarian military. Following the elections of 1930 on which these officer militias exerted a strong influence, the new conservative leaning government of Darányi Kálmán introduced the Győri program, a complex and extremely expensive plan for the total rearmament of the country both through outright military spending and through infrastructure developments and military industry. Phase I of the program, accomplished in 1934, has resulted in eight fully trained [and modern] infantry divisions and the beginnings of an airforce under the sole command of Budapest.
The Kingdom of Hungary in 1936 stands at a crossroads and large problems are building just beneath the surface. The new agricultural production coming online in the eastern states threatens to drive down prices and cut the lifeblood of the Hungarian economy, which although somewhat diversified, still relies on agriculture for a large portion of it's income. The minorities question remains unanswered and with the rise of Syndicalism across Europe, the fusion of it with nationalist ideology within the minority communities could be Hungary's undoing. The officer militias have gained much power and prestige, including the appointment of Gömbös as Director of Military Intelligence, and increasingly resemble a state within a state. The Ausgleich is due to be renegotiated in 1937, with no one sure of what demands should be put forward or what the reaction of the Austrians and their German backers will be.
The Hungarian Kingdom is surrounded by enemies and survival depends on how to resolve these problems.