So how come? How is it that Austria and Germany are different countries, especially since the Habsburgs owned just about all that land.
To add more to this query, how come Switzerland is also not part of some enormous Austro-German state?
Habsburgs ruled Austria. The von Hohenzollerns ruled Germany from 1871 to 1918.
Germany and Austria were in fact enemies before 20th century. Prussia, a kingdom in Germany, was battling for unification. This meant that they had to beat Austrians to have even more influence over other German states. Only before WW1 did Germany realise that they had to maintain close ties withz Austria Hungary because of the BritishFrenchRussian alliance.
Switzerland maintained its neutrality since the Napoleonic Wars and they were never interested in such a union. Also, the country had some Italian and even more French population.
Why did these countries not merge? Well, the Versailles Treaty (signed by Germany after WW1) actually forbade both countries from merging. It clearly stated that Germany could not annex Austria.
However, during Hitlers reign Germany basically discarded almost all bans and limitations of the treaty. Annexation of Austria just before WW2 is also against the treaty. Germans could not do this earlier because the state or the country wasn't powerful yet to object this clause, since this would give Britain and France a lawful claim to war.
And needless to say, Germany and Austria were governed by occupying forces after WW2 so the idea was forgotten.