Author's note to all new comers of this story: The original idea for this story was conceived all the way back when VC1 was still a new game in 2008, before any of the subsequent entries to the series were released. As such, for plot purposes of this story, in-universe, the events of VC4 will be considered non-canon, while VC2&3 will be considered 'broad strokes' canon, with certain select elements such as characters, locations, technologies, events, etc, being incorporated into the story, but with the exact details changed.
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This story will be a total reboot and reimagining of the "Valkyria Chronicles: Modern Warfare" which I had written back in 2010 that I had published on this site, but was soon abandoned afterwards. Originally published over at another forum starting in late 2016. After the overwhelmingly positive response I received from other users on that forum, I decided to share this story over here as well.

The End of the EW2 and the the East Europan Revolution (1938-1939)

By early 1938, after the entire Europan continent was engulfed by the merciless and devastating flames for EW2 for almost 3 long years, the Atlantic Federation had managed to not only pushing back the Imperial advance, but also counterattacking deep into the Empire's heartlands. But with both sides too exhausted to pursue the war any further, it was obvious to everybody that the end of the war could be achieved only through diplomacy.

In mid-1938, a series of ceasefire agreements finally led to a peace treaty between the two superpowers, as dictated by the Federation. Under the terms of the treaty, harsh terms were imposed on the Empire, with them being forced to pay heavy reparations to the Federation (Galia was not included in the deal, since they negotiated a separate peace of status quo antebellum a year before that point), acknowledge the Federation's territorial gains from the war, and to grant full independence to a number of their conquered territories (including General Jaeger's homeland of Fhirald) to serve as buffer states, with pro-Federation republican governments being installed.

With their economy already stretched to the breaking point and facing internal unrest at home, the Imperial Alliance had no choice but to accept the conditions. Otherwise the Federation could have simply spent a few months regrouping before crushing them utterly if they refused.

The treaty was formally signed on September 6 1938, declaring the end of the Second European War after 3 years of fighting. A war that will forever changed the destiny of Europa and the entire world….

While the Empire had always had to deal with internal dissidences since the nation's founding, they had historically been able to keep it's large population under control though a combination of 'bread and circuses' and iron-fisted suppression. With the defeat of the Empire in EW2, however, not only did it utterly failed in achieving it's strategic war aims of securing additional sources of ragnite, the war meant that they had used up most of their reserves. And with the loss of resource rich territories due to the peace treaty, the Empire entered a state of terminal economic decline and hardship, causing the mounting internal dissent (Which were already high due to anger over the failure of the war) to escalate. Soldiers who just came home from the front soon found themselves being deployed to violently put down protesters in their own country.

The definitive trigger that caused what would later be remembered as the East Europan Revolution is still a hotly debated topic amongst historians to this day. All that is known for sure is that worker at the Zechmeister Armaments manufacturing plant organized a labor strike, demanding better wages and living conditions, after months of being forced to work without pay. Judging it's armaments industry to be of national importance, the imperial government responded by sending in soldiers to break up the strike by force.

Accounts from those sympathetic to the strikers suggested that when orders came in for soldiers to open fire on the workers, the captain in command refused to obey his orders, resulting in the political officer attached to his company trying to arrest him. While pro-Imperial sources maintained that the captain was secretly a dissident who has been building up underground support within the company under his command for months prior, and used the opportunity to escalate an already tense situation by verbally provoking the political officer in charge.

The only that is certain was that a single shot was fired, but no matter the cause, it was enough to turn the scene into chaos, with many of the soldiers making common cause with the impassioned and enraged strikers, turning against their own former comrade-in-arms. A brief firefight later, the soldiers loyal to the Imperial government was forced to retreat from the factory.

News quickly spread across the Empire, with rumors of an armed insurrection against the Imperial government supported by elements of the army. As a result, sporadic violence began to break out across the country, as mutiny spread throughout the ranks of the Imperial Military. With the loss of so many of their seasoned veterans to both Galia and the Federation during EW2, the remaining officers, who mostly came from nobility who were promoted due to family connections instead of abilities, were unable to keep their troops under control.

Despite the Emperor and his minister's promises to restore order, the situation escalated with each passing day. As the violence spreading further across the country, gangs of discontent workers and mutineer army units began to attack and loot the grand estates of the aristocracy, seizing their property at gunpoint and setting up 'people's courts' to purge those they deemed responsible for dragging them into the two devastating continental wars. In turn, the loyalist forces enacted brutal crackdowns upon the rebels using the same terror tactics that they employed in occupied territories during the war.

The violence finally came to a climax when a group as assassins infiltrated the imperial palace and assassinated the Emperor alongside the entire direct line of the royal family. A council of high nobles, together with loyal military generals quickly took control to keep what remain of the Empire together.

Realizing the hopelessness of the situation, the ruling council decided to effectively concede defeat by abandoning the capital. Evacuating what is left of the government and order all remaining loyal military units to regroup in the north-western parts of the country near the Gallian boarder, in the hopes that someday the Imperials will be able to 'restore order' in the rest of the country. The surviving aristocracy and their loyal retainers quickly followed suit, moving as many men and materials (Most importantly, many materials relating to the Artificial Valkyria project) to safety as possible in the few remaining roads that were still under Imperial control. This temporary arrangement however soon became a permanent one, and the Imperial Remnants find themselves effectively in exile and reduced to a rump state, but still claiming to be the legitimate government of all of East Europa.

In the streets of former Imperial capital of Schwartzgrad, the crimson hammer and sickle flag of the communists is now raised over the heavily damaged ruins of the Imperial palace and other government buildings. By sun rise, a new East Europa now stands before the shell-shocked continent, the old order lies shattered and with the nation enters in a new, unpredictable future…