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Graz is a derivation of the Slav word gradec, meaning small fortress, and developed from a Bavarian settlement that was first documented in 1128. By 1189 Graz was a city, and in 1379 it became the seat of the Leopold line of the Habsburgs. Friedrich III, emperor of Austria and the Holy Roman Empire, resided here and left his famous motto, AEIOU (Austria Est Imperare Orbi Universo; Austria rules the world) inscribed all over town. In 1564, Graz became the administrative capital of Inner Austria, an area covering present-day Styria and Carinthia, plus the former possessions of Carniola, Gorizia and Istria. In 1784, with the Turks no longer a threat, Graz tore down its city walls.

Early in the 19th century Archduke Johann, benign brother of Franz I, founded the first museum in Austria, the Joanneum, in Graz. In the late 1990s the historic centre of Graz achieved the status of a Unesco World Heritage site.