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The story is set on a large Balkan agricultural estate in the 1920s. It is one of a number of properties belonging to the glamorous Countess Maritza. She has not visited the place for some time, perfering the whirl of international high society in the capitals of Europe. A new manager has recently been appointed to oversee the property.
Manja the gipsy girl suspects that this new manager is accustomed to a more elevated life-style than his present position. He enters with a group of children from the village who sing and dance for him as a special thank-you for his kindness to them. It is revesled that the manager is none other than Count Tassilo Endrody-Wittenberg, formerly the toast of Budapest and Vienna. His father's death has left his family penniless.
Tassilo has been forced to sell-up and take his present menial position in order to provide a dowry for his younger sister, Lisa, in the hope that she will find a better future. He admits to a friend that he often longs for his old way of life, but he has at least kept news of his family's ruin from Lisa.
The tranquility of Tassilo's present pastoral existence is shattered by the arrival of the countess and her entourage. They have come to spend an evening at the property to celebrate the countess' engagement. Tassilo is alarmed to find that Lisa is one of the vistors. At the first opportune moment Tassilo tells Lisa that his presenmt situation is the result of a crazy wager, but she must not reveal his true identity. Together they relive the joys of their earlier life.
It is revealed that Maritza's engagement is a sham, to encourage unwelcome would-be suitors. She names her pretend fiance after one of the characters in Johann Strauss' The Gyspy Baron - Baron Kiloman Zsupan from Varasdin. Difficulties arise when someone of just that name arrives, bent on sweeping Maritza off her feet and carrying her off to his home. When the guests are celebrating indoors, Tassilo gives vent to his mood of depression outside on the terrace, accompanied by a gipsy violinist. Maritza and her guests are about to leave when Manja asks if she may read her palm. Manja foretells that within a month Maritza will fall in love with a handsome nobleman. Her independence at stake, Maritza tells her guests to leave. She will remain on the estate alone, where there is no one who fits the gipsy's description.
A month has passed. Maritza's guests return. Zsupan realises that his intention to marry Maritza was a mistake. Instead, a strong mutual attraction has developed between him and Lisa.
Prince Popolescu, Maritza's elderly admirer, suggests a party to celebrate their reunion. But Maritza is beginning to be attracted to the sincerity and straightforwardness of her manager. She finds herself tiring of the superficiality of her society friends.
"If I were a simple village girl," she asks Tassilo, "how would you talk to me?" Tassilo acts out the part of a young society man making up to a pretty girl. Maritza is greatly charmed when Tassilo is caught up in his play-acting and realises he has made a sincere declaration of love to her.
Popolescu shatters Maritza's romantic notions. The manager has been seen hand in hand with Lisa. A letter Tassilo carelessly left lying around seems to point to his quest for Maritza's money.
In the finale Maritza exposes Tassilo to her guests as a penniless aristocrat, an imposter seeking her fortune. With contempt, she pays him off with a bundle of banknotes, With equal vehemence he flings the money at the assembled company. Lisa intervenes and Maritza realises that the two are, in fact, brother and sister. She is now certain of Tassilo's love, but how can she redeem herself in his eyes?
The following day, Tassilo presents himself to Maritza to finalise business matters and to say goodbye, before leaving. Obviously the two are deeply in love with each other, but neither will take the first step towards reconciliation. Instead Maritza writes Tassilo a reference and says goodbye.
Tassilo and Lisa are about to leave when an unexpected visitor arrives. It is Princess Bozena Cuddenstein, Tassilo's wealthy aunt, with her servant Penezek in tow. The princess has only just heard of the misfortunes of Tassilo's family and is determined to help him. She even has a wealthy bride in mind for him.
The princess quickly recognises the relationship between Maritza and Tassilo and is quite impressed with Maritza. Still, there is no move to reconciliaton until Maritza asks if Tassilo has read her reference for his next job. He opens the envelope, takes out the letter and reads:
Though as a manager you won't do,
All is forgiven. The curtain falls on two happy couples: Maritza and Tassilo, Lisa and Zsupan.
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The Orpheum Cabaret Theatre in Budapest
Feri and Boni persuade Sylva to sing an eighth encore after what is to be her farewell performance before making an American tour. Boni and Feri discuss the passion of the absent Edwin for Sylva and the unlikelihood of his aristocratic family ever allowing him to marry her. Boni is carrying a telegram for Edwin which he suspects is another demand to return to his family in Vienna. If they were fathers, the two men about town decide, they would introduce their sons early to showgirls to complete their educations - there is nothing like the ladies of the chorus as tutors in the ways of love.
Boni delivers the telegram to Edwin - another demand from his father to give up Sylva and return home, but he refuses to be moved and tries to convince Sylva not to go away, since she is only leaving because she loves him and is aware of his difficult position. Boni distributes gifts to the dancers, as he is off to America as Sylva's manager. He declares that he is always trying, unsuccessfully, to give up girls. Sylva reasserts that she is leaving because she loves Edwin and proposes a toast to love.
Edwin's cousin Rohnsdorff brings him an order to report to his commanding officer in Vienna the next morning and Edwin, while suspecting that it is a ruse to separate him from Sylva, cannot disobey. Rohnsdorff is not sympathetic to Edwin's passion for a showgirl, particularly as he has a fiancee at home in Vienna. Edwin denies that he is engaged to his cousin Stasi, who has been brought up with him, but Rohnsdorff says that both Stasi and Edwin's parents think otherwise.
Sylva comes to bid Edwin farewell and Rohnsdorff is impressed by her glamor. Edwin agrees to go with Rohnsdorff in half an hour and goes off to arrange a surprise he is planning. Rohnsdorff shows Boni the announcement of Edwin's engagement to Stasi which his parents, unbeknown to him, have had printed, to force his hand.
Edwin brings Sylva back and calls for a lawyer. He has a contract drawn up, by which he promises to marry Sylva in eight weeks' time. Both sign it, but when Sylva shows it to Boni, telling him she is not going to America, he tells her about Edwin's engagement to his cousin so she decides to devote herself to her art and make the American tour after all.
The villa of Prince Lippert-Weylersheim
A party is in progress and the prince and princess, Edwin's parents, watching him dance with Stasi, congratulate themselves on the fact that their son seems to have consoled himself for the loss of Sylva.
Stasi cross-examines Edwin about Sylva. Discussing the marriage they are supposed to be making, they agree that at least they are very fond of one another and that the other eligible suitors are too boring to contemplate, so they agree that they might as well enter into a marriage of convenience which will leave them both free to follow other interests if necessary.
Boni appears, with Sylva, who he claims is his wife and Prince Lippert-Weylersheim is impressed by the young countess. The American ambassador Macgrave remarks on her resemblance to the singer Sylva Varescu whom he had recently seen in New York and who, he said, had been jilted by some prince in Budapest.
Edwin demands to know what is going on and Boni continues to insist that he and Sylva have just got married. He then confronts Sylva who tells him she has come to see his fiancee, the girl he had been in love with when he played what she considers to have been a trick with the marriage contract. She claims that she loves Boni, so Edwin declares that he will marry Stasi, but both are overcome with nostalgia for the happy days gone by. The situation is made more complicated by the mutual attraction of Boni and Stasi.
Edwin's father confesses to Sylva that if the cabaret singer really resembles her so closely, he can almost excuse his son's love for her, but adds that now that Edwin has had his fling he is ready to settle down with the right wife.
Boni confesses his love for Stasi and assures her that he can easily dispose of his supposed wife. Edwin, having cleared up Sylva's misunderstanding about the marriage contract, tries to get her to admit that she still loves him. Boni readily agrees to divorce her, but there is still a stumbling block: while Edwin is delighted at being able to tell his parents that he loves the Countess Kancsianu, as this will remove the obstacle of his marriage to a cabaret singer, Sylva feels that he is ashamed of her and decides to leave.
The prince and princess detain her and announce the betrothal of Edwin and Stasi; but Edwin declares that he does not love Stasi, but another, pointing to Sylva. She in turn refuses to pretend any longer and declares that she is not Boni's wife, and produces the marriage contract signed by Edwin, thus revealing her true identity. The eight weeks are nearly up, but she tears up the document, even though Edwin declares that the contract still stands. Boni and Sylva leave and the prince stops Edwin from following.
The Hotel Winkelbaum in Vienna, just after the end of Act II
Boni tries to convince Sylva that Edwin was not ashamed of her. To Feri and the dancers they explain that they have cut short their American tour and Sylva says she is not coming back to the Orpheum, but will marry Boni. Feri is unimpressed, telling her he too once suffered the pangs of love, and encourages her not to give up the stage. He calls on a gipsy violinist to cheer her up.
Edwin appears and confronts Boni, demanding to know what he is up to - first showing Sylva the engagement notice and then pretending to be married to her. Boni's attempts to explain that he really loves Stasi are interrupted by the announcement of the arrival of Prince Lippert-Weylersheim and Edwin leaves, not wanting to see his father. Boni seizes the opportunity to ask for Stasi's hand, and when the prince declares that she loves Edwin, Boni rings the villa and proposed to Stasi, who accepts him.
Feri introduces himself to Edwin's father and tells him that he thinks it his duty to allow Edwin to marry Sylva, reminiscing about his own youthful love for a dancer, who had married first a general, then a count. He shows the prince her picture and he recognises his wife. When she appears, she recognises Feri, but he discreetly pretends not to recognise her and leaves. The prince confronts her with her past and decides that he might as well give in to Edwin, who is probably showing the unfortunate effects of heredity in falling in love with a showgirl.
Stasi tells Boni she wants to be sure Edwin and Sylva are happy before fixing their wedding day, and he assures her that he has the matter in hand. He waits till Sylva is in earshot and then pretends to be talking to Edwin on the phone and trying to dissuade him from suicide. Sylva begs him to assure Edwin of her love and Edwin, coming into the room behind her, is overjoyed, so both couples are happily united.
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