Hungary and Austria engaged in awkward diplomacy — it offers hope of relaxation (7,4)
I believe the answer is:
holiday camp
'it offers hope of relaxation' is the definition.
The definition suggests a singular noun which matches the answer.
'hungary and austria engaged in awkward diplomacy' is the wordplay.
I cannot quite understand how this works, but
'hungary' could be 'h' (abbreviation used in vehicle registration codes) and 'h' is present in the answer.
'austria' could be 'a' and 'a' is found in the answer.
an anagram of 'diplomacy' is 'olidycamp' which is within the remaining letters.
This accounts for all the letters.
This explanation may well be incorrect...
Can you help me to learn more?
(Other definitions for holiday camp that I've seen before include "something for the rest of the workers" , "place for rest?" , "All-inclusive vacation destination" .)