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Figure 4. Austria-Hungary, 1867-1918

The Founding of the Dual Monarchy

Defeat in the Seven Weeks' War demonstrated that Austria was no longer a great power. Looking to the future, Franz Joseph set three foreign policy objectives designed to restore Austrian leadership in Germany: regain great-power status; counter Prussian moves in southern Germany; and avoid going to war for the foreseeable future. Because reconciliation with Hungary was a precondition for regaining great-power status, the new foreign minister, Friedrich Ferdinand von Beust, became a strong advocate of bringing the stalemated negotiations with the Hungarians to a successful conclusion. By the spring of 1867, a compromise had been reached and was enacted into law by the Hungarian Diet.

The Compromise Ausgleich of 1867 divided the Habsburg Empire into two separate states with equal rights under a common ruler, hence the term "Dual Monarchy." Officially, these states were Hungary and the "Kingdoms and Lands represented in the Parliament," the latter being an awkward designation necessitated by the lack of a historical name encompassing all non-Hungarian lands (see fig. 4). Unofficially, the western half was called either Austria or Cis-Leithania, after the Leitha River, which separated the two states. The officially accepted name of the Dual Monarchy was Austria-Hungary, also seen as the AustroHungarian Empire.

The two national governments and their legislatures in Vienna and Budapest shared a common government consisting of a monarch with almost unlimited powers in the conduct of foreign and military affairs, a ministry of foreign affairs, a ministry of defense, and a finance ministry for diplomatic and military establishments. In the absence of a shared parliament, discussion of the empire's common affairs was conducted by parallel meetings of delegates from the two national legislatures communicating with each other through written notes. A key topic of these meetings was the common commercial policy and customs union that had to be renegotiated every ten years.

The Austrian parliament passed legislation implementing the Ausgleich in late 1867. This "December Constitution" was the product of German-speaking Liberals, who were able to dominate parliament because of a boycott by Czech delegates. The December Constitution closely followed the constitution of 1849 and placed no significant restrictions on the emperor with regard to foreign and military affairs but did add a list of fundamental rights enjoyed by Austrians. The lower house of the Austrian parliament was elected through a highly restricted franchise (about 6 percent of the male population). Seats were apportioned both by province and by curiae, that is, four socioeconomic groups representing the great landowners, towns, chambers of commerce, and peasant communities.

By building on the two dominant nationalities in the empire, German and Hungarian, dualism enabled Austria-Hungary to achieve relative financial and political stability. It did not, however, provide a framework for other nationalities, in particular the Slavs, to achieve equivalent political stature. Indeed, the Hungarian state used its power to preclude such an outcome. Hungary interpreted provisions in the Ausgleich as requiring Austria to retain its basic constitutional structure as a unitary state, so that any federalist accommodation with the Czechs would invalidate the Ausgleich and dissolve the Dual Monarchy.

Data as of December 1993