The Austro-Hungarian Compromise of 1867 (German: Ausgleich, Hungarian: Kiegyezés), or Composition of 1867, established the dual monarchy of Austria-Hungary. The Compromise partially re-established the sovereignty of the Kingdom of Hungary, separate from, and no longer subject to, the Austrian Empire. Under the Compromise, the lands of the House of Habsburg were reorganized as a real union between the Austrian Empire and the Kingdom of Hungary. The Cisleithanian (Austrian) and Transleithanian (Hungarian) regions were governed by separate parliaments and prime ministers. Unity was maintained through the rule of a single head of state, reigning as both Emperor of Austria and King of Hungary, and common monarchy-wide ministries of foreign affairs, defence and finance under his direct authority. The armed forces were combined with the Emperor-King as commander-in-chief.
The names conventionally used for the two realms were derived from the river Leitha, or Lajta, a tributary of the Danube and the traditional border between Austrian and Magyar lands. The Leitha did not, however, form the entire border, nor was its whole course part of the border: the Cis- and Trans- usage was by force of custom rather than geographical accuracy.
Hungarian political leaders had two main goals. First, as far as possible to regain the traditional status (both legal and political) of the Hungarian state, which was lost after the revolution of 1848; and second, to restore the reform laws of the revolutionary parliament of 1848, which were based on the ten points that established modern civil and political rights, economic and societal reforms in Kingdom of Hungary.
According to Emperor Franz Joseph I of Austria, only three people contributed to the compromise: "There were three of us who made the agreement: Deák, Andrássy and myself."
In the Middle Ages Austria was a quasi-independent state within the Holy Roman Empire, ruled by the House of Habsburg, while the Kingdom of Hungary was a sovereign state outside the empire. In 1526 at the Battle of Mohács, Hungary was defeated and partially conquered by the Ottoman Empire. The young king Louis II of Hungary, who had no legitimate heir, died on the battlefield. The crown of Hungary was inherited by the Habsburgs. The Ottomans were subsequently driven out of Hungary in 1699. From 1526 to 1804, Austria and Hungary were in a personal union under the Habsburgs, but remained nominally and legally separate.
In 1804, Francis II, Holy Roman Emperor, who was also ruler of the lands of the Habsburg Monarchy, founded the Empire of Austria, in which all his lands were included. In doing so he created a formal overarching structure for the Habsburg Monarchy, which had functioned as a composite monarchy for about three hundred years. Until the 1848 revolution, the workings of the overarching structure and the status of its component lands stayed much the same as they had been under the composite monarchy that existed before 1804. This was especially demonstrated by the status of the Kingdom of Hungary, a country which had always been considered a separate realm—a status that was affirmed by Article X, which was added to Hungary's constitution in 1790 during the phase of the composite monarchy and described the state as a Regnum Independens. Hungary's affairs continued to be administered by its own institutions (King and Diet) as they had been previously. Thus under the new arrangements no Imperial institutions were involved in its internal government. The Holy Roman Empire was abolished in 1806.
The administration and the structures of central government of Kingdom of Hungary remained well separated from the Austrian Imperial administration and Austrian government until the 1848-49 revolution. Hungary was governed to a greater degree by the Council of Lieutenancy of Hungary (the Gubernium) in Pressburg (Pozsony) and to a lesser extent by the Hungarian Royal Court Chancellery in Vienna (which was independent of the Imperial Chancellery of Austria)
In this period, the Kingdom of Hungary maintained its own customs borders, which separated Hungary from the customs system of the rest of the Empire of Austria. After the Hungarian revolution of 1848-49, the independent customs system of Hungary was abolished, and Hungary became part of the unified imperial customs system on 1 October 1851.
In the failed Hungarian Revolution of 1848, the Magyars came close to regaining independence, and were defeated by the Austrian Empire only with the military intervention of the Russian Empire. After the restoration of Habsburg power, Hungary was placed under martial law. Prime Minister Félix von Schwarzenberg and his government, operating from November 1848, pursued a radically new imperial policy. It wanted to develop a uniform empire in the spirit of the imperial constitution issued by Franz Joseph I in Olmütz on 4 March 1849, and as a result, Hungary's constitution and her territorial integrity were abolished. A military dictatorship was created in Hungary. Every aspect of Hungarian life was put under close scrutiny and governmental control.
German became the official language of public administration. An edict issued on 9 October 1849 placed education under state control, the curriculum was prescribed and controlled by the state, the teaching of national history was restricted, and history was taught from a Habsburg viewpoint. Even the bastion of Hungarian culture, the Academy, was kept under control: the institution was staffed with foreigners, mostly Germans, and the institution was practically defunct until the end of 1858. Hungarians responded with passive resistance. Anti-Habsburg and anti-German sentiments were strong. In the following years, the empire instituted several reforms, but failed to resolve these problems.
In 1866, Austria was completely defeated in the Austro-Prussian War and its position as the leading state of Germany ended forever, as the remaining German minor states were soon absorbed into the German Empire created by Prussia. Austria also lost almost all of its remaining claims and influence in Italy, which had been its chief foreign policy interest.
The state needed to redefine itself to maintain unity in the face of nationalism.
As a consequence of the Franco-Austrian War and the Austro-Prussian War, the Habsburg Empire was on the verge of collapse in 1866, as these military endeavours resulted in monumental state debt, and a financial crisis.
The Habsburgs were forced to reconcile with Hungary to save their empire and dynasty. The Habsburgs and part of the Hungarian political elite arranged the Austro-Hungarian Compromise of 1867, even though the overwhelming majority of the populace wanted full independence.
Hungarian statesman Ferenc Deák is considered the intellectual force behind the Compromise. Deák initially wanted independence for Hungary and supported the 1848 Revolution, but he broke with hardline nationalists and advocated a modified union under the Habsburgs. Deák took the line that, while Hungary had the right to full internal independence, questions of defence and foreign affairs were "common" to both Austria and Hungary under the Pragmatic Sanction. He also felt that Hungary benefited from continued union with wealthier, more industrialized Austria, and that the Compromise would end the pressures on Austria to continually choose between the Magyar and Slav populations of the Kingdom of Hungary. Imperial Chancellor Beust quickly negotiated the Compromise with the Hungarian leaders. Beust was particularly eager to renew the conflict with Prussia, and thought a quick settlement with Hungary would make that possible. Franz Joseph and Deák signed the Compromise, and it was ratified by the restored Diet of Hungary on 29 May 1867.
The Compromise was negotiated and legitimised by only a very small part of Hungarian society (suffrage was very limited: less than 8 percent of the population had voting rights), and was seen by a very large part of the population as a betrayal of the Hungarian cause and the heritage of the 1848-49 War of Independence. The Compromise was very unpopular and the government resorted to force to suppress civil dissent. The Compromise caused deep and lasting schisms in Hungarian society.
Beust's desired revenge against Prussia did not materialize. When in 1870 Beust wanted Austria-Hungary to support France against Prussia, Hungarian Prime Minister Gyula Andrássy was "vigorously opposed", effectively vetoing Austrian intervention.
Under the Compromise:Austria and Hungary had separate parliaments that met in Vienna and Pest (later Budapest).
The Austrian state and the Hungarian state maintained their separate legal systems: their laws, and their traditionally independent and separate judicial systems.
Each region had its own government, headed by its own prime minister. The "dual monarchy" consisted of the emperor-king, and the common ministers of foreign affairs, defence, and a finance ministry only for the army, navy and diplomatic expenditures in Vienna.
A common Ministry of Foreign Affairs was created; it was responsible for the diplomacy and foreign policy of the Austrian Empire and Kingdom of Hungary.
There was no common citizenship in Austria-Hungary: one was either an Austrian citizen or a Hungarian citizen, never both.
Austria-Hungary used two separate passports: the Austrian passport and the Hungarian one. There was no common passport.
A common finance ministry was founded only for the expenditures of the Common Army, the navy, and the diplomatic service, and for the issue of Banknotes. It was headed by the Common Finance Minister. All other expenditures belonged to the Austrian Finance Ministry in the Austrian Empire and the Hungarian Finance Ministry in the Kingdom of Hungary, The Austrian finance minister was subordinated to the Minister-President of Austria in Austrian Empire, and the Hungarian Finance Minister was subordinated to the Prime Minister of Hungary.
The monetary and economic terms of the Compromise were renegotiated every ten years.
Despite Austria and Hungary sharing a common currency, they were fiscally sovereign and independent entities.
The Austrian Empire and Kingdom of Hungary contracted their international commercial treaties independently of each other.
The restoration of Hungarian armed forces (See Royal Hungarian Honvéd); Austria also created its own separate army (See Imperial-Royal Landwehr), but both states had to continue to finance a third and common army (See: The Common Army) which was much a larger armed force than the Landwehr and the Honvéd. A common Austro-Hungarian War Ministry was formed immediately for the large Common Army, but it had no right to command directly the small Landwehr and the Honvéd armies. The Landwehr and the Honvéd armies were respectively placed under the direct control of the separate Austrian and Hungarian Ministries of Defence. The Austrian and Hungarian Ministers of Defence were not placed under the command and jurisdiction of the Common War ministry; they were subordinated only to their own prime ministers and the respective Parliaments in Vienna and Budapest.
Under the terms of the Compromise Hungary took on a large part of the towering Austrian state debt.
The King retained royal privileges:He became the supreme warlord, holding all authority over the structure, organization, and administration of the army. He appointed the senior officials, had the right to declare war, and he was the commander-in-chief of the army.
He had the right to declare a state of emergency.
He had the right of preliminary royal assent to every bill the Cabinet Council wanted to report to the National Assembly. He had the right to veto any law passed by the National Assembly.
He had the right to dissolve the National Assembly.
He had the right to appoint and dismiss the members of the Cabinet Council.
This meant a great reduction in Hungarian sovereignty and autonomy even in comparison with the pre-1848 status quo.
The resulting system was maintained until the dissolution of the dual monarchy after World War I. The favoritism shown to the Magyars, the second largest ethnic group in the dual monarchy after the Germans, caused discontent on the part of other ethnic groups like the Slovaks and Romanians. Although a "Nationalities Law" was enacted to preserve the rights of ethnic minorities, the two parliaments took very different approaches to this issue.
The basic problem in the later years was that the Compromise with Hungary only encouraged the appetites of non-Hungarian minorities in Hungary that were historically within the boundaries of the Hungarian Kingdom. The majority of Hungarians felt they had accepted the Compromise only under coercion. The Austrian Emperor, separately crowned King of Hungary, had to swear in his coronation oath not to revise or diminish the historic imperial (Hungarian) domains of the Hungarian nobility, magnates, and upper classes. The Hungarians, having been given self-rule and a separate status, only partially acquiesced to granting "their" minorities recognition and local autonomy.
In the Kingdom of Hungary, several ethnic minorities faced increased pressures of Magyarization. Further, the renegotiations that occurred every ten years often led to constitutional crises. Ultimately, although the Compromise hoped to fix the problems faced by a multi-national state while maintaining the benefits of a large state, the new system still faced the same internal pressures as the old. To what extent the dual monarchy stabilized the country in the face of national awakenings and to what extent it alleviated, or aggravated, the situation are debated even today.
In a letter of February 1, 1913, to Foreign Minister Berchtold, Archduke Franz Ferdinand said that "irredentism in our country ... will cease immediately if our Slavs are given a comfortable, fair and good life" instead of being trampled on (as they were being trampled on by the Hungarians).
With the political agenda dominated by war and imminent defeat, in the middle of October 1918 the Hungarian government, with the agreement of King Charles IV of Hungary (who was also the Austrian Emperor Charles I), gave notice of termination. The 1867 compromise was formally terminated on 31 October 1918, ending the Chrysanthemum Revolution. Shared institutions such as the Council of Ministers remained formally in force until 2 November 1918, but by this time for all practical purposes power had devolved from Budapest to the various emerging nationally based regions that would form the basis for the redrawing of the map of central Europe at the Paris Peace Conference, 1919, which formally began its work early in 1919.