Austria–Hungary

Austria–Hungary, also known as the Austro-Hungarian Empire, the Dual Monarchy or the k.u.k. Monarchy, or Dual State, was a monarchic union between the crowns of the Austrian Empire and the Kingdom of Hungary in Central Europe. The union was a result of the Ausgleich or Compromise of 1867, under which the Austrian House of Habsburg agreed to share power with the separate Hungarian government, dividing the territory of the former Austrian Empire between them. The Dual Monarchy existed for 51 years until 1918, when it was dissolved following military defeat in the First World War.

The Habsburg dynasty ruled as Emperor of Austria over the western and northern half of the country that was Empire of Austria (Cisleithania or Lands represented in the Reichsrat) and as King of Hungary over the Kingdom of Hungary (Transleithania or Lands of St Stephen's Crown) which enjoyed self-government and representation in joint affairs (principally foreign relations and defence).

The two capitals of the Monarchy were Vienna for Austria and Budapest for Hungary. Austria–Hungary was geographically the second largest country in Europe after the Russian Empire (621 538 km², or 239,977 sq. m in 1905 ), and the third most populous (after Russia and the German Empire). Today, the territory it covered has a population of about 69 million.

As a multinational empire and great power in an era of national awakening, it found its political life dominated by disputes among the eleven principal national groups.

The Monarchy bore the full name internationally of "The Kingdoms and Lands Represented in the Imperial Council and the Lands of the Crown of St. Stephen".

Creation
The Austro-Hungarian Compromise of 1867 which inaugurated the Empire's dualist structure in place of the former unitary Austrian Empire (1804–67) originated at a time when Austria had declined in strength and in power—both in the Italian Peninsula (as a result of the Austro–Sardinian War of 1859) and among the states of the German Confederation (where it had been replaced by Prussia as the dominant German-speaking power following the Austro–Prussian War of 1866). Other factors in the constitutional changes included continued Hungarian dissatisfaction with rule from Vienna and increasing national consciousness on the part of other nationalities of the Austrian Empire. Hungarian dissatisfaction grew partially from Austria's suppression, with Russian support, of the Hungarian liberal revolution of 1848–49. However, dissatisfaction with Austrian rule had grown for many years within Hungary, and had many other causes.

By the late 1850s, however, a large number of Hungarians who had supported the 1848-49 revolution were willing to accept the Habsburg monarchy. They took the line that while Hungary had the right to full internal independence, under the Pragmatic Sanction foreign affairs and defense were "common" to both Austria and Hungary.

In the effort to shore up support for the monarchy, Emperor Franz Joseph began negotiations for a compromise with the Hungarian nobility to ensure their support. In particular, Hungarian leaders demanded and received the Emperor's coronation as King of Hungary, and the re-establishment of a separate parliament at Budapest with the powers to enact laws for the lands of the Hungarian crown.

Full names
Names of the Empire in languages officially recognized by the Austro-Hungarian Empire:


 * Austro-Ugarska*
 * Austro-Ugarska
 * Rakousko-Uhersko
 * Österreich-Ungarn
 * Osztrák–Magyar Monarchia
 * Austria-Ungheria
 * Austro-Węgry
 * Austro-Ungaria
 * Aустро-Угарска/Austro-Ugarska
 * Serbo-Croatian: Аустро-Угарска/Austro-Ugarska*
 * Rakúsko-Uhorsko
 * Avstro-Ogrska
 * Австро-Угорщина/Avstro-Ugorshchina
 * Австро-Угорщина/Avstro-Ugorshchina


 * - Bosnian was a project of Benjamin Kallay introduced during the Austro-Hungarian occupation of the Ottoman province, in his attempt to develop a strong left-wing regionalist nationalism and fight the Greater Serbian and Croatian national ideologies. It was first formally sanctioned on 1 January 1879, however Kallay's project did not find final acceptance amongst the Bosnian-Herzegovinian population, with the very same year the local authorities suspending the term for local usage in favor of Serbo-Croatian. Serbo-Croatian was formally adopted as the official language of Bosnia-Herzegovina in 1907, replacing Bosnian. Serbo-Croatian was the official language of Bosnia and Herzegovina throughout the parliamentary period, from the annexation until the dissolution of A-H after WWI

Foreign policy
After the agreement of 1867 the Imperial foreign minister was obliged to take account of the views on the minister-president of Hungary; besides Germanisation the Hungarians were most concerned about the threat of Pan-Slavism, a concern also voiced by the German-speaking part of the monarchy. Here Russia was perceived as the immediate threat, with Serbia as its "Trojan Horse" in the Balkans. Nobody represented this view more clearly than Count Gyula Andrássy Jr., son of the first minister-president of Hungary and then himself the Imperial foreign minister.

By the late 1860s, Austrian ambitions in both Italy and Germany had been choked off by the rise of new national powers. With the decline and failed reforms of the Ottoman Empire, Slavic opposition in the occupied Balkans grew and both Russia and Austria–Hungary saw an opportunity to expand in this region. In 1876, Russia offered to partition the Balkans, but Andrássy declined for Austria–Hungary was already a "saturated" state and it could not cope with addiditonal territories. The whole Empire was thus drawn into a new style of diplomatic brinkmanship, first conceived of by Andrássy, centering on the province of Bosnia and Herzegovina, a predominantly Slavic area still under the control of the Ottoman Empire. It was a dangerous game to play in a dangerous place. A road was thus mapped out, with a terminus at Sarajevo in 1914.

On the heels of the Great Balkan Crisis, Austro-Hungarian forces occupied Bosnia and Herzegovina in August 1878 and the Empire eventually annexed Bosnia and Herzegovina in October 1908 as a common holding under the control of the finance ministry, rather than attaching it to either territorial government. The occupation of Bosnia-Herzegovina was a step taken in return for Russia's advances into Bessarabia. Unable to mediate between Turkey and Russia over the control of Serbia, Austria–Hungary declared neutrality when the conflict between the two powers escalated into a war. At the Congress of Berlin in 1878, Andrássy managed to force Russia to retreat from further demands in the Balkans. As a result, Great Bulgaria was broken up and Serbian independence was guaranteed. In order to counter Russian and French interests in Europe, an alliance was concluded with Germany in October 1879 and with Italy in May 1882.

This led some in Vienna to contemplate combining Bosnia and Herzegovina (originally Bosnien und Herzegowina) with Croatia to form a third component of the Empire.

The Great War
The deaths of Franz Joseph's brother, Maximilian (1867), and only son, Rudolf, made the Emperor's nephew, Franz Ferdinand, heir to the crown. On June 28, 1914, he visited the Bosnian capital, Sarajevo, where Bosnian Serb militants of the nationalist group Mlada Bosna, supplied by the Serbian militant group Black Hand, ambushed Franz Ferdinand's convoy and assassinated him. There were a few members of the Black Hand in Sarajevo that day. Before Franz was shot, somebody had already tried to kill him and his wife. The member of the Black Hand threw a grenade into the vehicle but Franz managed to push it away. It injured some people nearby and Franz made sure they were seen to before the convoy could carry on. Gavrilo Princip was the man who shot and killed Franz Ferdinand and his wife Sophie. The convoy took a wrong turn into a street where Gavrilo Princip was. He took out a pistol from his pocket and shot Franz and his wife.

The Empire's military spending had not even doubled since the 1878 Congress of Berlin, while German spending had risen fivefold, and British, Russian and French threefold. The Empire had previously lost ethnically Italian areas to Piedmont owing to nationalist movements sweeping through Italy, and many Austro-Hungarians perceived the threat of losing the southern territories inhabited by Slavs to Serbia as imminent. Serbia had recently gained a significant amount of territory in the Second Balkan War of 1913, causing much distress in government circles in Vienna and Budapest. Some members of the government, such as Conrad von Hötzendorf, had wanted to confront the resurgent Serbian nation for some years. The leadership of Austria–Hungary, especially Count Leopold von Berchtold, backed by its ally Germany, decided to confront Serbia militarily before it could incite a revolt; using the assassination as an excuse, they presented a list of ten demands called the July Ultimatum, expecting Serbia would never accept. When Serbia accepted nine of the ten demands but only partially accepted the remaining one, Austria–Hungary declared war.

Over the course of July and August 1914, these events caused the start of World War I, as Russia mobilized in support of Serbia, setting off a series of countermobilizations. Italy initially remained neutral, although it had an alliance with Austria–Hungary. In 1915, it switched to the side of the Entente powers, hoping to gain territory from its former ally.

General Franz Conrad von Hötzendorf was the Chief of the Austro-Hungarian General Staff during the war. Under his command, Austro-Hungarian troops were involved in much of the fighting in the Great War.

At the start of the war, the army was divided in two; the smaller part attacked Serbia while the larger part fought against the formidable Russian army. The 1914 invasion of Serbia was a disaster. By the end of the year, the Austro-Hungarian Army had taken no territory and had lost 227,000 men out of a total force of 450,000 men (see Serbian Campaign (World War I)).

On the Eastern front, things started out equally poorly. The Austro-Hungarian Army was defeated at the Battle of Lemberg and the mighty fort city of Przemyśl was besieged and fell in March 1915.

In May 1915, Italy joined the Triple Entente and attacked Austria–Hungary. The bloody but indecisive fighting on the Italian Front would last for the next three and a half years. It was only on this front that the Austrians proved effective in war, managing to hold back the numerically superior Italian armies in the Alps.

In the summer, the Austro-Hungarian Army, working under a unified command with the Germans, participated in the successful Gorlice–Tarnów Offensive. Later in 1915, the Austro-Hungarian Army, in conjunction with the German and Bulgarian armies, conquered Serbia.

In 1916, the Russians focused their attacks on the Austro-Hungarian army in the Brusilov Offensive, recognizing the numerical inferiority of the Austro-Hungarian Army. The Austrian armies took heavy losses (losing about 1 million men) and never recovered. However, the huge losses of men and material inflicted on the Russians during the offensive contributed greatly to their two revolutions of 1917. The Austro-Hungarian war effort became more and more subordinate to the direction of German planners. The Austrians saw the German army positively, but by 1916 the general belief in Germany was that they were "shackled to a corpse." Supply shortages, low morale, and the high casualty rate seriously affected the operational abilities of the Austro-Hungarian army, as well as the fact the army was of multiple ethnicity, with different peoples, languages, and customs.

The last two successes for the Austrians, the Romanian Offensive and the Caporetto Offensive, were German-assisted operations. As the Empire became more politically unstable, it became more and more dependent on German assistance. The majority of its people, not of Hungarian or Austrian ethnicity, became increasingly restless.

Dissolution of Austria-Hungary
Much of the military defeat of the Austro-Hungarian Empire in World War I could be put down to its inability to act entirely on its own because, as part of the Dual Alliance, it was effectively a military satellite state of Imperial Germany which tied its hands. After having attacked Serbia, forces soon had to be withdrawn to protect its Eastern frontier against Russia's invasion, while German units were engaged in fighting on the Western Front. This unfortunate maneuver resulted in a greater loss of men in the Serbian invasion than expected. Furthermore, during the course of the war it became evident that the Austrian high command had possessed no plans for a possible continental war and the army and navy were also ill-equipped to handle such a conflict. Former ambassador and foreign minister Alois Count Aehrenthal assumed any future war would be in the Balkan region.

Hungary's contribution
Austria–Hungary could hold on for years, as the Hungarian half provided sufficient supply for the military to continue to wage war. This was also shown in a transition of power when Hungarian prime minister István Count Tisza and foreign minister István Count Burián had decisive influence on internal and external affairs of the Monarchy. By late 1916 and early 1917, food supply from Hungary became intermittent shifting the government to seek armistice from the Entente powers. However, most of these attempts failed. Britain and France no longer had any regard to the integrity of the Empire owing to Austro-Hungarian support for Germany.

As it became apparent that the Allied powers of the British Empire, France, Italy and the United States would win World War I, nationalist movements which had previously been calling for a greater degree of autonomy for various areas started pressing for full independence. In Austria and Hungary (in places where the Austrians and Hungarians were the majority) the leftist and liberal movements and politicians strengthened and supported the separatism of ethnic minorities.

As one of his Fourteen Points, U.S. President Woodrow Wilson demanded that the nationalities of the empire have "freest opportunity to autonomous development." In response, Karl I agreed to reconvene the Imperial parliament and allow for the creation of a confederation with each national group exercising self-governance. However, the latter no longer trusted Vienna, and were now dead set on independence.

On October 14, 1918 Foreign Minister Baron István Burián von Rajecz asked for an armistice based on the Fourteen Points. In an apparent attempt to demonstrate good faith, Karl I issued a proclamation two days later, transforming Austria into a federal union of four components—German, Czech, South Slav and Ukrainian. The Poles were granted full independence with the purpose of joining their ethnic brethren in Russia and Germany in a Polish state, and Trieste was to receive special status.

It was all for naught; four days later, on October 18, Secretary of State Robert Lansing replied that the Allies were now committed to the causes of the Czechs, Slovaks and South Slavs. Therefore, Lansing said, autonomy was no longer enough, and Washington could not deal on the basis of the Fourteen Points anymore. In fact, a Czechoslovak provisional government had joined the Allies on October 14, and the leaders of the South Slav community had already declared in favor of uniting with Serbia in a large South Slav state.

The Lansing note was, in effect, the death certificate for Austria–Hungary. National councils formed in the Empire's provinces had already begun acting more or less as provisional governments of independent countries. With defeat in the war imminent after the Italian offensive in the Battle of Vittorio Veneto on October 24, Czecho-Slovakia declared independence on October 28 (the Czechs in Prague) and on October 30 (the Slovaks in Martin), and on October 29, the southern Slav areas declared the State of Slovenes, Croats and Serbs. The Hungarian government terminated the personal union with Austria on October 31, officially dissolving the Austro-Hungarian state. There was now nothing left of the Habsburg realm except its Alpine and Danubian provinces.

Facing an impossible situation, the last Habsburg Emperor-King, Karl I (Karl I in Austria and Károly IV in Hungary), issued a statement on November 11 in which he renounced the right to participate in Austrian affairs of state. On November 13, he issued a similar proclamation for Hungary. However, he did not abdicate, in the event the people of either state recalled him.

In Austria and Hungary, separate republics were declared at the end of the war in November. The Treaty of Saint-Germain-en-Laye (between the victors of World War I and Austria) and the Treaty of Trianon (between the victors and Hungary) regulated the new borders of Austria and Hungary. As a result, the Republic of German Austria was a remnant of the pre-war Austrian Empire and the Hungarian Democratic Republic lost 72% of the pre-war territory included as part of the Kingdom of Hungary. The treaties, drawn up one-sidedly by the Allies, had devastating political and economic effects. The previously rapid economic growth of the Empire ground to a halt because the new borders became major economic barriers. All the formally well established industries were optimized to satisfy the needs of an extensive empire. Therefore, the emerging countries were forced to make considerable sacrifices to transform their economies. Politically speaking, the treaties created major unease among the population. Owing to economic difficulties, extremist movements gained strength and there was a lack of a regional superpower in Central Europe. Along with the Treaty of Versailles, which set conditions on Germany, the Treaties of Saint Germain and Trianon sowed the seeds of World War II.

The Hungarian Democratic Republic was short-lived and was replaced by the communist Hungarian Soviet Republic. Armed forces of the Kingdom of Romania ousted Béla Kun and his communist government during the Hungarian-Romanian War. In March 1920, a monarchist revival resulted in the restoration of the Kingdom of Hungary. Royal powers were entrusted to a Regent, the naval hero Admiral Miklós Horthy.

In March and again in October 1921, ill-prepared attempts by Károly IV (Karl I in Austria) to regain the throne in Budapest collapsed. The initially wavering Horthy, after receiving threats of intervention from the Allied powers and neighboring countries, refused his cooperation. Subsequently, the British took custody of Karl and removed him and his family to the Portuguese island of Madeira, where he died the following year.

Successor states
The following successor states were formed (entirely or in part) from the former Habsburg lands:
 * German Austria and First Austrian Republic
 * Hungarian Democratic Republic, Hungarian Soviet Republic, and Kingdom of Hungary
 * Czecho-Slovakia after 1920 Czechoslovakia to 1938, then Czecho-Slovakia against
 * State of Slovenes, Croats and Serbs (joined with the Kingdom of Serbia on 1 December 1918 to form the Kingdom of Serbs, Croats and Slovenes, later Kingdom of Yugoslavia)
 * Second Polish Republic

Austro-Hungarian lands were also ceded to the Kingdom of Romania, the Ukrainian People's Republic and the Kingdom of Italy. The Principality of Liechtenstein, which had formerly looked to Vienna for protection, formed a customs and defense union with Switzerland, and adopted the Swiss currency instead of the Austrian. In April 1919 Vorarlberg, the westernmost province of Austria, voted by a large majority to join Switzerland; however both the Swiss and the Allies disregarded this result. The Allies generally discarded the ideas of plebiscites in the regions of Austria–Hungary.

Territorial legacy
The following present-day countries and parts of countries were located within the boundaries of Austria–Hungary when the empire was dissolved:

Empire of Austria (Cisleithania):
 * Austria (with the exception of Burgenland);
 * Czech Republic (with the exception of the Hlučínsko area);
 * Slovenia (with the exception of Prekmurje);
 * Italy (autonomous regions of Trentino-Alto Adige/Südtirol and small portions of Friuli-Venezia Giulia);
 * Croatia (Dalmatia, Istria);
 * Poland (voivodeships of Lesser Poland, Subcarpathia, southernmost part of Silesia (Bielsko and Cieszyn);
 * Ukraine (oblasts of Lviv, Ivano-Frankivsk, Ternopil (except its northern corner) and most of the oblast of Chernivtsi);
 * Romania (county of Suceava);
 * Montenegro (bay of Boka Kotorska, the coast and the immediate hinterland around cities of Budva, Petrovac and Sutomore).

Kingdom of Hungary (Transleithania):
 * Hungary;
 * Slovakia;
 * Austria (Burgenland);
 * Slovenia (Prekmurje);
 * Croatia (Slavonia, Central Croatia, southern parts of the pre-1918 Baranya and Zala counties – today's Croatian part of Baranja and Međimurje county);
 * Ukraine (oblast of Zakarpattia);
 * Romania (region of Transylvania and Partium);
 * Serbia (autonomous province of Vojvodina and parts of the present-day Belgrade north of the Sava River);
 * Poland (Polish parts of Orava and Spiš);
 * Bosnia and Herzegovina (the villages of Zavalje, Mali skočaj and Veliki skočaj including the immediate surrounding area western of the city of Bihać).

Austrian-Hungarian Condominium
 * Bosnia and Herzegovina
 * Montenegro (Sutorina – western part of the Municipality of Herceg-Novi between present borders with Croatia (SW) and Bosnia and Herzegovina (NW), Adriatic coast (E) and the township of Igalo (NE))
 * Raška region/Sandzak of Serbia and Montenegro under effective Austro-Hungarian occupation while formally part of the Ottoman Empire until 1912

Colonies of the Austro-Hungarian Monarchy Other parts of Europe had been part of the Habsburg monarchy once but left it even before its dissolution in 1918. Prominent examples are the regions of Lombardy and Veneto in Italy, Silesia in Poland, most of Belgium and Serbia, and parts of northern Switzerland and southwestern Germany.
 * The Empire was not able to gain and maintain huge colonial areas owing to its geographical position. Its only little colony was in Tianjin (now China), that was a kind of present for the supporting of the Boxer Rebellion with the Eight-Nation Alliance. However despite its relatively short lifespan (only 16 years in all), the Austro-Hungarians have left their mark on that area of the city, as can be seen in the wealth of Austrian architecture, that stands in the city to this day. (more information about the Austro-Hungarian concession)

Like Germany, Austria–Hungary frequently employed liberal economic policies and practices. From the 1860s liberal businessmen succeeded in industrializing parts of the Empire and the prosperous middle classes erected conspicuously large homes, giving themselves a prominence in urban life that rivalled the aristocracy's. They persuaded the government to search out foreign investment to build up infrastructure such as railroads. Despite these measures, Austria–Hungary remained resolutely monarchist and authoritarian. Liberals in Austria, most of them ethnic Germans, saw their influence weaken under the leadership of Count Edouard von Taaffe, Austrian prime minister from 1879 to 1893. Building a coalition of clergy, conservatives and Slavic parties, Taaffe used its power to weaken the liberals. In Bohemia for example he designated Czech as an official language of the bureaucracy and school system thus breaking the German speakers' monopoly on officeholding. Reforms outraged those at whose expense other ethnic groups received benefits and those who won concessions, such as Czechs, clamored for even greater autonomy. By playing nationalities off one another the government ensured the monarchy's central role in holding together competing interest groups in an era of rapid change. Emperor Francis Joseph and his ministers still feared the influence of the most powerful Slavic nation-Russia-on the ethnic minorities living within Austria–Hungary. Nationalists in the Balkans demanded independence from the declining Ottoman Empire, raising Austro Hungarian fears and ambitions. In 1876 Slavs in Bulgaria and Bosnia and Herzegovina revolted against Turkish rule killing Ottoman officials. As the Ottomans slaughtered thousands of Bulgarians in turn, two other small Balkan states, Serbia and Montenegro, rebelled against the sultan. Russian Pan-Slavic organizations sent aid to the Balkan rebels and so pressured the tsar's government that Russia declared war on Turkey in 1877 in the name of protecting Orthodox Christians. With help from Romania and Greece, Russia defeated the Ottomans and by the Treaty of San Stefano created a large Pro-Russian Bulgaria. The Treaty of San Stefano sparked an international uproar that almost resulted in a general European war. Austria–Hungary and Britain feared that an enlarged Bulgaria would become a Russian satellite that would enable the tsar to dominate the Balkans. Austrian officials worried about an uprising of their own restless Slavs. British prime minister Benjamin Disraeli moved warships into position against Russia in order to halt the advance of Russian influence in the eastern Mediterranean so close to Britain's routes through the Suez Canal. The public was drawn into foreign policy: the music halls and newspapers of England echoed a new jingoism or political sloganeering that throbbed with sentiments of war: "We don't want to fight but by Jingo if we do We've got the ships we've got the men, We've got the money too." The other great powers, however, did not want a Europe-wide war and in 1878 they attempted to revive the concert of Europe by meeting at Berlin under the auspices of Bismarck, who was a calming presence on the diplomatic scene. The Congress of Berlin rolled back the Russian victory by partitioning the large Bulgarian state that Russia had carved out of Ottoman territory and denying any part of Bulgaria full independence from the Ottomans. Austria occupied Bosnia and Herzegovina as a way of gaining clout in the Balkans. Serbia and Montenegro became fully independent. Nonetheless the Balkans remained a site of political unrest, teeming ambition for independence and great power rivalries. Following the Congress of Berlin the European powers attempted to guarantee stability through a complex series of alliances and treaties. Anxious about Balkan instability and Russian aggression, Austria Hungary forged a defensive alliance with Germany in 1879. The Dual Alliance, as it was called, offered protection against Russia, and its potential for inciting Slav rebellions. In 1882 Italy joined this partnership largely because of Italy's imperial rivalries with France. Tensions between Russia and Austria–Hungary remained high, so Bismarck replaced the Three Emperors League with the Reinsurance Treaty with Russia to keep the Habsburgs from recklessly starting a war over Pan-Slavism.

Government
Three distinct elements ruled the Austro-Hungarian Empire: Hungary and Austria maintained separate parliaments, each with its own prime minister. Linking/co-ordinating the two fell to a government under a monarch, wielding power absolute in theory but limited in practice. The monarch’s common government had responsibility for the army, for the navy, for foreign policy, and for the customs union.
 * 1) the Hungarian government
 * 2) the "Austrian" or Cisleithanian government
 * 3) common foreign and military policy under the monarch

Within Cisleithania and Hungary certain regions, such as Galicia and Croatia enjoyed special status with their own unique governmental structures.

A common Ministerial Council ruled the common government: it comprised the three ministers for the joint responsibilities (joint finance, military, and foreign policy), the two prime ministers, some Archdukes and the monarch. Two delegations of representatives (60-60 members), one each from the Austrian and Hungarian parliaments, met separately and voted on the expenditures of the Common Ministerial Council, giving the two governments influence in the common administration. However, the ministers ultimately answered only to the monarch, and he had the final decision on matters of foreign and military policy.

Overlapping responsibilities between the joint ministries and the ministries of the two halves caused friction and inefficiencies. The armed forces suffered particularly from overlap. Although the unified government determined overall military direction, the Austrian and Hungarian governments each remained in charge of "the quota of recruits, legislation concerning compulsory military service, transfer and provision of the armed forces, and regulation of the civic, non-military affairs of members of the armed forces". Needless to say, each government could have a strong influence over common governmental responsibilities. Each half of the Dual Monarchy proved quite prepared to disrupt common operations to advance its own interests.

Relations over the half-century after 1867 between the two halves of the Empire (in fact the Cisleithan part contained about 57% of the combined realm's population and a rather larger share of its economic resources) featured repeated disputes over shared external tariff arrangements and over the financial contribution of each government to the common treasury. Under the terms of the Austro-Hungarian Compromise of 1867, an agreement, renegotiated every ten years, determined these matters. Each build-up to the renewal of the agreement saw political turmoil. The disputes between the halves of the Empire culminated in the mid-1900s in a prolonged constitutional crisis—triggered by disagreement over the language of command in Hungarian army units, and deepened by the advent to power in Budapest (April 1906) of a Hungarian nationalist coalition. Provisional renewals of the common arrangements occurred in October 1907 and in November 1917 on the basis of the status quo.

Ethnic relations
[[File:Austria Hungary ethnic.svg|thumb|left|300px|Ethnic issues after the dissolution of Austria–Hungary

The Austro-Hungarian Compromise of 1867, in creating a semi-independent Hungary, entailed the rise of an assertive Magyar identity within the Kingdom of Hungary. The Romanian and Slav minorities resented the rise of a government-sponsored Magyar (ethnic Hungarian) nationalism, perceived as less liberal in language and cultural matters than the policies previously set by Vienna. Nationalistic ideas prevalent in the Empire of Austria created tension between ethnic German and Czech citizens, too. In addition, the emergence of national identity in newly independent Romania and Serbia also contributed to the ethnic issues of the empire.

Article 19 of the 1867 "Basic State Act" (Staatsgrundgesetz), valid only for the Cisleithanian (Austrian) part of Austria–Hungary, says:
 * All races of the empire have equal rights, and every race has an inviolable right to the preservation and use of its own nationality and language. The equality of all customary languages ("landesübliche Sprache") in school, office and public life, is recognized by the state. In those territories in which several races dwell, the public and educational institutions are to be so arranged that, without applying compulsion to learn a second country language ("Landessprache"), each of the races receives the necessary means of education in its own language.

The implementation of this principle led to several disputes since everything depended on the decision as to which language could be regarded as landesüblich or customary. The Germans, the traditional bureaucratic, capitalist and cultural elite, demanded the recognition of their language as a customary language in every part of the Empire. While Italian was regarded as an old "culture language" (Kultursprache) by German-speaking intellectuals and had always been granted equal rights as an official language of the Empire, they had particular difficulties in accepting the Slavic languages as equal to German. On one occasion Count A. Auersperg (Anastasius Grün) entered the diet of Carniola carrying what he claimed to be the whole corpus of Slovene literature under his arm to provide evidence that the Slovene language could in his view not be substituted for German as a medium of higher education.

Nevertheless the following years saw an emancipation of several languages at least in the Cisleithanian part of the Empire. In a series of laws from 1867 and onwards, the Croatian language was raised to equality with the hitherto officially dominating Italian language in Dalmatia. From 1882 there was a Slovene majority in the diet of Carniola and in the capital Laibach (Ljubljana), thereby replacing German as the dominant official language. Polish was introduced instead of German in 1869 in Galicia as the normal language of government. The Poles themselves systematically disregarded the large Ukrainian minority in the country, and Ukrainian was not granted the status of an official language.

The language disputes were most fiercely fought in Bohemia where the Czechs formed a majority and wanted to reestablish the equal status for their language. German speakers lost their majority in the Bohemian diet in 1880 and their dominating position in the cities of Prague and Pilsen (while retaining a slight numerical majority in the city of Brno (Brünn)) and found themselves in an unfamiliar minority position. The old Charles University in Prague hitherto dominated by the German speakers was divided into a German and a Czech part in 1882.

At the same time, Hungarian dominance faced challenges from the local majorities of Romanians in Transylvania and in the eastern Banat, of Slovaks in today's Slovakia, of Croats and Serbs in the crownlands of Croatia and of Dalmatia (today's Croatia), in Bosnia and Herzegovina and in the provinces known as the Vojvodina (today's northern Serbia). The Romanians and the Serbs also looked to union with their fellow nationalists in the newly-founded states of Romania (1859–78) and Serbia.

Though Hungary's leaders showed on the whole less willingness than their Austrian counterparts to share power with their subject minorities, they granted a large measure of autonomy to the Croatia in 1868, paralleling to some extent their own accommodation within the Empire the previous year. The Croatian government, in spite of nominal autonomy, was in fact an economic and administrative arm of Hungary, which the Croatians resented.

Language was one of the most contentious questions in Austro-Hungarian politics. All governments faced difficult and divisive hurdles in sorting out the languages of government and of instruction. Minorities wanted to ensure the widest possibility for education in their own language as well as in the "dominant" languages of Hungarian and German. On one notable occasion, that of the so-called "Ordinance of April 5, 1897", the Austrian Prime Minister Kasimir Felix Graf Badeni gave Czech equal standing with German in the internal government of Bohemia, leading to a crisis because of nationalist German agitation throughout the Empire. In the end Badeni was dismissed.

The Hungarian minority act from 1868 gave the minorities (Slovaks, Romanians, Serbs etc.) individual (and not also community) rights to use their language in offices, schools (although in practice often only in those founded by them and not by the state), at courts and in municipalities (if 20% of the deputies demanded it). Although already the act XVII from 1879 prescribed the teaching of the Hungarian language as a school subject, in 1900 there were still 1340 schools among the 3343 non-Hungarians where the teaching of the Hungarian (the official language of the state) was unsuccessful. From June 1907 (lex Apponyi) all the public and private schools in Hungary were obliged to teach the Hungarian language in such an extent that after the fourth class the pupils could express them fluently in Hungarian (which was rather impossible by the standards of the time and led to the closing of several minority, mostly Slovak schools, although it was far less violent than the politics of the newly-founded states and their strong anti-Hungarian sentiment which was expressed in the banning of Hungarian in schools, municipalities and offices.

It was not rare for the two kingdoms to divide spheres of influence. According to Misha Glenny (The Balkans, 1804–1999), the Austrians responded to Hungarian badgering of Czechs by supporting the Croatian national movement in Zagreb.

Emperor Franz Joseph himself was very well aware that he reigned in a multiethnic country and spoke fluent German, Hungarian, Czech, and, to some degree, also Polish and Italian.

The situation of Jews in the kingdom, who numbered about 2 million in 1914, was ambiguous. Antisemitic parties and movements existed, but Vienna did not initiate pogroms or implement official Antisemitic policies. This was mainly out of fear that such ethnic violence could ignite other ethnic minorities and result in violence that could spin out of control. The majority of Jews lived in small towns of Galicia and rural areas in Hungary and Bohemia, although there were large communities in Vienna, Budapest, Prague and other large cities.

Linguistic distribution
Note that some languages are considered dialects of more widely-spoken languages. For example, Rusyn and Ukrainian were both counted as "Ruthenian" in the census, and Rhaeto-Romance languages were counted as "Italian".

Economy
The Austro-Hungarian economy changed dramatically during the existence of the Dual Monarchy. Technological change accelerated industrialization and urbanization. The capitalist way of production spread throughout the Empire during its fifty-year existence replacing medieval institutions. Economic growth centered around Vienna, the Austrian lands (areas of modern Austria), the Alpine region, and the Bohemian lands. In the later years of the nineteenth century, rapid economic growth spread to the central Hungarian plain and to the Carpathian lands. As a result, wide disparities of development existed within the Empire. In general, the western areas became more developed than the eastern.

However, by the end of the 19th century, economic differences gradually began to even out as economic growth in the eastern parts of the Empire consistently surpassed that in the western. The strong agriculture and food industry of the Kingdom of Hungary with the center of Budapest became predominant within the Empire and made up a large proportion of the export to the rest of Europe. Meanwhile, western areas, concentrated mainly around Prague and Vienna, excelled in various manufacturing industries. This division of labour between the east and west, besides the existing economic and monetary union, led to rapid economic growth throughout Austria–Hungary by the early 20th century. The GNP per capita grew roughly 1.76% per year from 1870 to 1913. That level of growth compared very favorably to that of other European nations such as Britain (1.00%), France (1.06%), and Germany (1.51%). However, the economy as a whole still lagged considerably behind the economies of other powers, as sustained modernization had begun much later. Britain had a GNP per capita almost 100% larger, while Germany's stood almost 70% higher.

Rail transport expanded rapidly in the Austro-Hungarian Empire. Its predecessor state, the Habsburg Empire, had built a substantial core of railways in the west, originating from Vienna, by 1841. At that point, the government realized the military possibilities of rail and began to invest heavily in construction. Preßburg (Bratislava), Budapest, Prague, Kraków, Graz, Laibach (Ljubljana), and Venice became linked to the main network. By 1854, the empire had almost 2000 kilometres of track, about 60 to 70% of it in state hands. The government then began to sell off large portions of track to private investors to recoup some of its investments and because of the financial strains of the 1848 Revolution and of the Crimean War.

From 1854 to 1879, private interests conducted almost all rail construction. What would become Cisleithania gained 7,952 track kilometres, and Hungary built 5,839 track kilometres. During this time, many new areas joined the railway system and the existing rail networks gained connections and interconnections. This period marked the beginning of widespread rail transportation in Austria–Hungary, and also the integration of transportation systems in the area. Railways allowed the Empire to integrate its economy far more than previously possible, when transportation depended on rivers.

After 1879, the Austro-Hungarian government slowly began to renationalize the rail network, largely because of the sluggish pace of development during the worldwide depression of the 1870s. Between 1879 and 1900, more than 25 000 km of railways were built in Cisleithania and Hungary. Most of this constituted "filling in" of the existing network, although some areas, primarily in the far east, gained rail connections for the first time. The railway reduced transportation costs throughout the Empire, opening new markets for products from other lands of the Dual Monarchy. See Imperial Austrian State Railways for details.

Flags
Although Austria–Hungary did not have a common national flag, a common naval ensign and a common civil ensign (the latter was introduced in 1869) did exist.

Coat of arms
The double-headed eagle of the Habsburg-Lorraine dynasty was used as the coat of arms of the common institutions of Austria–Hungary between 1867 and 1915. In 1915 a new one was introduced, which combined the coat of arms of the two parts of the empire and that of the dynasty.