III.

The Compromise

Shocked and humiliated by Austria's defeat, Francis Joseph compromised with the Magyars in Hungary to shore up his empire and save the Habsburg monarchy. First, Francis Joseph consolidated the monarchy's power in the German states that were part of the empire. Then, in exchange for Hungarian support of the monarchy, he agreed to surrender his control of Hungarian internal affairs, including his protection of the non-Magyar peoples. This was a key point in obtaining Magyar cooperation. This agreement was the basis of the compromise of 1867, which divided the old Austrian Empire into two parts, Austria and the kingdom of Hungary. The Habsburg monarch would be both the king of Hungary and the emperor of Austria. The new entity would be called the Austro-Hungarian Empire and would have a single foreign policy, one army, and a unified monetary system.

In the Austrian part of the new empire, the constitutional monarchy that was established in the old Austrian empire by an agreement called the February Patent of 1861 remained in force. The February Patent was the result of calls for a more democratic government. It transferred power from local legislatures that were controlled by the propertied classes and the nobility to a more centralized national government. The Magyars, who comprised the nobles and property owners in Hungary, had opposed the February Patent when it was issued in 1861, and they opposed it again when the compromise was discussed in 1867. To appease the Magyars, Francis Joseph agreed that the February Patent would apply only to Austria's half of the new empire. The compromise therefore sealed Magyar dominance of Hungary.

The compromise united two kingdoms under one head of state. Austria had its legislative branch, known as the Reichsrat, and the Hungarians had theirs, known as the Diet. The Delegations was a common legislative body that included delegates from each parliament; it served as a link between the two national governments. Each kingdom had its ruling class: the German-speaking people in Austria and the Magyars in Hungary. However, the Austro-Hungarian Empire included a significant number of Slavs, although they were a minority in both Austria and Hungary. In the entire Austro-Hungarian Empire of approximately 50 million people, about 23 million were Slavs. Since the compromise was primarily an agreement between the Habsburgs and the Magyars, the Slavic peoples were not consulted before the compromise was enacted. Consequently, most Slavs never supported the compromise and Slavic discontent later became an important issue leading to the outbreak of World War I in 1914.