Essential knowledge for students of European history, this was the agreement between the Austrian government in Vienna, led by Beust, and two moderate Hungarian politicians, Deák and Andrassy, leading to the transformation of what was then the Austrian Empire into the dual monarchy of ‘Austro- or Austria/Hungary’. As this signified the combination of the considerable powers of two influential nations, neither known as ‘homely’ or even peace-loving, the Compromise was witnessed with some scepticism and not a little alarm by the rest of Continent, starting with France, Russia and Great Britain.
Territories of the Emperor Franz or Francis Joseph (Austria) were divided into what was technically called ‘Austria’ (lands represented in the Imperial Parliament), and the Kingdom of Hungary. In the latter state the Magyars were allowed to dominate their subject peoples.
The two states were however to have but one monarch, combined foreign relations, joint military and naval affairs, and a shared finance ministry. Some British statesmen looked askance at this arrangement, because it could easily be used to create a war machine of great efficiency in the middle of Europe. Some Russians saw it as a deliberate move on the Continental chess board that might lead to invasion of Russian territory.
However, when it was seen that each state was to have its own Prime Minister and its own Parliament, with sixty members from each parliament summoned annually by the Emperor/ King ( to Vienna or Budapest) to discuss matters relating to each state, some relief was shown in the European corridors of power. This is natural, as if only one Parliament had ruled both states, it would have been infinitely easier for any power-hungry monarch in the future to raise money for warmaking. With two parliaments operating independently, this would have been impossible.
A commercial agreement was made at the same time, an agreement that was made renewable every ten years. As was expected, this compromise produced strained relations between Austrians and Hungarians, especially in the year 1897. Even greater tension was felt when the Hungarians attempted to secure more independence in terms of arms and manpower for the Hungarian section of the Imperial and Royal Army.
The Ausgleich also left Croatia within Hungarian territory, and the Hungarians negotiated a separate agreement with the Croats in 1868. But other nationalities in Austro/Hungary, notably the Czechs, enormously resented the privileged, almost exalted position given to the Hungarians by the Compromise. In fact there was an influential, intelligent group within the Monarchy itself who wanted to form a Slav unit of the Empire, in order to maintain a balance between the Austrians and the Hungarians (who traditionally distrusted each other anyway). This royal group of plotters was broken up by the unexpected assassination in Sarajevo of its leader Archduke Franz-Ferdinand, which inevitably led to the outbreak of World War in 1914.
The Ausgleich was invalidated and dissolved in 1918.