Ausgleich
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The German term Ausgleich (Hungarian kiegyezés) refers to the "compromise" or composition of February 1867 that established the Dual Monarchy of Austria-Hungary, which was signed by Franz Joseph of Austria and a Hungarian delegation led by Ferenc Deák. The compromise followed a series of failed constitutional reforms of the Habsburg Empire. Under the new arrangement the Magyar dominated government of Hungary gained near equal status to the Austrian government based in Vienna, while the common monarch government had responsibility for the army, navy, foreign policy, and customs union. The compromise was made under dire circumstances by the monarchy in an attempt to quiet internal dissent in the face of aggression from Prussia, as well as internal agitation by the various nationalities of the Empire.
The former revolutionaries — German and Magyar — became de facto "peoples of state", each ruling half of a twin country united only at the top through the Emperor-King and the common Ministries of Foreign Affairs and of War. Each half of the country had its own Prime Minister and parliament: in Hungary the Diet was restored to power. The special status of Transylvania and the Military Border ended: a new Nationalities Law was intended to preserve the rights of ethnic minorities, but was often violated in practice.
Periodically, every ten years, details of the compromise were renegotiated, invariably resulting in internal crisis as the Hungarian side escalated their demands.
The Dual Monarchy established by the Ausgleich was intended as an interim solution, but it lasted for 50 years after 1867, destroyed in 1918 by the fallout from World War I.
Many in the Austrian half of the monarchy (Cisleithania) resented the new influence of the Magyar government. It is true that the Magyar government refused to allow any form of internal reform, which most Austrians saw as necessary. In order to protect their new influence, the Magyar leadership pursued a policy that disenfranchised most of the nationalities of the Empire. The Magyars also blocked financing to modernize the army, since they feared its use against them (the army was primarily controlled by Vienna). The resulting political deadlock may have resulted in the fateful decision by the Austrian leadership to attack Serbia in July of 1914. It was felt by some, notably Conrad von Hötzendorf, the Chief of the General Staff of the Habsburg Army, and foreign minister, Count Leopold von Berchtold, that the only way to reform Austria-Hungary was through the annexation of foreign territory and populations to help balance the power of the Magyars.
Attempts to demolish the Dual Monarchy were proposals to federalize Austria-Hungary (e.g., from Aurel Popovici). These proposals did not gather enough support to be realized.
