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The reorganization of Austria and Hungary was made possible by the Ausgleich [compromise] of 1867, a constitutional compromise between Hungarian aspirations for independence and Emperor Francis Joseph's desire for a strong, centralized empire as a source of power after Austria's defeat in the Austro-Prussian War of 1866. The Hungarians gained control of their internal affairs in return for agreeing to a centralized foreign policy and continued union of the Austrian and Hungarian crowns in the Hapsburg ruler.
The agreement to establish the Dual Monarchy, which was worked out primarily by the Austrian foreign minister, Count Beust, and two Hungarians, the elder Count AndrAssy and Francis Deak, divided the Hapsburg empire into two states. Cisleithania [Lat.,=the land on this side of the Leitha River] comprised Austria proper, Bohemia, Moravia, Austrian Silesia, Slovenia, and Austrian Poland; it was to be ruled by the Hapsburg monarchs in their capacity as emperors of Austria. Transleithania [Lat.,=the land on the other side of the Leitha River] included Hungary, Transylvania, Croatia, and part of the Dalmatian coast; it was to be ruled by the Hapsburg monarchs in their capacity as kings of Hungary. Croatia was given a special status and allowed some autonomy but was subordinated to Transleithania, which also nominated the Croatian governor.
Austria-Hungary was the greatest recent example of a multinational state in Europe; however, of the four chief ethnic groups (Germans, Hungarians, Slavs, and Italians) only the first two received full partnership. The Hapsburg-held crown of Bohemia was conspicuously omitted in the reorganization. Both Cisleithania and Transleithania elected independent parliaments to deliberate on internal affairs and had independent ministries. A common cabinet, composed of three ministers, dealt with foreign relations, common defense, and common finances. It was responsible to the emperor-king and to the delegations of 60 members each (chosen by the two parliaments), which met to discuss common affairs. The regular armed forces were under unified command and currency was uniform throughout the empire, but there were separate customs regimes.
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