History
In the Middle Ages Austria was a quasi-independent state within the Holy Roman Empire, ruled by the House of Habsburg, while the Kingdom of Hungary was a sovereign state outside the empire. In 1526 at the Battle of Mohács, Hungary was defeated and partially conquered by the Ottoman Empire. The crown of Hungary was inherited by the Habsburgs, with part of the kingdom preserved from the Ottomans, who were subsequently driven out of Hungary in 1699. From 1526 to 1806, Austria and Hungary were in a “union of crowns”, having the same ruler but remaining two countries. In the 18th century, Hungary was legally subordinated to Austria, though remaining nominally sovereign.
In 1804–6, the Holy Roman Empire was abolished, and the Austrian Empire was created. The Austrian Empire included Hungary as a constituent state, no longer sovereign. This was resented by the Hungarian people, or Magyars. Nationalist sentiment among the Magyars and other peoples of the region threatened the stability of the state and the power of the Austrian elite.
In the failed Hungarian Revolution of 1848, the Magyars came close to regaining independence, and were defeated by the Austrian Empire only with the aid of the Russian Empire. After 1848, the empire instituted several constitutional reforms, trying to resolve the problem, but without success.
In 1866, Austria was completely defeated in the Austro-Prussian War and its position as the leading state of Germany ended forever, as the remaining German minor states were soon absorbed into the German Empire created by Prussia. Austria also lost almost all of her remaining claims and influence in Italy, which had been her chief foreign policy interest.
The state needed to redefine itself to maintain unity in the face of nationalism.
Read more about this topic: Austro-Hungarian Compromise Of 1867
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