After the Austro-Prussian War, Austria faced debt/financial issues, and they resorted to unification with Hungary. I do not understand how unification with another kingdom (Hungary) could solve the economic problems. I mean, did Hungary help pay down Austrian debt? Why would Hungary even agree to this?

From the "Austrian military and economic crisis and adoption" section of the Austro-Hungarian Compromise Wikipedia article:

As a consequence of the Second Italian War of Independence and the Austro-Prussian War, the Habsburg Empire was on the verge of collapse in 1866, as these wars caused monumental state debt and a financial crisis. The Habsburgs were forced to reconcile with Hungary, to save their empire and dynasty.

But this does not explain, specifically, how unification with Hungary would provide economic relief. It seems it has something to do with Austria's control of Hungary (Did Austria "own" Hungary?), given the word choice of "reconcile," and a brief discussion of the 1848 Revolutions (which I also do not understand) leading up to the above quote ("The suppression of the 1848 Revolutions and the Russian intervention had a very high price.").


1 Answer 1


This question is based on a misinterpretation, and is asking for an explanation of something that wasn't the case.

First of all, the compromise was a separation, not a "unification". As the "1849–1867 (military dictatorship)" section of the Wikipedia article makes clear, the formerly autonomous Kingdom of Hungary was put under strict Austrian control by Franz Josephs' 1849 edicts. The 1867 compromise was a partial retreat from this, granting Hungary more autonomy to manage its own affairs, although not as independently as before. This was a unique and complex, almost bizarre, arrangement sometimes known as the Dualist system.

Second, Austria didn't seek "economic relief" from the compromise, at least not in any simple or direct way. I've skimmed some articles on the complex monetary and economic implications of the compromise (Eddie 1982, Flandreau 2006) but didn't see any clear reason that Austria should have expected to gain fiscal benefits from Hungarian autonomy. To the contrary, an impressive article by a high school student (Kwok 2003) argues in no uncertain terms: "The Dualist system was not beneficial to Austria... It helped damage a flagging Austrian economy."

So then what was the connection between Austria's financial situation and the compromise? Mounting debts limited Austria's political options. I've not found an authoritative source that lays this all out clearly in one place but there are multiple arguments that can be made. As a comment on Reddit points out, continuing to assert control over Hungary could have led to another revolt like there was in 1848, and it would have been expensive to put that down. According to Kwok, Franz Joseph feared Hungary would side with Prussia's military onslaught and this was the impetus to make the compromise, "[giving] into their demands, at whatever cost."

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