The material below is copyrighted and may not be copied without permission of the authors.  It is taken from:
Thomas J. Kehoe, Harold E. Damerow, and Jose Marie Duvall, Exploring
     Western Civilization:  1600 to the Present:   A Worktext for the Active
     Student, Revised Edition.  (Dubuque, Iowa: Kendall/Hunt Publishing Co.,
      1999.)

            The defeat of Austria in the Austro-Prussian War led to the creation of the Dual Monarchy of Austria-Hungary in 1867. The Hapsburg monarch, Francis Joseph (1848-1916), was the single ruler of both parts of the empire. There were common imperial ministries for foreign policy, war, and finance, and also a common postal system and a common currency. In other respects, the two parts functioned as separate countries with their own constitutions, parliaments, and government offices for domestic affairs. German was the administrative language of the Austrian section, while Magyar was the administrative language of the Hungarian section.

            The fundamental problem with the arrangement was that within Austria German speakers made up less than half the population, while in Hungary Magyar was similarly the mother tongue of about forty-seven percent of the people. The Austrian government tended to be conciliatory, albeit in fits and starts. A diversity of languages was tolerated and, by 1907, universal manhood suffrage was granted. In Hungary, the Magyars took the opposite tactic. They tried to force Magyarization upon the whole populace. Because of this policy of suppressing the use of other languages, the Magyars did not dare permit universal manhood suffrage in their kingdom. When World War I came, only about twenty-five percent of the adult males in Hungary had the right to vote. Neither policy satisfied ethnic minorities. The nationalities issue was the greatest problem in both parts of the empire. Czechs, Romanians, Serbs, Croats, and other nationalities wanted independence, which would require the dissolution of the empire. Strangely, Austria-Hungary became interested in expanding in the Balkans at the expense of the dissolving Ottoman Empire. Expansion was seen as one means of distracting people from the internal discontent. In 1908, Austria annexed Bosnia-Herzegovina, which Serbia also desired. This helped set the stage for the chain of events that led to the First World War.