Today, lets travel back into history, into the Austro-Hungarian Empire, which was established in 1867 by the union of two empires, Austria and Hungary. The increasing waves of national unification in Germany and Italy challenged the dominance of Austria?s Habsburg monarchy in Europe. While Germany and Italy were each coming together, Austria was crumbling apart fast. Austria?s defeat at the hands of French and Piedmont forces in 1859 and its overwhelming loss to Prussia in Seven Week?s War aggravated its influence in Europe. Faced with a rapidly modernizing Germany and unified Italy, Austria sought a new political partner to overcome them. In 1848, the Magyar leaders of Hungary and the Czech leaders of Bohemia had asserted independence from Austria, but Austrian military crushed the Czechs while Magyars remained firm. Later, Austria with the help of 100,000 Russian troops took control over the defiant Magyars. Though the revolution was crushed, the Hungarian nationalistic sentiment remained intact which was a problem for the ruling Austrians. So, after ruling Hungary for 150 years, Austrians offered the Magyars the promise of equal power. With the passage of the Settlement of 1867, known as Ausgleich, Austria became the Austro-Hungarian Empire, a dual monarchy. In a ceremony held in Budapest, the capital of Hungary, the Austrian Habsburg ruler Franz Josef received the crown of St. Stephen, Hungary?s first king. The Habsburg Empire was now divided into to parts: the Austrian Empire and the Kingdom of Hungary, both ruled by the Habsburg monarch centred in Vienna. The empire retained its place as a great power in Europe. But the heterogenous nature of the empire was the cause of its failure. The minorities like Croats and Serbs sought their national identities and tried to separate, but the state took the path of repression. Even Hungary sought independence from Austria. This repression caused the birth of the pan-Slavic terrorist groups such as the Black Hand which was responsible for assassination of the Austrian archduke Francis Ferdinand in 1914, which triggered the First World War. This war marked the end of the existence of Austro-Hungarian Empire. Following the First World War, new borders were set by the treaties of Saint Germain-en-Laye and Trianon. As a result, the Austro-Hungarian Empire had utterly transformed itself into a much smaller state. From this great Empire, smaller nations were produced, which were Austria, Hungary, Czechoslovakia and Yugoslavia. Romania and Poland annexed some portions of this once great Empire. Sources: http://www.beyondbooks.com/eur12/2d.asp http://www.genealogienetz.de/reg/AUT/aut-hun.html Map source: http://freepages.genealogy.rootsweb.com/~menzak/maps/map-ah.jpg