At the close of the 19th century both states of the Dual Monarchy were visited by political crises of some severity. Parliamentary life in Austria was paralysed by the feud between Germans and Czechs that resulted directly from the Badeni language ordinances of 1897 and indirectly from the development of Slav influence, particularly that of Czechs and Poles during the Taaffe era (1879-1893). Government in Austria was carried on by cabinets of officials with the help of the emergency clause (paragraph 14) of the constitution. Ministers, nominally responsible to parliament, were in practice responsible only to the emperor. Thus during the closing years of last and the opening years of the present century, political life in Austria was at a low ebb and the constitution was observed in the letter rather than in spirit.

Hungary was apparently better situated. Despite the campaign of obstruction that overthrew the Bánffy and led to the formation of the Széll cabinet in 1899, the hegemony of the Liberal party which, under various names, had been the mainstay of dualism since 1867, appeared to be unshaken. But clear signs of the decay of the dualist and of the growth of an extreme nationalist Magyar spirit were already visible. The Army bills of 1889, which involved an increase of the peace footing of the joint Austro-Hungarian army, had been carried with difficulty, despite the efforts of Koloman Tisza and of Count Julius Andrássy the Elder. Demands tending towards the Magyarization of the joint army had been advanced and had found such an echo in Magyar public opinion that Count Andrássy was obliged solemnly to warn the country of the dangers of nationalist Chauvinism and to remind it of its obligations under the Compact of 1867. The struggle over the civil marriage and divorce laws that filled the greater part of the nineties served and was perhaps intended by the Liberal leaders to serve as a diversion in favour of the Liberal-dualist standpoint; nevertheless, Nationalist feeling found strong expression during the negotiations of Bánffy and Széll with various Austrian premiers for the renewal of the economic Ausgleich, or "Customs and Trade Alliance." At the end of 1902 the Hungarian premier, Széll, concluded with the Austrian premier, Körber, a new customs and trade alliance comprising a joint Austro-Hungarian tariff as a basis for the negotiation of new commercial treaties with Germany, Italy and other states.

This arrangement, which for the sake of brevity will henceforth be referred to as the Széll-Körber Compact, was destined to play an important part in the history of the next few years, though it was never fully ratified by either parliament and was ultimately discarded. Its conclusion was prematurely greeted as the end of a period of economic strife between the two halves of the monarchy and as a pledge of a decade of peaceful development. Events were soon to demonstrate the baselessness of these hopes.

In the autumn of 1902 the Austrian and the Hungarian The Army question. governments, at the instance of the crown and in agreement with the joint minister for war and the Austrian and Hungarian ministers for national defence, laid before their respective parliaments bills providing for an increase of 21,000 men in the annual contingents of recruits. 16,700 men were needed for the joint army, and the remainder for the Austrian and Hungarian national defence troops (Landwehr and honvéd). The total contribution of Hungary would have been some 6500 and of Austria some 14,500 men. The military authorities made, however, the mistake of detaining in barracks several thousand supernumerary recruits (i.e. recruits liable to military service but in excess of the annual 103,000 enrollable by law) pending the adoption of the Army bills by the two parliaments. The object of this apparently high-handed step was to avoid the expense and delay of summoning the supernumeraries again to the colours when the bills should have received parliamentary sanction; but it was not unnaturally resented by the Hungarian Chamber, which has ever possessed a lively sense of its prerogatives.

The Opposition, consisting chiefly of the independence party led by Francis Kossuth (eldest son of Louis Kossuth), made capital out of the grievance and decided to obstruct ministerial measures until the supernumeraries should be discharged. The estimates could not be sanctioned, and though Kossuth granted the Széll cabinet a vote on account for the first four months of 1903, the Government found itself at the mercy of the Opposition. At the end of 1902 the supernumeraries were discharged - too late to calm the ardour of the Opposition, which proceeded to demand that the Army bills should be entirely withdrawn or that, if adopted, they should be counterbalanced by concessions to Magyar nationalist feeling calculated to promote the use of the Magyar language in the Hungarian part of the army and to render the Hungarian regiments, few of which are purely Magyar, more and more Magyar in character. Széll, who vainly advised the crown and the military authorities to make timely concessions, was obliged to reject these demands which enjoyed the secret support of Count Albert Apponyi, the Liberal president of the Chamber and of his adherents. The obstruction of the estimates continued.

On the 1st of May the Széll cabinet found itself without supply and governed for a time "ex-lex"; Széll, who had lost the confidence of the crown, resigned and was succeeded (June 26) by Count Khuen-Hederváry, previously ban, or governor, of Croatia. Before taking office Khuen-Hederváry negotiated with Kossuth and other Opposition leaders, who undertook that obstruction should cease if the Army bills were withdrawn. Despite the fact that the Austrian Army bill had been voted by the Reichsrath (February 19), the crown consented to withdraw the bills and thus compelled the Austrian parliament to repeal, at the dictation of the Hungarian obstructionists, what it regarded as a patriotic measure. Austrian feeling became embittered towards Hungary and the action of the crown was openly criticized.