“Austria-Hungary” was initially ruled by a German-Magyar Liberal con-dominium. There were two constitutional states, Hungary and “Cisleithania”, although Franz Joseph remained powerful in both. Policy was liberalized, especially in religious and educational affairs. In principle, individuals’ nationality rights were guaranteed in both states. In Hungary the Nagodba (Compromise) was signed with Croatia. Government in Hungary became very centralized to enhance Magyar power. After Prussia defeated France in 1870, Franz Joseph offered Bohemia and Czechs a deal similar to that of Hungarians and Galicia’s Poles. The Fundamental Articles were dropped in 1871 due to opposition from German Liberals, the German government, and the Magyar leadership. Liberal rule resumed, but the financial Crash of May 1873 undermined liberalism’s authority. In Hungary liberal nationalist power was consolidated under Kálmán Tisza. In Cisleithania the “old”/”young” split weakened liberal power. Foreign minister Andrássy chose occupation, not annexation, of Bosnia in 1878, because annexation upset the dualist balance, and more Slavs threatened German-Magyar hegemony. Franz Joseph saw German Liberal opposition to the occupation as an attack on his prerogatives. By using his still immense influence, he secured German Liberal electoral defeat in 1879. Andrássy, meanwhile, arranged the Dual Alliance with Germany.