In 1867, the Empire of Austria and the Apostolic Union of Hungary became coequal partners in a new confederated constitutional union. The Hapsburgs may have nominally ruled the Austro-Hungarian Empire, but most governmental functions were divided between the two monarchies, with the other territories acting autonomously in the majority of their affairs. With many languages spoken across its territory, the boundaries of this relatively young, ethnically-diverse empire had never been settled for long. Although they had occupied Bosnia since 1878, the Hapsburgs had only annexed the region five years before Archduke Franz Ferdinand was assassinated visiting the new possession.
So although it is considered a “great power” by the other powers of Europe in 1914, Austria-Hungary is riven with internal weaknesses: there is no shared sense of citizenship, for both states issue passports to their own nationals. Laws do not apply in both states unless ratified by both parliaments. Although they share a common currency, Austria and Hungary do not share a common fiscal policy. Industrialization is uneven, and production lags behind the rest of Europe. With no more room to grow except in the Balkans, restive Slavic peoples are a growing problem.
Right now, most subject peoples are willing to submit to their distant monarchs. As the weaknesses of the empire become obvious and the casualties mount, however, that will change. The army is practically the only shared institution in the land — and when it eventually breaks, so will the empire.