"...the 1907 negotiation had been straightforward, simply over duties, spending, and contributions to the joing Austro-Hungarian military; indeed, the impression some in Vienna had had after them was that it was Hungary that had made some unexpected concessions. The 1917 round, however, had long been expected to be something different; it would come ten years later, with the Greens able to organize themselves in the interim and for Hungarian society to polarize further. It would land at the symbolic date of fifty years since the original Ausgleich and just a century after the Congress of Vienna. For Karolyists, it was an open question as to why exactly Hungary should continue to be governed under auspices a half-century or older. The ghosts of 1848 were still haunting Budapest, as it ever was.
The core problem ahead of the votes was that the Whites, who in theory supported Bethlen's cabinet of technocrats and obscure minor nobles, did not have a majority in the Diet, and if the renewal of the Compromise was defeated on the floor of the legislature then all hell was likely to break loose thereafter even if in practice the "expiration" of the previous terms would do little. It was symbolic - Hungary rejecting Compromise with Vienna would suggest a potential constitutional crisis, and not long after the events of November that had seen Apponyi cast to the wolves. As such, Ferdinand was not necessarily negotiating with Bethlen on the course ahead but also Karolyi, which immediately created massive problems that threatened to sink the whole endeavor.
Contrary to his portrayal in popular history, Karolyi was not as radical as his reputation suggested. He was a monarchist and indeed of noble origin; his views on domestic matters, setting aside his fierce Magyar nationalism, would not have been too different from many of the liberal landed nobility in the British House of Lords or Prussian Herrenhaus. The notion that he was a syndicalist instigator or a republican idealist are nonsense. That being said, Karolyi was aware of the moment at hand. Not only were his faction of the Greens firmly in the driver's seat, he took the survival of the Party of Independence in late February as a sign that it was time to press harder ahead.
One of the profound ironies of this hour, however, was that Karolyi - despite his maneuvering himself to the top of the Greens - had before 1916 been considered something of a naive and colorful gadfly by the Hungarian public. He was known for his drinking and gambling, for his lavish lifestyle and frequent travails in Parisian salons, and his being yet another powerful aristocrat (his wife as a lesser Andrassy) rather than for his political acumen and talent. Indeed, of the two men who helped plunge Hungary into crisis from the left, it was Jaszi who was the more powerful intellectual and capable organizer, having built the Radicals from the ground up. Nonetheless, Karolyi found himself thrust into the spotlight when Bethlen announced his Cabinet's initial proposal for the renewal of the Compromise on May 10th, 1917.
The Bethlen Compromise was a surprisingly liberal and nationalist document for being drafted by a cabinet supported by the minority Whites. It proposed an expansion of suffrage to a full twenty-two percent of the population and proposed a financial settlement that favored Hungary (largely by undoing the concessions of 1907). For Karolyi, this was not good enough. On May 13th, having read the proposal, he gave a speech flanked by Jaszi that demanded a secret ballot before they would sign onto any "negotiation;" further, Karolyi announced that the terms of the financial renewal would need to be further adjusted in Hungary's favor, potentially including Hungary's right to mint its own currency, and opened the door to a "constitutional compromise" rather than a financial one, with his most radical proposal being re-empowering the Palatine of Hungary to act as the Emperor-King's viceroy. That Archduke Joseph August was the titular (though entirely powerless) Palatine was a major factor in this proposal; Joseph August was well-liked by the Hungarian street amongst both ethnic Magyars and the minorities, and his sympathies for the cause of the Lands of St. Stephen were well known even if he kept them private to avoid embarrassing his cousins in Vienna.
Ferdinand was aghast, though at first discussions around a response were limited. Several advisors suggested calling Karolyi's bluff and having Bethlen put his initial proposal on the floor of the Diet; this was a popular course of action amongst more moderate "Prague Circle" figures whom Ferdinand had spent the last six months bringing into his immediate orbit in Vienna. It should be clear that there was no suggestion that Ferdinand actually take Karolyi seriously or attempt to engage with him, as such a suggestion would have seen whoever made it ejected from the Schonbrun in quick order. The view that won out came from Moritz von Auffenberg, a staff officer promoted within the War Ministry shortly before Franz Josef's death and for years a close confidant of the new Emperor from outside the famed Prague clique. Auffenberg denounced Karolyi as a traitor and proposed his immediate exile for threatening "the constitutional underpinnings of the Hungarian state." Bethlen was alarmed at this provocation but it was a popular position amongst many Whites, who hoped that Karolyi's exit stage left would allow more "malleable" Greens like Apponyi to once again enjoy sway.
As such, after Karolyi again threatened to defeat the Compromise and again demanded a "constitutional congress" to resolve the issues at the heart of Austria-Hungary, Bethlen announced their immediate arrest for inciting rebellion against the Crown but signalled through intermediaries to Karolyi that if he immediately went into exile, he would not be molested by the authorities in transit. Karolyi, Jaszi and sixteen others, primarily of the Radical Party, thus fled in late May to the port of Fiume and from there sailed across the Adriatic to Italy, where on June 4th they gathered in Milan and announced a "Democratic Government of Hungary" in exile, proclaiming to "represent the general interests of the Magyar people within the Habsburg realms." (Note that this declaration still recognized Habsburg authority, and very pointedly recognized "Magyar" peoples). These "Milan Magyars" became a sensation in European diplomatic circles, utterly unrecognized but still seen as an interesting novelty if for nothing else the enormous provocation that this represented. Italy's ambassador to Vienna (not Budapest) visited Ferdinand within days to assure him that Italy did not recognize Karolyi in the least and dismissed the Democratic Government as an "idle thought experiment by aggrieved exiles;" Ferdinand did not see it that way and was privately angered that Italy did not expel Karolyi over the risk he represented to Austro-Italian relations, insulted that the government of Antonio Salandra did not place the Milan Magyars on the first train to Switzerland, as was regarded as the proper course of action to do with such instigators.
The proclamation of a pseudo-cabinet in Milanese exile caused massive problems for Bethlen, as well. Massive protests erupted across Budapest in June and July, with no renewal of the Compromise in sight. The Prime Minister was a dedicated White but nonetheless, and probably correctly, deduced that Hungarian public opinion needed to be sated more than Viennese elite opinion and that the path out of the crisis needed to be found in Hungary. He thus resubmitted his Compromise proposals, this time with crucial modifications around military spending that proposed a slight reduction in the size of the Common Army and a substantial increase in the size of the Honved, and critically he published this new package of reforms tied to the renewal of the Compromise in Hungarian newspapers as the "Compromise for Peace." It did not go so far as the near-wholesale rejection of 1867 that Karolyi supported that would have essentially returned to a personal union, but it was a much greater step than any other White would likely have taken.
Had Ferdinand accepted this proposal, history may have gone very different. Hungarian radicals may not have been entirely satisfied but Bethlen had voluntarily placed his neck on the headsman's block, politically, to rescue the Ausgleich after only four months in office. But this revision was not accepted, as much due to Ferdinand's refusal to consider any constitutional modifications that further decentralized the Habsburg realm as the War Ministry's apoplexy at the idea of a strong, independent Honved that served as anything more than a home guard. The rejection of this peace offering saddened Bethlen, and on principle he resigned on July 20th, 1917. The crisis deepened dramatically, but Bethlen was seen by his countrymen as choosing Hungarian honor over prostrating himself to Vienna, and he was one of the few figures of the 1916-19 prewar crisis to emerge with his reputation intact to the point that he became a key figure of postwar Hungary thereafter..."
- Ferdinand: The Last Emperor
