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In 1866, Prussia fought her neighbor Austria for control and influence over their neighboring German states. Bismark sought to expel Austria from the confederation and establish Prussia as the dominant German state. He wanted to create a KleinDeutschland with the other neighboring states.
A short Wikipedia history:
"The Austro-Prussian War (also called the Seven Weeks' War or the German Civil War) was a war fought between the Austrian Empire and its German allies and Prussia with its German allies in 1866 that resulted in Prussian dominance in Germany. In Germany and Austria it is called Deutscher Krieg (German war) or Bruderkrieg (war of brothers). In the Italian unification process, this is the Third Independence War.
Most of the German states sided with Austria against Prussia, perceived as the aggressor. These included Saxony, Bavaria, Baden, Württemberg, Hanover, Hesse-Kassel, Hesse-Darmstadt and Nassau. Some of the northern German states joined Prussia, in particular Oldenburg, Mecklenburg-Schwerin, Mecklenburg-Strelitz, and Brunswick. Also, Italy joined with Prussia, because Austria still occupied the territory of Venetia which Italian irredentists wanted in order to complete Italian unification. Notably, the other foreign powers abstained from this war. French Emperor Napoleon III, who expected an Austrian victory, chose to remain out of the war to strengthen his negotiating position for territory along the Rhine, while Russia still bore a grudge against Austria from the Crimean War.
The first major war between two continental powers in many years, this war used many of the same technologies as the American Civil War, including the use of railroads to concentrate troops during mobilization and the use of telegraphs to enhance long distance communication. The Prussian Army used breech-loading rifles that could be loaded while the soldier was seeking cover on the ground, whereas the Austrian muzzle-loading rifles could be loaded only while standing (thus being a good target). The main campaign of the war occurred in Bohemia. Prussian Chief of the General Staff Helmuth von Moltke had planned meticulously for the war, and chose to mostly ignore the minor states in favour of a concentration against Austria. He rapidly mobilized the Prussian army and advanced across the border into Saxony and Bohemia, where the Austrian army was concentrating for an invasion of Silesia. There, the Prussian armies led personally by King Wilhelm converged, and the two sides met at the Battle of Königgrätz (Sadová) on July 3. Superior Prussian organization and élan decided the battle against Austrian numerical superiority, and the victory was near total, with Austrian battle deaths nearly seven times the Prussian figure. It is worth noting that Prussia was equipped with von Dreyse's breech-loading needle-gun, which was vastly superior to Austria's muzzle-loaders. Austria rapidly sought peace after this battle. Except for Saxony, the other German states allied to Austria played little role in the main campaign. Hanover's army defeated Prussia at Langensalza on June 27, but within a few days they were forced to surrender by superior numbers. Prussian armies fought against Bavaria on the Main River, reaching Nuremberg and Frankfurt. The Bavarian fortress of Würzburg was shelled by Prussian artillery, but the garrison defended its position until armistice day. The Austrians were more successful in their war with Italy, defeating the Italians on land at the battle of Custoza (June 24) and on sea at the battle of Lissa (July 20). Garibaldi's "Hunters of the Alps" defeated the Austrians at battle of Bezzecca, on 21 July, conquered the lower part of Trentino, and moved towards Trento. Prussian peace with Austria-Hungary forced the Italian government to seek an armistice with Austria, on 12 August. According to Treaty of Vienna, signed on October 12, Austria ceded Venetia to France, which in turn ceded it to Italy.
In order to forestall intervention by France or Russia, Bismarck pushed the king to make peace with the Austrians rapidly, rather than continue the war in hopes of further gains. The Austrians accepted mediation from France's Napoleon III. The Treaty of Prague on August 23, 1866 resulted in the dissolution of the German Confederation, Prussian annexation of Schleswig-Holstein, Hanover, Hesse-Kassel, Nassau, and Frankfurt, and the permanent exclusion of Austria from German affairs. This left Prussia free to form the North German Confederation the next year. Prussia chose not to seek Austrian territory for itself, and this made it possible for Prussia and Austria to ally in the future, since Austria was threatened more by Italian and Pan-Slavic irredentism than by Prussia. The war left Prussia dominant in Germany, and German nationalism would compel the remaining independent states to ally with Prussia in the Franco-Prussian War in 1870, and then to accede to the crowning of King Wilhelm as German Emperor. United Germany would become one of the most powerful of the European countries."
Bismarck wanted to just expel Austria even though the Austrian military had been crushed in just a few weeks. King William I and others in the General Military Staff wanted to invade Austria for more conquests but Bismarck eventually had his way and Austria was preserved.
But what if it had been different? What if King William, Bismarck, and the Prussian military had gone on to march into Vienna and conquer Austria? What if Austria was then partitioned with the German states annexed to Germany and the creation of a subserviant and allied Kingdom of Hungary? What if, instead of a KleinDeutschland, they had created a powerful GrossDeutschland? What would be the future outcome of Europe and the world then?