Austro-Italian ironclad arms race
In the years after Ferdinand Max's departure from Austria, the Imperial Austrian Navy suffered under further political and budgetary constraints. In April 1864, it was proposed that the naval ministry, which the former Archduke had helped to establish, be disbanded. In January 1865, Emperor Franz Joseph I dissolved the ministry and the Imperial Austrian Navy was again placed under the jurisdiction of the Austrian Ministry of War. Under the 1865 budget, just 7,100,000 Florins were allocated towards naval expenses, but once more, none of the funds were designated for warship construction. In 1866, the naval budget grew slightly to 7,800,000 Florins, but for the third consecutive year there would be no funds for additional ironclads, or other warships. Thus, when the Seven Weeks War began in June 1866, the Imperial Austrian Navy would possess only ships which had been constructed during Ferdinand Max's tenure as "Oberkommandant der Marine".
Wilhelm von Tegetthoff
Tegetthoff was appointed commander of the Austrian battle fleet on 9 May 1866, shortly before the Seven Weeks' War against Italy. Although the Italian fleet was larger and more powerful, Tegetthoff decided to engage it after a successful reconnaissance of the Italian base of Ancona on 27 June 1866. With their army suffering defeats against the Austrians during the first week of the war from 20 to 27 June 1866, the Italians sought a victory over the Austrian navy by sending their fleet against the Austrian naval base at Lissa, off the coast of Dalmatia near Spàlato (Split) on 16 July 1866. Encountering the Italian fleet early on the morning of 20 July 1866, Tegetthoff sailed straight for the center of the Italian fleet, hoping to ram the ships to make up for his own fleet's lack of firepower ("Rammstosstaktik"). The smoke from the Italian ships made visibility very poor, however, and the Austrians missed the Italian fleet completely. Swinging around, Tegetthoff again charged, this time setting two Italian armored ships on fire and damaging several more.