Austro-Italian ironclad arms race
Austria's defeat in the Seven Weeks War forced Austria to determine a new set of foreign and domestic policies for the future, as Austria's interests since the days of the Holy Roman Empire had primarily been found in Italy and Germany. The Empire thus reformed itself into the Austria-Hungarian Empire following the adoption of the Austro-Hungarian Compromise of 1867 (German: "Ausgleich"), which re-established the sovereignty of the Kingdom of Hungary and placed Hungarians within the Empire on an equal footing with Austrians. Under the "Ausgleich", Emperor Franz Joseph I would be crowned as King of Hungary, while a separate parliament at Pest with powers to enact laws for the lands of the Holy Crown of Hungary would be established.
History of Austria
Over the next three years Austria, whose foreign policy was now directed by Philipp Stadion, attempted to maintain peace with France, avoiding the War of the Fourth Coalition (1806–1807) but obliged to do France's bidding. The overthrow of the Spanish Bourbons in 1808 was deeply disturbing to the Habsburgs, who rather desperately went to war once again in 1809, the War of the Fifth Coalition this time with no continental allies, but the United Kingdom. Stadion's attempts to generate popular uprisings in Germany were unsuccessful, and the Russians honoured their alliance with France, so Austria was once again defeated at the Battle of Wagram, although at greater cost than Napoleon, who had suffered his first battlefield defeat in this war, at Aspern-Essling, had expected. However Napoleon had already re-occupied Vienna. The terms of the subsequent Treaty of Schönbrunn were quite harsh. Austria lost Salzburg to Bavaria, some of its Polish lands to Russia, and its remaining territory on the Adriatic (including much of Carinthia and Styria) to Napoleon's Illyrian Provinces. Austria became a virtual subject state of France.