Franz Joseph I of Austria
If Greater Germany was to prevail, the crown would necessarily have to go to Franz Joseph, who had no desire to cede it in the first place to anyone else. On the other hand, if the idea of a smaller Germany won out, the German crown could of course not possibly go the Emperor of Austria, but would naturally be offered to the head of the largest and most powerful German state outside of Austria—the King of Prussia. The contest between the two ideas, quickly developed into a contest between Austria and Prussia. After Prussia decisively won the Seven Weeks War, this question was solved; Austria lost no territories as long as they remained out of German affairs.
Silesian Wars
After entering Bohemia, Prussian forces converged upon Prague by the beginning of September, seizing the city on 16 September. This new threat drew the Austrian army back from Alsace through Bavaria; the French, however, failed to harass and disrupt the Austrian redeployment, so Austria's army was able to return to Bohemia quickly and at full strength, though it was forced to abandon control of Alsace and Bavaria. Frederick gathered his forces around Prague and tried repeatedly to force a decisive engagement, but Austrian commander Otto Ferdinand von Traun focused on harassing the invaders' supply lines, eventually forcing the Prussians to abandon Prague and Bohemia and retreat into Upper Silesia in November.
With the January 1745 Treaty of Warsaw, Austria established a new "Quadruple Alliance" among Austria, Britain, Saxony, and the Dutch Republic, followed by a secret offensive alliance between Austria and Saxony, which envisioned a territorial partition of Prussia. Meanwhile, Emperor Charles died on 20 January, destroying the rationale behind Frederick's alliance. These events combined to produce a major shift in the direction of the war in Germany. Austria renewed its offensive against Bavaria in March 1745, decisively defeating the Franco-Bavarian army at the 15 April Battle of Pfaffenhofen, and making peace with Maximilian III of Bavaria (the son of the late Emperor Charles) by the Treaty of Füssen on 22 April.