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".
Drache-class ironclad
Two years after the ships entered service, Austria joined Prussia in the Second Schleswig War against Denmark. "Drache" and "Salamander" were kept in the Adriatic to defend against a possible Danish attack, which failed to materialize. In 1866, Austria's erstwhile ally Prussia signed an alliance with Italy directed against Austria, beginning the Seven Weeks' War. The Austrian fleet was commanded by Rear Admiral Wilhelm von Tegetthoff, who attacked the Italian fleet as it attempted to capture the island of Lissa in the central Adriatic. In the ensuring Battle of Lissa, both ships were heavily engaged, with "Drache" inflicting fatal damage to the coastal defense ship , setting her on fire and ultimately destroying her. "Drache" did not escape unscathed, however, as she was hit by Italian shells numerous times; she lost her main mast, was temporarily set on fire, and her commander was killed. "Salamander" engaged the leading ships of the Italian line, though neither side inflicted serious damage on the other. Nevertheless, the loss of "Palestro" and the ironclad led the demoralized Italian fleet to disengage and retreat to their base at Ancona.