Austro-Italian ironclad arms race
Seizing upon the decline of the Regia Marina in the years immediately after the Battle of Lissa, Tegetthoff worked to continue the efforts of Archduke Ferdinand Max of expanding the ironclad fleet of the now Austro-Hungarian Navy. Tegetthoff found political allies in the Austro-Hungarian Minister of War Carl von Franck and retired Admiral Bernhard von Wüllerstorf-Urbair. Wüllerstorf's and Franck's primary arguments in favor of continuing with the ironclad program Austria had engaged in prior to the Seven Weeks War lay largely along economic grounds. The two believed that constructing new ironclad warships would rejuvenate Austria-Hungary's economy following the defeat at the hands of Prussia and Italy, and that such a fleet would help to open up new commercial opportunities in the Levant and the Middle East. These proposals would be shelved however while Austria continued to reel from the military defeats inflicted by Prussia, and several cabinet reshufflings by Emperor Franz Joseph I resulted in a government more interested in pursuing revenge against Prussia than constructing new ironclads, which would be of little use in a hypothetical second war with Prussia.
Austro-Hungarian Navy
Prior to the Austro-Hungarian Compromise of 1867, the Navy was referred to as the Imperial Austrian Navy or simply the Austrian Navy. It saw action in the French Revolutionary Wars, the Napoleonic Wars, the Second Egyptian–Ottoman War, the First and Second Wars of Italian Independence, the Second Schleswig War, and the Seven Weeks War as well as the simultaneous Third War of Italian Independence. Following Austria's defeat to Prussia and Italy during the Seven Weeks War, the Empire reformed itself into a dual monarchy with the Habsburg monarch ruling as Emperor of Austria over the western and northern half of the country that was the Austrian Empire, and as King of Hungary over the Kingdom of Hungary. The Austro-Hungarian Compromise of 1867 also transformed the Austrian Navy into the Austro-Hungarian Navy. Largely neglected by the Empire in its early years, the k.u.k. Kriegsmarine grew throughout the late 19th and early 20th centuries to become one of the largest navies in the Adriatic and Mediterranean Seas. By 1914 the k.u.k. Kriegsmarine had a peacetime strength of 20,000 personnel.
The k.u.k. Kriegsmarine saw action in the Boxer Rebellion, and the first shots of World War I were fired by the Austrian monitor "Bodrog", which bombarded Belgrade on 29 July 1914, the day after Austria-Hungary declared war on Serbia.