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.
War of the Bavarian Succession
For four months, negotiators shuttled between Vienna and Berlin, Dresden and Regensburg, and Zweibrücken, Munich and Mannheim. By early spring 1778, Austria and Prussia faced each other with armies several times the size of their forces during the Seven Years' War, and their confrontation had the potential to explode into another European-wide war.