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.
Seven Years' War
The Treaty of Hubertusburg, between Austria, Prussia, and Saxony, was signed on 15 February 1763, at a hunting lodge between Dresden and Leipzig. Negotiations had started there on 31 December 1762. Frederick, who had considered ceding East Prussia to Russia if Peter III helped him secure Saxony, finally insisted on excluding Russia (in fact, no longer a belligerent) from the negotiations. At the same time, he refused to evacuate Saxony until its elector had renounced any claim to reparation. The Austrians wanted at least to retain Glatz, which they had in fact reconquered, but Frederick would not allow it. The treaty simply restored the status quo of 1748, with Silesia and Glatz reverting to Frederick and Saxony to its own elector. The only concession that Prussia made to Austria was to consent to the election of Archduke Joseph as Holy Roman emperor. Saxony emerged from the war weakened and bankrupt; despite losing no territory, Saxony had essentially been a battleground between Prussia and Austria throughout the conflict, with many of its' towns and cities (including the capital of Dresden) damaged by bombardment and looting.