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.
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.