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.
Silesian Wars
After entering Bohemia, Prussian forces converged upon Prague by the beginning of September, seizing the city on 16 September. This new threat drew the Austrian army back from Alsace through Bavaria; the French, however, failed to harass and disrupt the Austrian redeployment, so Austria's army was able to return to Bohemia quickly and at full strength, though it was forced to abandon control of Alsace and Bavaria. Frederick gathered his forces around Prague and tried repeatedly to force a decisive engagement, but Austrian commander Otto Ferdinand von Traun focused on harassing the invaders' supply lines, eventually forcing the Prussians to abandon Prague and Bohemia and retreat into Upper Silesia in November.
With the January 1745 Treaty of Warsaw, Austria established a new "Quadruple Alliance" among Austria, Britain, Saxony, and the Dutch Republic, followed by a secret offensive alliance between Austria and Saxony, which envisioned a territorial partition of Prussia. Meanwhile, Emperor Charles died on 20 January, destroying the rationale behind Frederick's alliance. These events combined to produce a major shift in the direction of the war in Germany. Austria renewed its offensive against Bavaria in March 1745, decisively defeating the Franco-Bavarian army at the 15 April Battle of Pfaffenhofen, and making peace with Maximilian III of Bavaria (the son of the late Emperor Charles) by the Treaty of Füssen on 22 April.