Franz Joseph I of Austria
If Greater Germany was to prevail, the crown would necessarily have to go to Franz Joseph, who had no desire to cede it in the first place to anyone else. On the other hand, if the idea of a smaller Germany won out, the German crown could of course not possibly go the Emperor of Austria, but would naturally be offered to the head of the largest and most powerful German state outside of Austria—the King of Prussia. The contest between the two ideas, quickly developed into a contest between Austria and Prussia. After Prussia decisively won the Seven Weeks War, this question was solved; Austria lost no territories as long as they remained out of German affairs.
War of the Bavarian Succession
By the late 1770s, Joseph also faced important diplomatic obstacles in consolidating Habsburg influence in Central Europe. When the British had been Austria's allies, Austria could count on British support in its wars, but Britain was now allied with Prussia. In the Diplomatic Revolution, the French replaced the British as Austria's ally, but they were fickle, as Joseph discovered when Vergennes extricated Versailles from its obligations. Russia, which also had been an important Austrian ally for most of the Seven Years' War, sought opportunities for expansion at the expense of its weak neighbors. In 1778, that meant Poland and the Ottoman Empire, but Joseph fully understood the danger of appearing weak in Russia's eyes: Habsburg lands could be carved off easily by the cagey Catherine's diplomatic knife. Still, Frederick of Prussia was the most definite enemy, as he had been throughout the reigns of Theresa and Franz before him, when the Prussian state's emergence as a player on the European stage had occurred at Habsburg expense, first with the loss of Silesia, and later in the 1750s and 1760s. Joseph sought to unify the different portions of his realm, not the German states as a whole, and to establish Habsburg hegemony in German-speaking central Europe beginning with the partition of Bavaria.