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.
Austro-Italian ironclad arms race
Meanwhile, Austria reformed itself into the Austro-Hungarian Empire in 1867 after losing the Seven Weeks War to Prussia. In the years following the Battle of Lissa, Wilhelm von Tegetthoff would oversee the construction of three additional ironclads and the rebuilding of a fourth. After Tegetthoff's death in 1871, the Austro-Hungarian Navy entered its own period of neglect, with just five additional ironclads being constructed in the ensuing thirteen years. Both navies engaged in further construction projects throughout the 1870s and early 1880s, but the arms race ended in the 1880s due the signing of the Triple Alliance between Italy, Austria-Hungary, and Germany in 1882 and the introduction of new technologies that led to the development of pre-dreadnought battleships. Despite their alliance, however, Italy and Austria-Hungary would engage in a second naval arms race centered around the construction of battleships at the turn of the century. This arms race would continue until the beginning of World War I.