Austro-Italian ironclad arms race
Seizing upon the decline of the Regia Marina in the years immediately after the Battle of Lissa, Tegetthoff worked to continue the efforts of Archduke Ferdinand Max of expanding the ironclad fleet of the now Austro-Hungarian Navy. Tegetthoff found political allies in the Austro-Hungarian Minister of War Carl von Franck and retired Admiral Bernhard von Wüllerstorf-Urbair. Wüllerstorf's and Franck's primary arguments in favor of continuing with the ironclad program Austria had engaged in prior to the Seven Weeks War lay largely along economic grounds. The two believed that constructing new ironclad warships would rejuvenate Austria-Hungary's economy following the defeat at the hands of Prussia and Italy, and that such a fleet would help to open up new commercial opportunities in the Levant and the Middle East. These proposals would be shelved however while Austria continued to reel from the military defeats inflicted by Prussia, and several cabinet reshufflings by Emperor Franz Joseph I resulted in a government more interested in pursuing revenge against Prussia than constructing new ironclads, which would be of little use in a hypothetical second war with Prussia.
Wilhelm von Tegetthoff
Tegetthoff was appointed commander of the Austrian battle fleet on 9 May 1866, shortly before the Seven Weeks' War against Italy. Although the Italian fleet was larger and more powerful, Tegetthoff decided to engage it after a successful reconnaissance of the Italian base of Ancona on 27 June 1866. With their army suffering defeats against the Austrians during the first week of the war from 20 to 27 June 1866, the Italians sought a victory over the Austrian navy by sending their fleet against the Austrian naval base at Lissa, off the coast of Dalmatia near Spàlato (Split) on 16 July 1866. Encountering the Italian fleet early on the morning of 20 July 1866, Tegetthoff sailed straight for the center of the Italian fleet, hoping to ram the ships to make up for his own fleet's lack of firepower ("Rammstosstaktik"). The smoke from the Italian ships made visibility very poor, however, and the Austrians missed the Italian fleet completely. Swinging around, Tegetthoff again charged, this time setting two Italian armored ships on fire and damaging several more.