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.
Austria–Prussia rivalry
The rivalry is largely held to have begun when upon the death of the Habsburg Emperor Charles VI in 1740, King Frederick the Great of Prussia launched an invasion of Austrian-controlled Silesia, starting the First Silesian War (of three Silesian Wars to come) against Maria Theresa. Frederick had broken his promise to acknowledge the Pragmatic Sanction of 1713 and the indivisibility of the Habsburg territories, whereby he sparked off the pan–European War of the Austrian Succession. He decisively defeated the Austrian troops at the 1742 Battle of Chotusitz, whereafter Maria Theresa, by the Treaties of Breslau and Berlin, had to cede the bulk of the Silesian lands to Prussia.
At the time, Austria still claimed the mantle of the Empire and was the chief force of the disunited German states. Until 1745, Maria Theresa was able to regain the Imperial crown from her Wittelsbach rival Charles VII by occupying his Bavarian lands, but, despite her Quadruple Alliance with Great Britain, the Dutch Republic and Saxony failed to recapture Silesia: The Second Silesian War started with Frederick's invasion into Bohemia in 1744 and after the Prussian victory at the 1745 Battle of Kesselsdorf, by the Treaty of Dresden the "status quo ante bellum" was confirmed: Frederick kept Silesia but finally acknowledged the accession of Maria Theresa's husband, Emperor Francis I. The terms were again confirmed by the final Peace of Aix-la-Chapelle in 1748.