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In 1864, the rival German powers Prussia and Austria together annexed the Danish provinces of Schleswig and Holstein on behalf of the German Confederation. Old tensions between the states bubbled to the surface as they each attempted to gain control of the new territory, and in 1866 the Austrian-Prussian War broke out.
Although the war was over in seven weeks, its consequences were far-reaching. Austria was excluded from the Confederation. which was dissolved, and Prussia became the dominant power in a new Germany. Free of inner tensions, Germany was set to become a Great Power.
Introduction to the Austrian Germany timeline
But imagine that Austria had won the war instead. Clearly this would have lead to a very different situation in which Prussia would have been excluded from the Confederation and Austria would have remained part of it. Unlike Austria, however, Prussia would probably not have coped that well with independence. Austria was a member of the huge Austro-Hungarian Empire as well as Germany and did not suffer too much from independence. On the other hand, Prussia had little territory outside Germany, and probably would have suffered from economic recession as well as Polish nationalism. She would have become bitter, siding against Germany in the First World War. This is where the Austrian Germany timeline begins to really diverge from ours; the outcome of WW1 is totally different, and therefore so is WW2, and the rest of the 20th century.
List of major events