The Apostolic Confederation (Long live the Qing)

From Alternative History

The stunning defeat at Königgrätz was a major setback for Prussia's rise. Among the territories she lost were Silesia, etc. Instead, Austria became the dominating power among the German states, and the Habsburg Emperor were willing to unify Germany under his rule. The largest empire in Europe after Russia (if the Ottoman Empire does not count), the newly founded Austrian Empire (Kaisertum) saw itself as a head of a confederation of monarchic states. The newly introduced Principal Diet (Fürstentag) became a "parliament" where Germany's Kings, Dukes and Graves could consult each other (of course under Austrian leadership), and they were granted a generous autonomy. Due to riots in Hungary, Austria shifted to a more balanced policy towards the ethnic minorities in her realm; instead of the official "Deutscher Bund", meaning German Confederation (it was never abolished due to Austrian influence) the name "Apostolischer Bund" was employed, to reflect the multinationality of the Empire, de jure unified by Roman Catholicism (despite of many Protestant member states and Muslim minorities). Hungary was granted large amounts of autonomy, similar to the German states, but the Austrian Emperor remained king of Hungary. Pressure came as well from the Poles and Czechs, which in turn led to more autonomy for Galicia, Lodomeria and Bohemia. Another problem Apart from the internal pressures, the industry in the German states has developed well, and by 1900, it was well above the UK's (like in OTL); companies like Krupp produced high-quality armaments for the Emperor.