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Previous: The Powers let the war continue
The Southern coalition, led by the Bavarian king, unites Germany as a Federal Empire, under its own conditions. Two main principles, dictated by the South`s interests, shape this new Reich: the dissolution of Prussia into many small, fractured and insignificant member states, and the strengthening of Catholic control over the Empire.
While Southern German states join the new Reich as they were, the North undergoes major reshaping. Prussia is completely torn apart and the Hohenzollern line left only with a rump state of Brandenburg-Prussia in the borders of 1687 (with the capital city of Potsdam), further diminished by declaring Berlin, Kolberg, Danzig, Posen and Königsberg as Free Cities.
On Prussia´s former territory, more than a dozen duchies, principalities are prince-bishoprics are "restored": Münster, Westphalia, Jülich-Kleve-Berg, Hesse-Kassel, Anhalt, Silesia ... Officially, this happens in the name of "restituting" the legitimate sovereignties which had been "devoured" by Prussia's expansion in the 1860s and thereafter. In fact, though, the prince-bishoprics had already ceased to exist in 1807 and the duchy of Silesia already in the 16th century.
The new Reich needed a constitution - and although the Bavarian king wasn't exactly fond of democracy and parliaments, he also couldn't act entirely against the spirit of the time. So, a bit of democracy was added to the constitutional design, with a bicameral federal Parliament (the lower chamber being elected by the people, the upper chamber constituted by the monarchs of the member states and delegates from the free cities). The kings of Bavaria would always also be the Emperors of Germany at the same time, retaining a lot of executive and supreme judicial powers as well as a right to veto any Parliamentary law. In contrast to the OTL Reichstag, Parliament did not even have absolute power over the federal Budget, with a portion of the federal budget being constitutionally put under the Emperor`s control.
But although this wasn't exactly what German liberals and democrats had fought for in 1848, it was more than nothing, and amid continuing hostility between North and South, Catholics and Protestants, Prussian loyalists and regional separatists, a lively electoral campaign took place. On October 3rd, 1886, the new Reichstag was elected.
But who wins and leads a highly divided German Reich into the future?