This did not end Austrian involvement with the rest of the German states, as some might have expected before the downfall of Napoleon, but it did move Austria in that direction. Previous Holy Roman Emperors had tried to solidify Austrian leadership in the German-speaking world; most recently with Emperor Joseph II (who Francis I greatly admired) but he was blocked by the Prussian King Frederick the Great. With the creation of the new Austrian Empire, while Austria joined in subsequent loose unions of the German states, most of the Hapsburg territories (of which Hungary was the largest part) remained on the outside. It was also during this period that the Hapsburg realm became even more diverse which inevitably weakened the position of the German-speaking Austrians. When making peace with Napoleon, Austria lost a sizeable amount of territory (such as Belgium) but was also ceded territory in Italy such as about half of all that remained of the old Republic of Venice. By the time it was all over, much of northern Italy fell under Austrian control as the Kingdom of Lombardy-Venetia, ironically thanks to the success of Napoleon and revolutionary France (the First Republic).
These ethnic tensions combined with militant liberalism to boil over in 1848 when revolutions broke out all over Europe. Emperor Francis I was gone and Emperor Ferdinand I, though a perfectly wonderful man, was simply not up to the challenge. It was a moment of terrible crisis with riots in Vienna, rebellions in Italy and in Hungary. This could have very easily been the end of the Austrian Empire with northern Italy and Hungary engulfed in rebellion there was really only enough military strength to suppress one or the other but not both. There were also other uprisings in almost every minority group such as the Slovaks, the Serbs, the Poles and the Czechs. In the end, a new monarch came to the throne, Emperor Francis Joseph I, and the rebellions in Austrian territory were suppressed. In Hungary, the new Emperor asked Tsar Nicholas I of Russia for help and in a show of monarchial solidarity he sent a Russian army into Hungary to aid the Austrians in putting down the rebellion. Even then, the Hungarian rebels might have done better had it not been for the rebellion of minority ethnic groups in their own territory. This caused some to draw back and renew their support for the Hapsburgs, reasoning that they were stronger together than they would be apart and that an independent Hungary might lose considerable territories to ethnic rebellions of their own.
In 1859 an ill-advised ultimatum to Piedmont-Sardinia sparked the Second Italian War for Independence between Austria on one side and France and Piedmont-Sardinia on the other. Emperor Francis Joseph I took the field himself and met Emperor Napoleon III in battle but it was a bloody disaster, fairly ruinous for both sides but resulting in Austria losing Lombardy. Frustrated in the south, the Austrian Empire looked north and fought in the coalition against Denmark with Prussia and the rest of the German Confederation but Prussia was soon determined to supplant Austria as the preeminent German-speaking power. In 1866 Prussia (and Italy) went to war against Austria which was totally isolated. Again, due to penny-pinching with the military, Austria was swiftly and decisively defeated, losing her place in the community of German states to Prussia and losing Venice to Italy. However, as long as actual German unification did not take place, there was still hope that Austria might regain her place and it was toward that end that Emperor Francis Joseph finally gave in to the demands for Hungarian autonomy as to be able to focus on the Prussian rival without worrying about another rebellion in Hungary. So it was that the Compromise of 1867 came about, creating the “Dual Monarchy” of Austria-Hungary which saw separate but equal parliaments and prime ministers for both halves of the Hapsburg realm; one in Vienna for the Empire of Austria and one in Budapest for the Kingdom of Hungary.
To be concluded in Part II...