Austria and Prussia were the two leading germanic states of the 19th century before the unification of states into Germany. By the mid 1800 these two states both had empires and held sway over about half of the germanic states each. Austria controlled what was known as the German confederation which included Hannover, Saxony and Bavaria while Prussia's strength was in the north with allies such as Hamburg, Brecon and Saxe-Coburg. In previous European wars the two German powers often forght on opposite sides which allowed their powers over the other German states to grow.

There was strong support from both camps for the idea of unifying the German states into a strong German nation. The idea had been the goal of these states since the humiliation of The Holy Roman Empire by Napoleon which resulted in its dissolution and the German states becoming puppets of the European powers of the day. The main point of contention between Austria and Prussia was which of the two would dominate the new German state. This could well have ended in a stalemate between the two powers except for one major factor. There was another group of small and city states that since its capitulation to Napoleon had also made moves to create a greater national state - Italy. Part of the territory that the newly founded Kingdom of Italy believed was inherently Italian was part of the Austrian Empire. This meant that Italy got involved as an ally of Prussia during the Austrian Prussian war which resulted in Austria loosing territory to Italy as well as loosing influence over much of the German states to Prussia - the German Confederation was dissolved, Hannover annexed to Prussia and the North German Confederation was founded with Prussia at its head.

This effectively left Austria isolated in the German states, it's sphere of influence shifted east as it still had its empire territories in eastern Europe where the Ottoman Empire had previously held sway. Within a year the Austrian Empire had become the Austro-Hungarian Empire, a European power in its own right but importantly the majority of the state was not German speaking, Austria would not be part of the German nation. Prussia on the other had went quickly from de facto leader of the North German Confederation to the most powerful state in the federal nation of Germany within the decade. Germany was founded in the aftermath of the franco-prussian war of 1870 when the former states of the German Confederation which had not been annexed during the austrian-prussian war (except Austria) joined the North German Confederation in its war against France and after the war joined the Prussian led confederation which became the the German Empire with the Prussia king declared Emperor.

Is there scope for arguing that this question is the wrong way around? That a popular German national identity has its beginning after Austria was set upon an extra-german empire. That any separation of institution and tradition was forced by Prussia, and was a necessary condition for the development of a German national identity?