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 Emperors were willing to unify Germany under their 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