The Prussian people were almost frantic with joy; and Bismarck, from being the most unpopular man in the nation, became instantly a national idol. His marvellous diplomacy, by which Austria was driven to the battlefield, was now seen and universally acknowledged. He obtained fame, decorations, and increased power. A grateful nation granted to him four hundred thousand thalers, with which he bought the estate of Varzin. General von Moltke received three hundred thousand thalers and immense military prestige. The war minister, Von Roon, also received three hundred thousand thalers. These three stood out as the three most prominent men of the nation, next to the royal family.

Never was so short a war so pregnant with important consequences. It consolidated the German Confederation under Prussian dominance. By weakening Austria it led to the national unity of Italy, and secured free government to the whole Austrian empire, since that government could no longer refuse the demands of Hungary. Above all, "it shattered the fabric of Ultramontanism which had been built up by the concordat of 1853."

It was the expectation of Napoleon III that Austria would win in this war; but the loss of the Austrians was four to one, besides her humiliation, condemned as she was to pay a war indemnity, with the loss also of the provinces of Schleswig-Holstein, Hanover, Hesse-Cassel, Nassau, and Frankfort. But Bismarck did not push Austria to the wall, since he did not wish to make her an irreconcilable enemy. He left open a door for future and permanent peace. He did not desire to ruin his foe, but simply to acquire the lead in German politics and exclude Austria from the Germanic Confederation. Napoleon, disappointed and furious, blustered, and threatened war, unless he too could come in for a share of the plunder, to which he had no real claim. Bismarck calmly replied, "Well, then, let there be war," knowing full well that France was not prepared, Napoleon consulted his marshals, "Are we prepared," asked he, "to fight all Germany?" "Certainly not," replied the marshals, "until our whole army, like that of Prussia, is supplied with a breech-loader; until our drill is modified to suit the new weapon; until our fortresses are in a perfect state of preparedness, and until we create a mobile and efficient national reserve."

When Carlyle heard the news of the great victories of Prussia, he wrote to a friend, "Germany is to stand on her feet henceforth, and face all manner of Napoleons and hungry, sponging dogs, with clear steel in her hand and an honest purpose in her heart. This seems to me the best news we or Europe have heard for the last forty years or more."

The triumphal return of the Prussian troops to Berlin was followed on the 24th of February, 1867, by the opening of the first North German parliament,--three hundred deputies chosen from the various allied States by universal suffrage. Twenty-two States north of the Main formed themselves into a perpetual league for the protection of the Union and its institutions. Legislative power was to be invested in two bodies,--the Reichstag, representing the people; and the Bundesrath, composed of delegates from the allied governments, the perpetual presidency of which was invested in the king of Prussia. He was also acknowledged as the commander-in-chief of the united armies; and the standing army, on a peace footing, was fixed at one per cent of all the inhabitants. This constitution was drawn by Bismarck himself, not unwilling, under the unquestioned supremacy of his monarch, to utilize the spirit of the times, and admit the people to a recognized support of the crown.

Thus Germany at last acquired a liberal constitution, though not so free and broad as that of England. The absolute control of the army and navy, the power to make treaties and declare peace and war, the appointment of all the great officers of state, and the control of education and other great interests still remained with the king. The functions of the lower House seemed to be mostly confined to furnishing the sinews of war and government,--the granting of money and the regulation of taxes. Meanwhile, secret treaties of alliance were concluded with the southern States of Germany, offensive and defensive, in case of war,--another stroke of diplomatic ability on the part of Bismarck; for the intrigues of Napoleon had been incessant to separate the southern from the northern States,--in other words, to divide Germany, which the French emperor was sanguine he could do. With a divided Germany, he believed that he was more than a match for the king of Prussia, as soon as his military preparations should be made. Could he convert these States into allies, he was ready for war. He was intent upon securing for France territorial enlargements equal to those of Prussia. He could no longer expect any thing on the Rhine, and he turned his eyes to Belgium.

The war-cloud arose on the political horizon in 1867, when Napoleon sought to purchase from the king of Holland the Duchy of Luxemburg, which was a personal fief of his kingdom, though it was inhabited by Germans, and which made him a member of the Germanic Confederation if he chose to join it. In the time of Napoleon I. Luxemburg was defended by one of the strongest fortresses in Europe, garrisoned by Prussian troops; it was therefore a menace to France on her northeastern frontier. As Napoleon III, promised a very big sum of money for this duchy, with a general protectorate of Holland in case of Prussian aggressions, the king of Holland was disposed to listen to the proposal of the French emperor; but when it was discovered that an alliance of the southern States had been made with the northern States of Germany, which made Prussia the mistress of Germany, the king of Holland became alarmed, and declined the French proposals. The chagrin of the emperor and the wrath of the French nation became unbounded. Again they had been foiled by the arch-diplomatist of Prussia.

All this was precisely what Bismarck wanted. Confident of the power of Prussia, he did all he could to drive the French nation to frenzy. He worked on a vainglorious, excitable, and proud people, at the height of their imperial power. Napoleon was irresolute, although it appeared to him that war with Prussia was the only way to recover his prestige after the mistakes of the Mexican expedition. But Mexico had absorbed the marrow of the French army, and the emperor was not quite ready for war. He must find some pretence for abandoning his designs on Luxemburg, any attempt to seize which would be a plain casus belli. Both parties were anxious to avoid the initiative of a war which might shake Europe to its centre. Both parties pretended peace; but both desired war.

Napoleon, a man fertile in resources, in order to avoid immediate hostilities looked about for some way to avoid what he knew was premature; so he proposed submitting the case to arbitration, and the Powers applied themselves to extinguish the gathering flames. The conference--composed of representatives of England, France, Russia, Austria, Prussia, Holland, and Belgium--met in London; and the result of it was that Prussia agreed to withdraw her garrison from Luxemburg and to dismantle the fortress, while the duchy was to continue to be a member of the German Zollverein, or Customs Union. King William was willing to make this concession to the cause of humanity; and his minister, rather than go against the common sentiment of Europe, reluctantly conceded this point, which, after all, was not of paramount importance. Thus was war prevented for a time, although everybody knew that it was inevitable, sooner or later.

The next three years Bismarck devoted himself to diplomatic intrigues in order to cement the union of the German States,--for the Luxemburg treaty was well known to be a mere truce,--and Napoleon did the same to weaken the union. In the meantime King William accepted an invitation of Napoleon to visit Paris at the time of the Great Exposition; and thither he went, accompanied by Counts Bismarck and Moltke. The party was soon after joined by the Czar, accompanied by Prince Gortschakoff, who had the reputation of being the ablest diplomatist in Europe, next to Bismarck. The meeting was a sort of carnival of peace, hollow and pretentious, with fêtes and banquets and military displays innumerable. The Prussian minister amused himself by feeling the national pulse, while Moltke took long walks to observe the fortifications of Paris. When his royal guests had left, Napoleon travelled to Salzburg to meet the Austrian emperor, ostensibly to condole with him for the unfortunate fate of Maximilian in Mexico, but really to interchange political ideas. Bismarck was not deceived, and openly maintained that the military and commercial interests of north and south Germany were identical.