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The Congress of Vienna broke the region that became the German confederation up into 39 states while trying to fix the balance of power. This was in itself a sort of unification of the German region into the confederation and inspired nationalistic ideas, but both of the individual states and of a larger Germany.
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The Unification of Germany essentially took place as a series of Prussian advances (largely by Otto von Bismarck's own work) on promoting nationalism and squashing liberalism in German ideals, until finally the two regions diplomatically united with popular consent.
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Free trade between the German states acts to unify Germany as their resources are more freely shared.
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Liberal revolutions were spreading through Europe, but the event in this time in Germany had failed. Liberal nationalists met for the Frankford assembly where Germans as well as the Prussian and Austrian emperor met to discuss the unification of Germany. However, both Austria and Prussia refused to combine with Germany, so nothing happened.
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France and Piedmont combined forces to defeat Austria and give independence to a presently unifying Italy. Austria was left much weaker by the losses, which further guided the German people to believe they could unify.
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Austria has been struggling to restructure its empire into a centralized modern state, and Prussia had been experiencing some political crisis that caused some stagnation on account of liberals recognizing their government's repression.The Prussian King would later appoint Bismarck in hopes of resolving the constitutional deadlock.
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Bismarck was appointed. He intended to give Prussia the foremost influence over Germany, and would quickly commit most of the influential action in the uniting of Germany. Through the tactic of realpolitik, which is trying to practically use any means available to come into power, he would be very successful in appealing to nationalism (through things like his Blood and Iron speech) and realism for uniting Germany.
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Using Austria as an ally in the war against Denmark, Prussia was trying to create agitation with Austria to declare war against them, while also adding territory to Germany. Austria was defeated at the battle of Koniggratz by the Prussians during the following 7 Weeks War, causing Austria to be pushed out of German affairs.
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Since the Seven Week's War, Austria has been unable to resist pressure, and resorts to reinstating a dual monarchy to please Hungarian demands.
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Prussia elicited France declaring war on them, and then crushed France and took Alsace and Lorraine from them. France in this time had a new leader, Louis Napoleon, who thought that by defeating Prussia and the German States, he could regain popularity with his people. However, Prussia winning mostly inspired nationalism and unity in Germany.
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The German Empire combined Prussia with the rest of Germany, as was declared in Versailles. William I of Prussia became Kaiser. This can be seen as the official unification of Germany.