Confederate State.  The Austrian position was from this time clearly defined, and it was in favour of that policy to which Bismarck would never consent.  It remained for him to propose an alternative.  Prussia, he said, could only allow the new State to be created on condition that large rights were given to Prussia; what these were would require consideration; he must consult the different departments.  This took time, and every month’s delay was so much gain for Prussia; it was not till February, 1865, that Bismarck was able to present his demands, which were, that Kiel should be a Prussian port, Rendsburg a Prussian fortress; that the canal was to be made by Prussia and belong to Prussia, the management of the post and telegraph service to be Prussian and also the railways; the army was to be not only organised on the Prussian system but actually incorporated with the Prussian army, so that the soldiers would take the oath of allegiance not to their own Duke but to the King of Prussia.  The Duchies were to join the Prussian Customs’ Union and assimilate their system of finance with that of Prussia.  The proposals were so drawn up that it would be impossible for Austria to support, or for the Prince of Augustenburg to accept them.  They were, in fact, as Bismarck himself told the Crown Prince, not meant to be accepted.  “I would rather dig potatoes than be a reigning Prince under such conditions,” said one of the Austrian Ministers.  When they were officially presented, Karolyi was instructed to meet them with an unhesitating negative, and all discussion on them ceased.

Prussia and Austria had both proposed their solution; each State even refused to consider the suggestion made by the other.  Meanwhile, since the departure of the Confederate troops the administration of the Duchies was in their hands; each Power attempted so to manage affairs as to prepare the way for the final settlement it desired, Prussia for annexation, Austria for Augustenburg.  Prince Frederick was still living at Kiel.  His position was very anomalous:  he assumed the style and title of a reigning Prince, he was attended by something like a Court and by Ministers; throughout Holstein, almost without exception, and to a great extent also in Schleswig, he was looked upon and treated by the population as their lawful sovereign; his birthday was celebrated as a public holiday; he was often prayed for in church.  All this the Austrians regarded with equanimity and indirectly supported; Bismarck wished to expel him from the country, but could not do so without the consent of Austria.  At the end of March the matter again came up in the Diet; Bavaria and Saxony brought in a motion that they expected that Austria and Prussia would transfer the administration to Frederick.  The Prussian Envoy rose and explained that they might expect it, but that Prussia would not fulfil their expectations; he moved that the claims of all candidates should be considered by the Diet, not only those of Augustenburg and of the Duke of Oldenburg, but also of Brandenburg.