Bismarck’s triumph in the military struggle led directly to his victory in the constitutional conflict. Before the outbreak of hostilities, he had tried to reach an understanding with the liberal opposition, but the liberals hesitated to make peace with a statesman who had so flagrantly violated the fundamental law of the kingdom. The defeat of Austria changed all that. While the war was still in progress, general elections resulted in important gains for the right. Many voters, elated over the successes of the Prussian armies, expressed their confidence in the government by supporting its adherents at the polls. Some of the ultraconservatives hoped that the cabinet would now capitalize on its triumph by suspending the constitution and establishing an authoritarian regime. Yet the prime minister recognized that such reactionary schemes would prove futile in the long run. What he wanted was not the suppression of liberalism but an accommodation with it. As soon as peace was concluded, he introduced in the legislature a bill of indemnity granting the government retroactive approval for its operation without a legal budget. The consequence, as Bismarck had foreseen, was a split in the ranks of his adversaries. Those who argued that there could be no compromise on the principle of constitutional government rejected the indemnity bill, but many more moderate liberals, who eventually formed the National Liberal Party, decided to accept the settlement offered by the prime minister. Their reasoning was that an obstinate resistance against the cabinet would only condemn them to sterile dogmatism, whereas a willingness to accept what could not be prevented would enable them to influence official policy in the direction of greater freedom. With the support of these moderate liberals, on September 3, 1866, the legislature approved the Bill of Indemnity, 230 to 75. By dividing the forces of reform and weakening their sense of purpose, Bismarck won as important a success in domestic affairs as the victory on the field of battle.

The prime minister had long believed that the achievement of unity could appease liberal demands for political freedom. The success of the Prussian armies provided him with an opportunity to test this assumption. Once Austria had been subdued, he cajoled and bullied the secondary governments north of the Main River into joining Berlin in the establishment of the North German Confederation. It was the union of a giant and 21 pygmies, for, with its annexation of Hanover, the second largest North German state, as well as other secondary states in the wake of the Seven Weeks’ War, Prussia constituted about four-fifths of the territory and population of the confederation. Executive authority was vested in a hereditary presidency occupied by the kings of Prussia, who were to govern with the assistance of a chancellor responsible only to them. The legislature comprised the Federal Council, or Bundesrat, whose members were appointed by the state governments, and a lower house, the Imperial Diet, or Reichstag, elected by equal manhood suffrage. Since Prussia had 17 votes out of 43 in the Bundesrat, it could easily control the proceedings with the support of a few of its satellites among the small principalities. Although the Reichstag could theoretically exercise considerable influence over legislation by granting or withholding its approval, parliamentary authority and party initiative were weak and untested, and Bismarck had little difficulty in piecing together a workable majority for his program by a strategy of divide and rule. His support came largely from a combination of moderate liberals and moderate conservatives who shared a willingness to compromise to achieve pragmatic goals. The federal constitution provided no bill of rights, no ministerial responsibility, and no civilian supervision over military affairs. But it made possible the creation of a national currency and uniform weights, measures, commercial practices, industrial laws, and financial regulations. In short, by satisfying the long-frustrated demands of middle-class Germans for economic and legal unity, the constitution helped reconcile them to the defeat of their hopes for greater political freedom.