hleswig-Holstein should be established as an independent 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 c