The Powers let the war continue (CYOAH! Redux)

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While neither Britain, nor France, nor Russia wish to see a more powerful Germany, they also do not trust each other, fearing that it might lead to a larger war. And so, as the weeks go on, the Northern Germans smash the Southerners brutally. Nuremburg falls, and then Augsburg, cutting the South in two. It appears that the war will be over in a few weeks with a united Germany.

But the Austro-Hungarians are now worried. After the Prussians trounced them soundly in 1866, kicking them out of the German Confederation, they have feared a resurgent Germany that sides against them. And so, as Stuttgart is besieged by the Prussians, the Austrians launch a massive strike into the North, taking Dresden and pushing towards Berlin!

With the sudden distraction, the Southerners are resurgent, brushing aside the attack on Stuttgart and taking back Nuremburg, cutting off Augsburg. With three armies trapped in Augsburg, and another two trying to defend against against the Austrian push towards Berlin, the Northerners are totally defenseless, and French and Russian partial mobilization carries a clear message; surrender now.

The Northerner capitulate on August 19th, 1885, a year and a month after the war started.

The Austrians and Bavarians are now in a dilemma- what to do with the Prussian Northerners?
 * Annex them to the South, with the capital in Munich.
 * Split them into 3 nations.
 * Annex part of them, and leave the rest under a single weakened nation.