The conclusion of the Seven Years War inaugurated a period of recovery and reform in many German states. Large areas of central Europe—Prussia, Saxony, Bohemia, the Rhinelands—had suffered severely through devastations, looting, requisitions and heavy impositions. Everywhere extraordinary war-taxation had brought about a state of economic exhaustion. For many states reconstruction and reform were a condition of survival.

In Vienna, the exigencies of the war clearly revealed the inadequacy of Haugwitz' work of reform. The effects of the loss of Silesia had indeed been overcome, and a most remarkable increase in revenue had been achieved. Nevertheless, after four years of war, the finances of the Habsburg monarchy were utterly exhausted, the administration had become chaotic, and the brilliant diplomatic perspectives of 1756 were displaced by the fear that Austria would sink to the status of a second-rate power.

The lesson was clear: the reform work of Haugwitz would have to be extended. The initiative for further changes came from the Chancellor of State, Kaunitz, who felt that his foreign policy had been robbed of the success it deserved because of the breakdown in the internal administration. At this stage, Kaunitz confined himself to purely administrative proposals. To promote a greater measure of unity among the diverse Habsburg provinces, more administrative coherence and continuity of policy, he proposed an advisory Council of State (Staatsrat), competent to consider ‘from the centre’ all internal affairs. The Council of State began its work in 1761.