Disorder is again rampant in Germany, especially in Bavaria, but general peace is restored by Frederick's vigorous, but conciliatory, measures.

The duchy of Bavaria is transferred from Henry II Jasomirgott, margrave of Austria, to Frederick's formidable younger cousin Henry the Lion, Duke of Saxony, of the House of Welf, whose father had previously held both duchies.

Henry is named duke of Austria in compensation for his loss of Bavaria.

As part of his general policy of concessions of formal power to the German princes and ending the civil wars within the kingdom, Frederick further appeases Henry by issuing him with the Privilegium Minus, granting him unprecented entitlements as Duke of Austria.