In 1866, relations between Austria and Prussia worsened and Bismarck demanded the expulsion of Austria from the German Confederation. Napoleon and his foreign minister, Drouyn de Lhuys, expected a long war and an eventual Austrian victory. Napoleon III felt he could extract a price from both Prussia and Austria for French neutrality. On 12 June 1866, France signed a secret treaty with Austria, guaranteeing French neutrality in a Prussian-Austrian war. In exchange, in the event of an Austrian victory, Austria would give Venetia to France and would also create a new independent German state on the Rhine, which would become an ally of France. At the same time, Napoleon proposed a secret treaty with Bismarck, promising that France would remain neutral in a war between Austria and Prussia. In the event of a Prussian victory, France would recognize Prussia's annexation of smaller German states, and France, in exchange, would receive a portion of German territory, the Palatinate region north of Alsace. Bismarck, rightly confident of success due to the modernization of the Prussian Army, summarily rejected Napoleon's offer.