Germany evolved from a feudal to a merchant society after the disastrous 14th Century. The knights were displeased because their monopoly on military skill was undermined by the newly developing foot soldiers and mercenary armies. The imperial Habsburgs, who controlled most of southeast Germany, attained the title of Holy Roman Emperor in 1438, retaining it until 1806 with little interruption. Maximilian I made attempts to reform Germany during his reign, establishing an Imperial Supreme Court and taxes. The reforms were undermined by persistent territorial fragmentation, however.

The Reformation of Luther began in 1521. This was long overdue, considering the discontent with Catholicism in Germany. Luther established the basis of modern German with his Bible translation. The Counter-Reformation began in 1545, with the Jesuit Order fueling it to a large extent. At this time, Protestantism was dominant in northeastern and central Germany.

The Lutheran faith was recognized under the Peace of Augsburg in 1555. It also stipulated that the ruler and the state had to have the same religion. Charles V abdicated, and the Habsburg Empire was divided. German territory no longer included that of present-day Spain.

Germany was ravaged by the Thirty Years’ War (1618 – 1648). The immediate cause of the war was a revolt by Protestant nobles in Bohemia against the emperor. It escalated into a pan-European conflict after Denmark, Sweden and France intervened. The war was fought primarily on German soil. Large parts of the country were laid to waste, and almost a third of the population died. The economy took a deep plunge. Under the Peace of Westphalia, Germany lost land to Sweden and France.

Prussia became a great power in the 18th Century, and began to fight with Austria for control of Germany. The concept of enlightened absolutism was popular at the time. It designated the ruler as the first servant of the state. Legal reforms were made, the economy developed, the status of Jews improved and torture was abolished as a penalty. Education was also promoted, and the emancipation of the lower classes began.

Napoleon I abolished most of the imperial free cities, ecclesiastical and secular states in Germany in 1803. As a result, new states in southwest Germany began to form. Prussia made territorial gains in northwest Germany.

The Holy Roman Empire was officially dissolved in 1806. Napoleon established the Confederation of the Rhine that same year.