How did the Bill of Indemnity divide Prussian liberals in 1866?

The Bill of Indemnity of 1866, introduced by Prime Minister Otto von Bismarck to retroactively legalize the government's unconstitutional collection of taxes, served as a catalyst that fractured the Prussian liberal opposition.12

The bill forced a choice between rigid adherence to constitutional principles and pragmatic cooperation with the state's newfound military success. This dilemma divided the liberals into two distinct groups:2

• The Progressives: These liberals argued that there could be no compromise regarding the fundamental law of the kingdom and the principle of parliamentary sovereignty. They rejected the indemnity bill, refusing to validate the government's past actions.12
• The Moderate Liberals: Recognizing that continued resistance might lead to political irrelevance, these members chose to accept the settlement. They believed that by compromising, they could influence future official policy toward greater freedom and national unity. This group eventually formed the National Liberal Party, where they subordinated traditional liberal goals to the cause of nationalism.12

By successfully splitting the opposition, Bismarck effectively weakened the liberal movement's sense of purpose and ended the struggle for parliamentary control.12