Im just wondering how you guys manage it. If i start a game and DOW Austria on day 1 i get my ass handed to me every time.
My troops loose manpower every day and never reinforce. i try and wait on my own soil for them to come to me and still i get creamed.
any idea what im doing wrong here?
Well, firstly, there's a random chance that Austria will have powerful allies at day 1. Actually, when I planned to do the game this way, I restarted just so Austria didn't get any allies. So we were fighting 1 on 1. Well, they had Krakow as allies, but it's not really worth reloading

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If they have Bayern as allies or another southern kingdom, it wouldn't be so easy, 'cos then you'll have very long borders with enemies (also, Sigmaringen will be occupied right off).
Secondly, AI is stupid, but not idiotic. If you gather all your army in 1 huge stack, AI will never attack it. Later, when fighting with France I put small stack in Saarbruecken with good defending general (yes, you shouldn't call Bayern and, of course, Baden and Belgium at the start of war, but it'll be useful to call them later so they help you to occupy lands), and 4-5 another stacks behind. So AI gathers "doomstack" and attacks you at Saarbruecken, then you immediately rush your forces to help. First time I had something about 180 thousands of frenchies crushed by 130 thousands of mine with huge battle warscore. After they retreat, you immediately disperse your stacks behind, so they didn't suffer attrition. Then you wait for another "blue" stack, but next time it will be smaller. You can also try to surround them, so they'll be completely wiped out.
Austria is another kind, you have many provinces to border with them, so they probably won't attack you in exact province you want, but generally, tactic is the same. Fight on your own land, surround, attack, reinforce. But be careful with your small single stacks. If you left small stack somewhere without reinforcement it could be actually beaten by made-of-mud austrian army. Sometimes happened, when I was occupying Bohemian provinces when actual battles were still in progress. But you just need to hold some stack near your cavalry occupation troops.
Oh no, it has nothing to do with that. In my game, Austria's prestige was rock-bottom, and their total ranking was down in the 20s by the time I got through with them. Still didn't drop their GP slot until the day the war ended.
Well, GP can't lose its status all of a sudden. There is a time period during which they can regain their score not losing GP. In V2 it was 6 month, but in AHD I noticed it's a year. So it can be pretty long to wait. You need to monitor the ledger. If they have lower score then some "Secondary power", but still considered as a GP, this means they will lose their status, you just need to wait. Or you could just tag switch to see the exact date, I don't think it's cheating

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If they lose GP status right after the war ended, it has nothing to do with game mechanics, it's just you couldn't wait one more day

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I got a question
Will the decision to form Greater Germany appear once i conquer Austria, or do I need to conquer it before I form the German Empire?
There is no decision to form "Greater Germany". When you meet conditions for forming usual Germany, it's enough. Austria and Luxembourg are optional.
Also, I have a question: when you form Greater Germany, do you release some lands as puppets so you have less underdeveloped provinces? If yes, what lands exactly? I thought releasing Siebenbuergen and Ukraine/Ruthenia you'll have pretty borders, but then again, releasing only them isn't really helpful.