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After state finances collapsed during the years 1566 to 1567, King Frederik II called Peder Oxe home to address the kingdom's economy.
He was hailed as successor to the throne of Denmark in 1542, and of Norway in 1548.His foreign politics were marked by a moral support of the Protestant powers – but at the same time by a strict neutrality.A period of affluence and growth followed in Danish history.Councillors of experience, including Niels Kaas, Arild Huitfeldt, and Christoffer Valkendorff, took care of the domestic administration.Subsequently, government finances were put in order and Denmark's economy improved.After King John III of Sweden, King Eric's successor, refused to accept a peace favoring Denmark in the Treaties of Roskilde (1568), the ongoing war dragged on until it was ended by a status quo peace in the Treaty of Stettin (1570), that let Denmark save face but also show limits of Danish military power.
After the war, King Frederick II kept the peace without giving up his attempt of trying to expand his prestige as a naval ruler.
King Frederick II won his first victory with the conquest of Dithmarschen in Schleswig-Holstein under Johan Rantzau, during the summer of 1559.
From his predecessor, he inherited the Livonian War.
His brother Magnus was later made titular King of Livonia, as a vassal of Tsar Ivan IV.
King Frederick's competition with Sweden for supremacy in the Baltic broke out into open warfare in 1563, the start of the Seven Years' War, the dominating conflict of his rule.
Unlike his father, King Frederick II was strongly affected by military ideals.