Spanish Kingdoms (Habsburgs rule)

Period of (16th–17th centuries)
Spain's world empire reached its greatest territorial extent in the late 18th century but it was under the Habsburg dynasty in the 16th and 17th centuries it reached the peak of its power and declined. When Spain's first Habsburg ruler Charles I became king of Spain in 1516, Spain became central to the dynastic struggles of Europe. After he became king of Spain, Charles also became Charles V, Holy Roman Emperor and because of his widely scattered domains was not often in Spain. As he approached the end of his life he made provision for the division of the Habsburg inheritance into two parts. On the one hand was Spain, its possessions in Europe, North Africa, the Americas and the Netherlands; on the other hand was the Holy Roman Empire. This was to create enormous difficulties for his son Philip II of Spain.

Philip II became king on Charles I's abdication in 1556. Spain largely escaped the religious conflicts that were raging throughout the rest of Europe and remained firmly Roman Catholic. Philip saw himself as a champion of Catholicism, both against the Muslim Ottoman Empire and the Protestant heretics.

In the 1560s, plans to consolidate control of the Netherlands led to unrest, which gradually led to the Calvinist leadership of the revolt and the Eighty Years' War. This conflict consumed much Spanish expenditure during the later 16th century. Conflicts included an attempt to conquer England – a cautious supporter of the Dutch – in the unsuccessful Spanish Armada, an early battle in the Anglo-Spanish War (1585–1604), and war with France (1590–98).

Despite these problems, the growing inflow of New World silver from mid-16th century, the justified military reputation of the Spanish infantry and even the navy quickly recovering from its Armada disaster, made Spain the leading European power, a novel situation of which its citizens were only just becoming aware. The Iberian Union with Portugal in 1580 not only unified the peninsula, but added that country's worldwide resources to the Spanish crown.

However, economic and administrative problems multiplied in Castile, and the weakness of the native economy became evident in the following century. Rising inflation, financially draining wars in Europe, the ongoing aftermath of the expulsion of the Jews and Moors from Spain, and Spain's growing dependency on the gold and silver imports, combined to cause several bankruptcies that caused economic crisis in the country, especially in heavily burdened Castile.

Barbary pirates from North Africa became an increasing problem. The coastal villages of Spain and of the Balearic Islands were frequently attacked. Formentera was even temporarily abandoned by its population. This occurred also along long stretches of the Spanish and Italian coasts, a relatively short distance across a calm sea from the pirates in their North African lairs. The most famous corsair was the Turkish Barbarossa ("Redbeard"). According to Robert Davis between 1 million and 1.25 million Europeans were captured by North African pirates and sold as slaves in North Africa and the Ottoman Empire between the 16th and 19th centuries. This was gradually alleviated as Spain and other Christian powers began to check Muslim naval dominance in the Mediterranean after the 1571 victory at Lepanto, but it would be a scourge that continued to afflict the country even in the next century.

The great plague of 1596–1602 killed 600,000 to 700,000 people, or about 10% of the population. Altogether more than 1,250,000 deaths resulted from the extreme incidence of plague in 17th-century Spain. Economically, the plague destroyed the labor force as well as creating a psychological blow to an already problematic Spain.

Philip II died in 1598, and was succeeded by his son Philip III. In his reign (1598–1621) a ten-year truce with the Dutch was overshadowed in 1618 by Spain's involvement in the European-wide Thirty Years' War. Government policy was dominated by favorites, but it was also the period in which the geniuses of Cervantes and El Greco flourished.

Philip III was succeeded in 1621 by his son Philip IV of Spain (reigned 1621–65). Much of the policy was conducted by the minister Gaspar de Guzmán, Count-Duke of Olivares. In 1640, with the war in central Europe having no clear winner except the French, both Portugal and Catalonia rebelled. Portugal was lost to the crown for good; in Italy and most of Catalonia, French forces were expelled and Catalonia's independence was suppressed.

In the reign of Philip's developmentally disabled son and successor Charles II (1665–1700), Spain was essentially left leaderless and was gradually being reduced to a second-rank power.

The Habsburg dynasty became extinct in Spain with Charles II's death in 1700, and the War of the Spanish Succession ensued in which the other European powers tried to assume control of the Spanish monarchy. King Louis XIV of France eventually lost the War of the Spanish Succession, but because the victors' (Great Britain, the Dutch Republic and Austria) candidate for the Spanish throne (Archduke Charles of Austria) became Holy Roman Emperor, control of Spain was allowed to pass to the Bourbon dynasty. However, the peace deals that followed included relinquishing the right to unite the French and Spanish thrones and the partitioning of Spain's European empire.