Spanish Empire's Decline: 17th Century Habsburg Fall

The Decline of the Spanish Empire in Europe

Political and Military Challenges

During the reign of Philip III, the monarch did everything possible to bring peace to his dominions, signing peace with England and the Twelve Years' Truce with the Netherlands. The Netherlands, a territory which had declared itself independent the previous century, had not seen its secession accepted by Spain.

The end of the Twelve Years' Truce and Spain's participation in the Thirty Years' War in support of Austria marked the beginning of a long and arduous conflict. While successes were achieved in the Netherlands (notably the Surrender of Breda) and victories gained in the early stages of the Thirty Years' War, France's entry into this conflict would prove decisive, signaling the beginning of the end for Spanish hegemony in Europe.

Spain suffered a heavy defeat at Rocroi. In the Peace of Westphalia (1648), which formally ended the Thirty Years' War, Spain was compelled to recognize the independence of Holland. The war with France, however, continued until 1659, culminating in the Treaty of the Pyrenees. This significant agreement was sealed with the marriage of Louis XIV and the Spanish Infanta Maria Teresa, an event that would directly link the Bourbon dynasty to the Spanish throne in 1700.

Under Charles II, clashes with Louis XIV's France continued. Spain consequently lost Franche-Comté and several strategic locations in Flanders. The death of Charles II without offspring ultimately gave rise to the War of the Spanish Succession (1701-1714), a conflict that definitively marked the end of the Habsburg dynasty's rule over the Spanish monarchy.

Economic and Social Developments

Throughout the seventeenth century, Spain was determined to maintain its vast empire at all costs. However, state expenditures consistently outstripped revenue. Consequently, governments were forced to implement various measures to raise funds: increasing the tax burden, issuing public debt (known as juros), requesting subsidies from the Cortes, issuing debased vellon coinage, and borrowing heavily from private bankers. The majority of this spending was allocated to military operations, though the costs associated with the Royal Court were also substantial.

This period was characterized by several state bankruptcies. Castile bore the heaviest tax burden among all territories of the Empire. While nobles and clergy did not pay direct taxes, they were subject to indirect ones. Key indirect taxes included sales taxes (alcabalas) and the specific 'millones' tax.

The wealthy continued to base their power on land ownership, primarily concentrated in the hands of the nobility and the Church. Paradoxically, much of this land remained unproductive. The labor of the peasants sustained the kingdom, but their purchasing power was critically low, which stifled the emergence of industries, which remained underdeveloped. In urban centers, production was tightly controlled by guilds.

The population of Spain significantly declined during the seventeenth century due to a confluence of factors: prolonged wars, devastating diseases, widespread famine, and the expulsion of the Moriscos (descendants of Muslims who had converted to Christianity). Society became increasingly polarized between the privileged classes (nobility and clergy) and the vast majority of landless workers. Manual labor was socially despised. Many hidalgos (lower nobility), despite their noble status, often faced precarious economic situations. The number of beggars proliferated in cities, and major urban centers like Madrid and Seville saw their populations decline.