By 1598, Spain was essentially bankrupt and Philip III inherited a nation seemingly doomed to decline. How did these economic problems come about?

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The economic problems of Spain

 of Spain inherited what was considered Europe's most wealthy nation with no apparent economic problems. By 1598,  was essentially bankrupt and  inherited a nation seemingly doomed to decline. How did these economic problems come about? 

When  inherited the throne in 1556, to all people he appeared to be Europe's most wealthy monarch. However, behind the glamour of royal life, the economic troubles that were to plague Philip throughout his reign, were developing. His inheritance from his father, , hardly helped him.

When Philip inherited the lands given to him by his father, he inherited with it many economic problems. left Philip with an empire that neither Spain’s military or economy had acquired. In order to keep up with the demands placed on it by its empire, Spain had to try to upgrade itself into a world power quickly.

One of the main problems Philip faced with his empire was that each part was supposed to be self-financing and yet the majority of the time Castille ended up paying for much of Philip’s policies. For example, the Italian states paid 400,000 ducats to the cost of the Battle of Lepanto which affected them most directly, but Castille paid 800,000 ducats. 

Philip was forced heavily to rely on taxes in Spain and in 1561 the servicio tax was made a regular one, the excusado was introduced in 1567 and the crusada tax, together were known as the "Three Graces" reaching as much as 1.4 million ducats per year in the 1590’s. However this was still not enough money and the Cortes had to be persuaded to grant the millones tax in 1590. The end result of all this taxation resulted in a tax increase of 430% between the years 1559 and 1598. This hit the Spanish peasantry hard, since the nobility were tax exempt. Between the same time the average wage only increased 80% and so the Spaniards witnessed a tax revolution as well as a price revolution.

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During Philip’s reign the price of goods increased fourfold had presented a serious problem for him. Initially the population growth in the 1530’ to 1580’s had proved beneficial with farmers doing more arable farming and ploughing the land. Yet the yield per acre did not increase and more food was available only because more land was being used. Also much of Spain was infertile land and the more fertile land near the Mediterranean Sea was not ploughed due to the fear of pirates. Plague in the 1560’s and an increase in demand saw some of Spain import wheat and Philip’s ...

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