Pilfered from Wikipedia:
St. Quentin to Lepanto (1556–1571)
Spain was not yet at peace, as the aggressive Henry II of France came to the throne in 1547 and immediately renewed the conflict with Spain. Charles’ successor, Philip II, aggressively conducted the war against France, crushing a French army at the Battle of St. Quentin in Picardy in 1557 and defeating Henry again at the Battle of Gravelines the following year. The Peace of Cateau-Cambrésis, signed in 1559, permanently recognized Spanish claims in Italy. In the celebrations that followed the treaty, Henry was killed by a stray splinter from a lance. France was stricken for the next thirty years by civil war and unrest (see French Wars of Religion) and was unable to effectively compete with Spain and the Habsburgs in the European power struggle. Freed from any serious French opposition, Spain saw the apogee of its might and territorial reach in the period 1559–1643. The Triumph of Death (c. 1562) by Pieter Brueghel the Elder reflects the increasingly harsh treatment the Seventeen Provinces received in the 16th century
Charles and his successors, while they may have been most comfortable with and fond of Spain, regarded it as just another part of their empire, rather than nurturing and developing it, as France, England, and the Netherlands might have in their countries. Achieving the political goals of the Habsburg dynasty – which primarily meant undermining the power of France, maintaining Catholic Habsburg hegemony in Germany, and suppressing the Ottoman Empire – was more important to the Habsburg rulers than the welfare of Spain. This emphasis would contribute to the decline of Spanish imperial power.
The Spanish Empire had grown substantially since the days of Ferdinand and Isabella. The Aztec and Inca Empires were conquered during Charles’ reign, from 1519 to 1521 and 1540 to 1558, respectively. Spanish settlements were established in the New World: Mexico City, the most important colonial city established in 1524 to be the primary center of administration in the New World; Florida, colonized in the 1560s; Buenos Aires, established in 1536; and New Granada (modern Colombia), colonized in the 1530s. The Spanish Empire abroad became the source of Spanish wealth and power in Europe. But as precious metal shipments rapidly expanded late in the century it contributed to the general inflation that was affecting the whole of Europe. Instead of fueling the Spanish economy, American silver made the country increasingly dependent on foreign sources of raw materials and manufactured goods.
The Battle of Lepanto (1571), marking the end of the Ottoman Empire as the dominant naval power in the Mediterranean
The Peace of Cateau-Cambresis in 1559 concluded the war with France, leaving Spain at a considerable advantage. However, the government was in enormous debt and declared bankruptcy that year. Philip’s ambitions were beyond his country’s ability to pay for them, although silver from Mexico and Peru compensated somewhat. Even so, most of the government’s revenues came from taxes and excise duties. The Ottoman Empire had long menaced the fringes of the Habsburg dominions in Austria and northwest Africa, and in response Ferdinand and Isabella had sent expeditions to North Africa, capturing Melilla in 1497 and Oran in 1509. Charles had preferred to combat the Ottomans through a considerably more maritime strategy, hampering Ottoman landings on the Venetian territories in the Eastern Mediterranean. Only in response to raids on the eastern coast of Spain did Charles personally lead attacks against holdings in North Africa (1545). In 1560, the Ottomans inflicted a serious defeat on the Spanish navy off the coast of Tunisia, but in 1565, the Ottoman landing on the strategically vital island of Malta, defended by the Knights of St. John, was defeated. The death of Suleiman the Magnificent the following year and his succession by the less capable Selim the Sot emboldened Philip, who resolved to carry the war to the Ottoman homelands. In 1571, a mixed naval expedition of Spanish, Venetian, and papal ships led by Charles’ illegitimate son Don John of Austria annihilated the Ottoman fleet at the Battle of Lepanto, in the largest naval battle fought in European waters since Actium in 31 BC. The victory curbed the Ottoman naval threat against European territory, particularly in the western Mediterranean, and the loss of experienced sailors was to be a major handicap in facing Christian fleets. Yet the Turks succeeded in rebuilding their navy in a year, using it handily to consolidate Ottoman dominance over most the Mediterranean’s African coast and eastern islands. Philip lacked the resources to fight both the Netherlands and the Ottoman Empire at the same time, and the stalemate in the Mediterranean continued until Spain agreed to a truce in 1580.
The troubled king (1571–1598)
The time for rejoicing in Madrid was short-lived. In 1566, Calvinist-led riots in the Spanish Netherlands (roughly equal to modern-day Netherlands and Belgium, inherited by Philip from Charles and his Burgundian forebearers) prompted the Duke of Alva to conduct a military expedition to restore order. Alva launched an ensuing reign of terror. In 1568, William the Silent led a failed attempt to drive the tyrannical Alva from the Netherlands. This attempt is generally considered to signal the start of the Eighty Years’ War that ended with the independence of the United Provinces. The Spanish, who derived a great deal of wealth from the Netherlands and particularly from the vital port of Antwerp, were committed to restoring order and maintaining their hold on the provinces. In 1572, a band of rebel Dutch privateers known as the watergeuzen (“Sea Beggars”) seized a number of Dutch coastal towns, proclaimed their support for William and denounced the Spanish leadership.