What caused the decline of the Spanish empire?

The story of the collapse or sudden decline of the Spanish empire in the 17th century is often greatly exaggerated. It's true that Spain's European leadership did fade in the second half of the century as France and other lesser powers increasingly asserted themselves but the economic and demographic problems were bad or worse in many other parts of a war torn Europe. Spain was still a great empire the following century and its place in the European political and economic scene was still significant. Christopher's Storrs' study "The Resilience of the Spanish Monarchy: 1665-1700" (2006) demonstrates this clearly.

In order to understand what happenned to the Spanish empire is one word "the economy".

At the end of the Reconquista in 1492, while the kingdom of Aragon was still a medieval country, the kingdom of Castille had just made new innovations in medicine and in technology, such as the arquebusier and cannon. After, Granada fall, spain introduce the Inquisition in order to be safe from Islam, furthermore, columbus had just discovered america so the commerce drived the economy enormously.

In the early XV. century, France invaded Italy, The king fernando of Aragon sent an army to avoid the french conquest of Italy, despite that Isabella was against the fight against Christians decided to send his best commander, The great captain. This general introduced the new castilian innovations, organized an army, building, for the first time, the Elite tercios. This army rejected a big medieval french army that was confident in his cavalry easily. So, in the end of XV. century with the most advanced army of the Christian Europe.

XVI. century, Once the Spanish royal family was changed by an Hasburg royal family, a very conservative Kingdom was established and loyal to the Austrian/German family helping in every conflict they have. In this period, was never introduced any innovation, not any economy development, only based on military policy. The hasburg Fhilip II received twice two alerts of risk of bankrupt but never made anything. It was not until the second half XVII. century when Spanish economy say "no, more" and made a big "crack".

The arrived of French bourbon on XVIII century, was a great hope because introduced the textile industry and spanish economy was recovered. Even spain recovered italy easily defeating Austrian Royal family or even the UK was defeated two times . Nevertheless, the french revolution was seen by surprise.

Napoleon with very audacious tricks forced Spain to be an "ally", but it was, in reality, a plan to conquest Spain. While the civilians were fighting house by house, town by town, the spanish army was without a head until the "Duke Wellingtom" arrived. While for the british was a great victory over napoleon spain ended in a big disaster. Factories destroyed, so many civilians killed by French soldiers, spain loses between 2-4% of the population in that war.

In early XIX. century, spain ended the war complete in ruins. People and Army demanded , like in UK, to stablish a parlamentary monarchy and embraced liberalism. The king accepted but forced, nevertheless, he called for help to the new kingdom of France to reestablish the absolutism, I mean, a conservative monarchy. With this problem spain started in a Civil War that provocked the independent movements in America. This war ended and liberalism was stablished in 1876.

Finally, with most of Spanish empire in America lost, between (1876-1929) introduced fastly the industrial revolution in order to recovered the time lost. The new innovations and the recover of the economy was not feel until 20s. So 1898, even with new innovations such as modern rifles, howitzers, submarines,machineguns, destroyers etc...not all the innovations werent introducers until XX.century, so was not prepared to the war with a big power so in 1898, the spanish navy was destroyed easily by US navy. And the army was not really well-equipped they do as much as they could to resist the position. The example was the first spanish battleship "Pelayo" (1888) that was not in time to used in Spanish-American war, used in 1911, or the Submarines created in 1888 but werent used until 1915 (Isaac Peral, great spanish inventor but misunderstand by politicians). The first spanish tank in 1925 or Air Fighter in 1913.

In 20s, with the introductions of new warships in navy, or air-fighters in Air force or even tanks spain was prepared (1st World war technology), Rif War (1911-1927) represented the transition between Imperial army to the industrial army. Despite of spanish recovery another Civil war ruined spain.

With General Franco in power, spain was a third world country, despite of having industrial factories in some parts of the country. In 50s. with USA decisive arrive and agreement, General Franco drived and change his economy policy to the liberalism and with big industrial investments put Spain in 8th most important economy of the world. Without any shoot USA won ally.

P.D: The Spanish economic problems is due to bad manage of the politicians. The matter of Catalonia and Basque Country were as a consecuences of the Conservatives politicians favourable to a centralised spain. Thats why these regions are absolutely anti-conservatives and its a battle between liberals and moderate Socialists while pro-independence parties appeared in the Second republic with small support and now are instead stronger due to the "Franco and his conservatives".

One of the main reasons was that Spanish empire was too large to control. After Napoleonic wars (and earlier against England) the Spain had lots of interior problems and this was more important than colonies. That's why most of them gained independence.

I totally disagree that "nobody liked Spanish". It might have been in 16th or 17th century, but not in 19th. Spain was Great Britain's ally against Napoleon. The Ostend Manifesto ended in great scandal and was denounced by Powers.

In Anglo-French treaty of 1904 (Spain was of course absent) both parties agreed that the Morocco issue should not alter Spanish possessions in Africa, eg. article 7:

In order to secure the free passage of the Straits of Gibraltar, the two Governments agree not to permit the erection of any fortifications or strategic works on that portion of the coast of Morocco comprised between, but not including, Melilla and the heights which command the right bank of the River Sebou.

This condition does not, however, apply to the places at present in the occupation of Spain on the Moorish coast of the Mediterranean.

and article 8:

The two Governments, inspired by their feeling of sincere friendship for Spain, take into special consideration the interests which that country derives from her geographical position and from her territorial possessions on the Moorish coast of the Mediterranean. In regard to these interests the French Government will come to an understanding with the Spanish Government.

The agreement which may be come to on the subject between France and Spain shall be communicated to His Britannic Majesty's Government.

This was after Spanish defeat during the war against the USA (you might want to read my answer to similar question). I think this last article was put on British demand.

A proximate cause of the Spanish empire was the Netherlands War of Independence (which lasted 80 years), and other revolts against Spain. http://en.wikipedia.org/wiki/Eighty_Years%27_War

The Spanish Empire had been "cobbled" together in the late 15th and early 16th centuries by the marriage of Ferdinand of Aragon and Isabella of Castile, whose daughter Juana married Philip, the son of Maximilian of Austria and Marie of Burgundy (who lost that province to France, but kept the Netherlands including modern Belgium). Charles V, the son of Juana and Philip, inherited Spain, the Netherlands and Austria. But when he subdivided it, the Netherlands went together with Spain to Charles' son Philip, instead of to Charles brother Ferdinand, who got Austria and Bohemia and the Holy Roman Empire.

The Netherlands rebelled against Philip and later Spanish rulers, so it became a major liability, instead of a major asset, especially since the war dragged on for 80 years, (with some breaks), during which Spain went bankrupt several times. Philip had annexed Portugal in 1580, but that rebelled in 1640 and broke away. Even Catalonia (part of the old Aragon) rebelled in the middle of the 17th century, although Spain managed to hang on to it. But fighting all these wars, plus a short but costly "Armada" war with England set Spain on a downward spiral through the 17th and 18th centuries.