and later the Spanish Hapsburgs, and Spain itself was created out of the union of the kingdoms of Aragon and Castile under Ferdinand and Isabella. If we look at the peak of Spanish power under Philip II, we'd see an empire that comprises modern day Spain, but also controls the Netherlands and large portions of Southern Italy. Even if we leave out the New World Empire, Continental Spain still sufficed to be a significant political power on its own merits.

However, the Spanish Empire did have its weaknesses which eventually contributed to its decline. Perhaps most obvious was the strong religious devotionalism that characterized the Spanish crown. It should be noted that one can argue that this devotionalism was critical to Spain's rise to power as well: the nation was forged in the Reconquista after all, and as we can see with the Spanish Inquisition (which was headed by the monarchy rather than the Papacy), religion was often used as a weapon of the State to serve its own political interests. However, it contributed to the dissolution of the Spanish Empire as well. Ultimately, Spain's attempt to suppress Dutch Protestants resulted in the Dutch Revolt, which represented a critical loss to the Empire. In addition, we can add the heavy losses sustained in the Thirty Years's War (the last of the great religious wars) from which Spain would never fully recover. The Early Modern Era was one dominated by religion and by the military struggle between different religious groups (Christians vs. Muslims, Catholics vs. Protestants) and the Spanish were in the center of that story of conflict, ultimately to their detriment.

Since we already mentioned religion, we might also mention dynastic struggles, which also played into this same pattern and can sometimes be difficult to fully separate from religious devotionalism. Regardless, the numerous wars Spain fought throughout the Early Modern Era drained away much of its economic and military strength and in the end proved crippling in effect.

For a deeper, more comprehensive explanation of the rise of Spanish power, see John Merriman, A History of Modern Europe: From the Renaissance to the Present (Third Edition). New York: W. W. Norton, 2010. Chapter 5: pp. 171-178

In the 16th century, Spain achieved a position of dominance through her conquest of the Americas and her conquering of the Aztec and Inca Empires. Both empires had vast amounts of wealth which the Spanish explorers took back home. Having acquired both territories and wealth, the Spanish empire became very powerful and colonized Portugal and other parts of Europe. Spain's strength lied in her leadership and desire to expand her territory. Spain also had a strong army that enabled it to maintain a grasp on the territories that it had conquered. Her weakness was being overambitious and underestimating her opponents. The Spanish empire was predominantly Catholic in the 16th century, and they wanted most of Europe to embrace Catholicism. Spain attacked England, which was dominated by Protestants, and lost because the English were too strong.

Spain rise from fragmented, occupied peninsula to global power was due to many different factors.

First, the Reconquista, or expulsion of the Moors, left Spain with several advantages. Isabela and Ferdinand were married, creating a unified catholic nation from the powerful states of Aragon and Castile. The army that finally defeated the Moors was one of the finest in Europe. Spain also ended up capturing a lot of cultural and financial wealth from the fleeing Moors and the later expulsion of the Jews during the Inquisition. When the Reconquista finally wrapped up Spain was one of the wealthiest, most stable, and most powerful nations in the world.

Capitalizing on this wealth, Spain began to expand its territory by launching voyages of discovery aimed at finding new trade routes to the east. Spain hired foreign mariners from Italy and France to chart new routes that brought even more wealth to Spanish markets. One such voyage, that of Christopher Columbus, resulted in Spain “discovering” the New World and becoming even more wealth and powerful. By the 16th century, Spain controlled a global trade empire that was policed by a navy of veteran captains.

There were some chinks in the Imperial armor. The empire was so rich that soon other nations began hiring privateers to raid Spanish shipping. Spain still made huge amounts of money, but a large percentage was stolen by nations like England. Spain also had to deal with constant wars in Europe, one of which robbed it of its entire fleet after an attempt to capture England went awry. Eventually the drains on its economy forced many of its financial institutions into bankrupcy, crippling the empire.