Financial and economic problems during the reign of Philip II were his most severe domestic problem. Economic regionalism led to record levels of poverty and unemployment which, by 1598, led to the collapse of the economy. Furthermore the debt Philip II acquired throughout his reign was his most severe domestic problem for it undermined all aspects of his governance and negated what economic progress had been made, as well as heighten religious tensions within the kingdom. Religious tensions between Christians and Moriscos were also a problem during Philip’s reign, as well as the political relationships between the crown, cortes and nobility. However ultimately Philip’s need for short term financial expedients most severely hindered the expansion and development of Spain, and also underpined all his other domestic issues.