Consequences
The surrender of Granada was seen as a great blow to Islam and a triumph of Christianity. Other Christian states offered their sincere congratulations to Ferdinand and Isabella, while Islamic writers reacted with despair. In Castile and Aragon, celebrations and bullfights were held. People rejoiced in the streets.
The Treaty of Granada (1491) terms for Granada's surrender were quite generous to the Moors, considering how little they had left to bargain with. They were similar to the terms offered to towns which surrendered earlier, when the outcome of the war was in doubt. For three years, Muslims could emigrate and return freely. They were allowed to keep weapons, though not firearms. (This provision was to be annulled a month later, though.) No one would be forced to change religion, not even former Christians who'd converted to Islam. Boabdil was offered money and the rulership of a small principality in the mountainous Alpujarras, an area that would have been difficult to control in any case. At first, most of conquered Granada was treated respectfully and so predominantly stable for seven years, though the Alhambra Decree of 1492 expelled the Jews that were not converso Marranos.
King Boabdil soon found his position intolerable. He left for Morocco in Oct 1493, where he would die some forty years later. Eventually, Castile started to revoke some of the more tolerant attributes of the treaty. This initiative was led by Archbishop Cisneros, who ordered the burning of valued Arabic manuscripts and other measures detrimental to the Muslims (and Jews).
This sparked a revolt — sometimes called the First Rebellion of the Alpujarras — that ended in many Muslims being forced to choose between baptism and exile (or execution). Tensions from then onward would remain high, and Castile was obliged to maintain a large military force in Granada to deter future revolts. Isabella also strengthened the Spanish Inquisition, and Ferdinand brought the Inquisition to Aragon where previously it had not held power.
Castile was the main beneficiary of the war. Castile completely annexed Granada, though Castile had also spent by far the majority of the money and manpower to prosecute the war. The conquest of Granada meant little for Aragon's strategic position, but it did help secure Castilian support in Italy and France, where Aragon's interests lay. Some historians have claimed that without the conquest of Granada, Columbus's expeditions might have been impossible (though occurring in the same year perhaps that's not true). Granada had presented a potential ally to France to act as a thorn in Castile and Aragon's side, much as Scotland did to England. Granada's conquest removed this weakness, enabling a more aggressive foreign policy.
Increasing oppression of the Moors - now known as Moriscos or "New Christians" - led to a second revolt throughout the province - particular in the Alpujarra - in 1568. This time almost all the Moriscos of Granada were expelled to other regions.
Read more about this topic: Granada War
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