WI: Spain the last Catholic state in Europe

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But you are rather overlooking its institutions and without them why should Thuringen or Mecklenberg follow an Austrian into Italy? Protestants can hardly call a Crusade
They did a decent showing of one during the Thirty Years War. A general move to Protestantism could be the driver for early Pan-Germanism, the same way the Time of Troubles did a lot to merge Orthodox Christianity with early Russian nationalism.

Hells, wouldn't even be the first time the HRE emperor was in a religious conflict with the Pope, even chances that a total flip to Protestantism could end up being considered yet another chapter of the political conflict between emperor and Pope.
 
And by that point it becomes less "Spain the last stronghold of Catholicism, with it's Empire fighting a uphill battle against the rest of Europe...again" and more The Best Case Scenario for the Reformation as the Catholic Church has been coopted and effectively turned into a Lutheran-Calvinist institution and what would have been protestant theologians instead are theological rulers of a unified(ideologically, not politically) Christendom

I would agree with you assessment. Again, this was the goal of the Reformation, so in this case you might see it as the Reformation succeeding (from its perspective) rather than half succeeding as it did IOTL. The fact that the Reformation was not crushed (as most schismatic groups had been) but also did not succeed in reforming the church (as the Mendicant orders did 300 years before) is actually quite interesting and dependent on some very peculiar events happening in just the right order.
 
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