Philip acknowledged that the Pope was Gods representative on earth, but he still kept control of the church in Spain. He could reject Papal Bulls and took a percentage of the churchs revenue. When Jesuits emerged to try and reconvert people Philip initially welcomed them but soon became annoyed as they swore allegiance to the Pope. He even arrested and imprisoned a Jesuit leader until the Pope demanded his release.
The Pope, being an Italian prince, always felt threatened as he was surrounded by Philips possessions in Italy. The Pope even made an alliance with Philips greatest enemy, France, to try and drive Philip out of Italy. Philip acted first when he heard the plans and sent the Duke of Alva who led and army and surrounded Rome. Although Philip did no ask for any conditions for withdrawal, the relations with the Pope deteriorated further. Philips father Charles had already sacked Rome before in 1527, and these events led to the Pope increasingly fearing Philip. This fear of Spanish dominance led to the pope rejecting Philips claim to become protector of French Catholics after the death of Henry III, making matters difficult for Philip and worsening relations.
The Pope and Philip did cooperate on occasions, such as when the Holy League was formed against the Turks. Philip, although reluctant, obliged to join the League and they achieved a great military victory at Lepanto, inflicting the Turks worst naval defeat. However the celebrations did not last as to the popes annoyance, Philip made peace with the Muslim Turks.
Overall Philips relations with the Papacy were never very good, despite there being numerous different popes during Philips reign. However with their common faith the two were never in serious direct conflict, as they together faced the common enemy of Protestantism.
Philips reign saw two serious internal rebellions within Spain. These were the revolt of the Moriscos and Aragon, each partly caused by Philips actions but also by other factors.
Moriscos were descended from the Moors who had been driven out of Spain by Ferdinand and Isabella. Moors were Muslims and Moriscos were converts who had converted to Christianity. However the people of Spain were still suspicious of them, and the vast majority of Inquisition cases were against Moriscos. Many Moriscos did secretly still practise their own religion and more and more laws were creating suppressing Moorish culture such as banning Moorish literature. The Moriscos were often seen as traitors with links to Turkey and Barbary Corsairs who raided Spanish coastlines. This meant they never fitted into Spanish society and felt alienated.
The Moriscos were also experience economic difficulty. Their main trade, silk, was heavily taxed and also facing competition from other sources. They were also prohibited from owning slaves and after government investigation large areas of Morisco land were confiscated. This led to Moriscos feeling even more oppressed and in financial difficulty.
These increasing tensions let to the Inquisitor General Espinosa being given control of the Moriscos in 1567 and by the end of 1568 the Moriscos were in revolt. Although Philips troops recaptured over 180 villages, trouble increased with news that Espinosa intended to deport all Moriscos from Granada. Philip then appointed his half brother Don John as commander of the army. This worsened matters as Don Johns undisciplined troops raped and murdered victims, causing the revolt to flare into civil war with 30,000 rebels. Some rebels dealt cruelly with Christians and Don John responded with massacres of some town. Philip finally realised that he could not win by force and cancelled the deportation orders. Instead he ordered Moriscos to be dispersed throughout Spain and free pardons were offered to those who surrendered. This was his first wise strategy and eventually brought the revolt to an end.
However if the Moriscos Revolt can be seen as less of Philips personal fault and more because of tension building through the years, the Aragon was much more to do with Philips personal actions. Philip resided in Castile and did not visit other parts of his empire, which was resented by other provinces as they felt neglected and suspected Philip of trying to Castilise the whole of Spain. Philip had largely left Aragon alone, but in 1590 there was the announcement of government troops arriving to help secure the border with France in order to keep out Huguenots. The Aragon nobles feared for their freedom and began a small revolt.
This was not serious but the situation changed when Antonio Perez fled to Aragon at his fall from power. He insisted on being trialled in Aragon as it was his native province. Whilst in Aragon Perez spread royal secrets including Philips involvement in the murder of Escobedo. Philip ordered his arrest to be tried in an Inquisition court but the Aragonese nobles saw this as breach of their rights and protests turned into uncontrollable riots. Philip quickly responded by sending troops to the Aragon border and demanded the handover of Perez. More riots broke out and Perez managed to escape. However the call for the Aragonese people to declare war on Philip received little support and Philips troops were able to crush the revolt.
In both cases, Philip was partly responsible for the revolts. The Moriscos revolt was largely due to the build up of tension through the years, but Philips decision to appoint Espinosa did not help matters and his reliance on Don John worsened the rebellion. His main faults lay with the people he appointed and this contributed to triggering the revolt. The Aragon revolt was more personally against Philip as he never visited but still attempted to assume to control over the area. There had been resentment of Castile amongst the Aragonese nobles and Philips insistence in the capture of Perez sparked off the revolt, so in this case Philip was largely responsible for the revolt.