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The "Too Multi-Religious" hypothesis

The Spanish Inquisition is interpretable as a response to the multi-religious nature of Spanish society following the reconquest of the Iberian Peninsula from the Muslim Moors. The Reconquista did not result in the total expulsion of Muslims from Spain, since they, along with Jews, were tolerated by the ruling Christian elite. Large cities, especially Seville, Valladolid, and Barcelona, had significant Jewish populations centered on Juderia, but in the coming years the Muslims became increasingly alienated and relegated from power centers.

Post-reconquest medieval Spain has been characterized by Américo Castro as a society of relatively peaceful co-existence (convivencia) punctuated by occasional conflict among the ruling Catholics and the Jews and Muslims. As historian Henry Kamen notes, the "so-called convivencia was always a relationship between unequals." Despite their legal inequality, there was a long tradition of Jewish service to the Crown of Aragon, and Jews occupied many important posts, both religious and political. Castile itself had an unofficial rabbi. Ferdinand's father John II named the Jewish Abiathar Crescas Court Astronomer.

Antisemitic attitudes increased all over Europe during the late 13th century and throughout the 14th century. England and France expelled their Jewish populations in 1290 and 1306 respectively. At the same time, during the Reconquista, Spain's anti-Jewish sentiment steadily increased. This prejudice climaxed in the summer of 1391 when violent anti-Jewish riots broke out in Spanish cities like Barcelona. To linguistically distinguish them from non-converted or long-established Catholic families, new converts were called conversos, or New Catholics.

According to Don Hasdai Crescas, persecution against Jews began in earnest in Seville in 1391, on the 1st day of the lunar month Tammuz (June). From there the violence spread to Córdoba, and by the 17th day of the same lunar month, it had reached Toledo (called then by Jews after its Arabic name "Ṭulayṭulah") in the region of Castile. Then the violence spread to Mallorca and by the 1st day of the lunar month Elul it had also reached the Jews of Barcelona in Catalonia, where the slain were estimated at two-hundred and fifty. Indeed, many Jews who resided in the neighboring provinces of Lleida and Gironda and in the kingdom of Valencia had also been affected, as were also the Jews of Al-Andalus (Andalucía). While many died a martyr's death, others converted to save themselves.

Encouraged by the preaching of Ferrand Martínez, Archdeacon of Ecija, the general unrest affected nearly all of the Jews in Spain, during which time an estimated 200,000 Jews changed their religion or else concealed their religion, becoming known in Hebrew as Anusim, meaning, "those who are compelled." Only a handful of the more principal persons of the Jewish community, those who had found refuge among the viceroys in the outlying towns and districts, managed to escape.

Forced baptism was contrary to the law of the Catholic Church, and theoretically anybody who had been forcibly baptized could legally return to Judaism. Legal definitions of the time theoretically acknowledged that a forced baptism was not a valid sacrament, but confined this to cases where it was literally administered by physical force: a person who had consented to baptism under threat of death or serious injury was still regarded as a voluntary convert, and accordingly forbidden to revert to Judaism. After the public violence, many of the converted "felt it safer to remain in their new religion." Thus, after 1391, a new social group appeared and were referred to as conversos or New Christians. Many conversos, now freed from the anti-Semitic restrictions imposed on Jewish employment, attained important positions in fifteenth-century Spain, including positions in the government and in the Church. Among many others, physicians Andrés Laguna and Francisco López de Villalobos (Ferdinand's court physician), writers Juan del Enzina, Juan de Mena, Diego de Valera and Alonso de Palencia, and bankers Luis de Santángel and Gabriel Sánchez (who financed the voyage of Christopher Columbus) were all conversos. Conversos —not without opposition—managed to attain high positions in the ecclesiastical hierarchy, at times becoming severe detractors of Judaism. Some even received titles of nobility and, as a result, during the following century some works attempted to demonstrate many nobles of Spain were descended from Israelites.