Answer:
The first question is an opinion question so there really is no wrong answer as long as you provide reasoning. Personally, I think Philip's failed involvement in the 30 years war was his most significant loss. As a result of the Treaty of Westphalia, Philip II lost possession of the Netherlands as well as demonstrated his inability to keep Spanish lands Catholic. It is also one of the first significant failures that showed the decline of Spain.
As the son of the Holy Roman Emperor Philip II was influenced by the political affairs of the Holy Roman Empire (HRE). Because of his strong ties to the HRE, Philip II was an ally to the Empire and shared many of the same beliefs. Both Philip's involvement in the 30 years war and the Protestant persecution in Spain show strong Catholic ties and allegiance to the HRE (keep in mind that the Pope lived in the HRE and held a lot of sway over the Empire).
