Well, they
did go for territorial expansion in Europe. The thing was that even with the vast silver and gold resources of the colonies - even with the superproductive San Luis Potosi mines - even with Castile, and the profitable Netherlands - even with the large, well-trained professional army from the Reconquista, led by some of the most brilliant military leaders in history, like de Cordoba - the Spanish still couldn't kill Francois I and his little rump kingdom that stood between all their holdings. Their wealth increased, but so did their strategic commitments, which required more wealth to hold than they produced, save the Americas. Without the precious metals and spices from the West, Spain wouldn't be able to fuel wars in Italy, the Low Countries, Hungary, and the Pyrenees simultaneously. Had they reorganized the Castilian finances and improved the taxation mode, turning that territory into something profitable again, it might have worked, but IMHO it was too entrenched and the nobility were too unwilling to give up their powers, and you'd probably have a brief civil war to deal with, with all of the attendant disadvantages that brings.
Italy seems to have done well enough by that.
Eastern Romans don't count?