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Hard. I didn't even remember till recently. See, I read(Here, I believe) that the AI bonuses affect the people under you as well as around the world. And since those bonuses include extra income...well, it can be a boost, potentially.
 
Normal. I like a playable game with few frustrations.......this is to relax. I am thinking about upping the Difficulty level on my EU3 games:p

And if AI gets more income and other bonuses to be "Harder" that isn't really making the AI Better........
 
My first game I've started was as Capua on Hard, and I've finished it with a Kingdom in Southern Europe (Italy, Sicily, Africa and additional part - Kingdom of Bohemia ;). But this was a game when I allowed myself to reload sometimes, as it was rather learning game. After it I started few more games. And - that was a time to face the challenge ! I am playing on Very Hard difficulty now and avoid reloading (except situations when game is against rules, like for example in patch 1.08 when a count could overthrow a Duke, vassal of me and thanks to faction put independent king there and I couldn't do nothing to stop him)

BTW, there isn't a problem with fertility - just give important courtiers something so they would appear on foreign court and penalty won't affect them ;)
 
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