Shylock, of course, was not the Merchant of  Venice. The merchant was the hero, Antonio. Shylock was only a moneylender. But popular belief declines to make the distinction  and persists in thinking that Shylock was the merchant, i.e., that Venetian merchants were all Shylocks. This reflects the reputation borne by the Venetians in the outside world. They had a name for sharp dealing, for "sticking together," artful diplomacy, business "push," and godless secularism -- traits familiarly ascribed to the Jews. anti-Semitism is often traced to a medieval  hatred  of capitalism.  To  the  medieval mind, the Jew was the capitalist par excellence. But this could also be said of the Venetian, whose palace was his emporium and his warehouse. 

Certainly the hatred excited by Venice during the late Middle Ages and early Renaissance, the wave of revulsion that swept over Europe, culminating in the League of Cambrai of 1508, had an irrational, supercharged quality that was like modern anti-Semitism. The Venetians were more feared than they deserved to be. Boundless ambition was attributed to them; they were accused of seeking world-domination, which seems to have been far from their thoughts. Even Machiavelli was taken in by this myth, and the language of the pact of Cambrai, signed by most of the great powers of the Christian world, anticipates the Protocols of the Elders of Zion -- a case of mass hysteria being manipulated by a political adventurer, who, in this instance, was the Emperor Maximilian. Early in I509, abetted by the pope, this German prince issued a manifesto, in which he cited the Venetians as "conspiring the ruin of everyone," and he called on all peoples to partake in a just vengeance, to put out "like a common fire, the insatiable cupidity of the Venetians and their thirst for domination." It was Maximilian himself, as a matter of fact, "the last of the knights," as he was styled, who was plotting a universal kingdom, and who, shortly afterwards, had the notion of making himself pope. But Christendom agreed with him that Venice was the real enemy. He was joined by the king of France, the king of Spain, the king of Hungary, the duke of Milan, and the duke of Savoy. The pope, Julius II (friend of Raphael, Michelangelo, and Bramante), laid Venice under an interdict and proclaimed the war against her to be a holy crusade, in which all measures were justified. 

The results were not as conclusive as might have been expected; the allies fell out among themselves,  and Venice was only partly dismembered. Nevertheless, this holy war against her was a moral shock from which Venice did not recover. Her decline as a power dates from the Cambrai period. To be disliked on such a scale and with so little provocation is unsettling to a nation which is, above all, rational in its approach to politics. There were those who saw it coming. In 1423, the old doge, Tommaso Mocenigo, called the chief magistrates to his deathbed to warn against territorial expansion and the suspicions it would  be  bound  to  arouse.  He  argued in terms of the balance-sheet: six million ducats a year in exports, with an annual return of two million; three thousand ships of two hundred tons, manned by seventeen thousand sailors; three hundred shipping firms with a payroll of eight thousand hands; forty-five galleys  with  eleven  thousand  sailors,  three thousand  shipwrights  and  three  thousand  r caulkers; three thousand silk weavers, sixteen thousand fustian weavers... This iflvestment  I could only be safeguarded by a peaceful policy. The other way lay universal odium, war abroad, bankruptcy at home. If "the young procurator," Francesco Foscari (48 years old), were elected doge, "the man who has ten thousand ducats will have a thousand; the man who has two houses will have one; you will spend your silver and gold, reputation and honor. Instead of being master in your city, you will be at the mercy of your troops, your military men and captains." The young procurator zyas elected, and the old doge's prophecy came true. Foscari's terra ferma adventures greatly increased Venice's holdings on the peninsula, but they left her much poorer and, as Mocenigo had said, dependent on her military men, soldiers of fortune, like General Carmagnola, who, having been paid for his prowess, preferred taking the baths at Lucca to fighting for the Republic. Yet even under "the young procurator," Venetian foreign policy lacked elan and firmness. It shuffled about, undecided, the merchants of the Senate being always of two minds as to whether these land wars would really be good for business in the long run, as the war party claimed. At the slightest reverse, querulous voices  began demanding  peace.  In all the confused wars of Francesco Foscari, the only military action that was done with resolution and dispatch was the arrest of General Carmagnola -- once it was agreed upon. He was apprehended in the Doge's Palace and politelv shown the way to prison, before he or anyone outside was aware of the Republic's suspicions of him. Under torture, he confessed. He was tried for treason and decapitated. And it was all done so swiftly and succinctly that it is even possible that the unfortunate mercenary was innocent. The rest of Europe gaped; that was not the way condottieri were treated. But such summary decisions, on the domestic scene, were what the Venetians were good at.

In the early days, under a Byzantine influence, they were fond of blinding their doges, over a brazier of live coals. Four doges met this punishment in the eighth and ninth centuries.  Later,  a refinement was  introduced;  the erring doge was seized by his people, who shaved his beard and compelled him to retire to a monastery or else banished him to Constantinople.  This  happened  on  three  occasions. Other doges fled secretly to monasteries to avoid being murdered by their subjects; one of these, Pietro Orseolo I, lived twenty-nine years of pious life after his escape and was eventually
Venice Observed, Mary McCarthy p.52

This means that the Durer painting is even more political than I had thought! The Germans no doubt worried that they would be damaged by association with the Emporer yet wishing to cover their backs against his possible success!