The diplomacy can certainly use some improvement, but I still think it's a great deal better than in RTW and M2TW. Contrary to the OP's statements, I tend to be able to get peace treaties from many AI nations. Sure, many of them declare war again a few turns later if they are still adjacent to you, but peace is certainly possible at least for short periods.
I think one of biggest problems isn't that the AI declares war too often, it's that it declares war at the wrong times. I'm currently playing an Austria game, which is very different from my previous post-1.2 games due to a total lack of trade income. At the start I was only able to afford about 1 army stack and I had a devil of a time fending off Poland. If ANY other nation had declared war on me, I would have been in serious trouble. No other nation did however. I was able to finish off Poland and consolidate my position shortly before the Ottomans declared war on me. If the Ottomans had declared war while I was still invovled with Poland, they could have wrecked me. Instead, I am able to beat them by focusing on them alone.
Europa Universalis 3 deals with this situation very well IMO. In that game, the more wars a nation is involved in, the more likely that other nations that dislike them will declare war on them as well. It's a typical human strategy that works well: strike when your enemy is pre-occupied elsewhere. CA needs some kind of coding like this.
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