I always play H/H and have pretty decent success using merchants as Spain, Sicily, Byzantine Empire and the Turks. With the French and English the wine resources in france seemed to provide the most bang for the buck and chance of monopolist. However the unrelenting psycho merchants mentioned by the OP had field days with my merchants.
So in came strategy #2.
Assassins. A skill 3 assassin generally has 95% success rates against all merchants. 2 of them were able to keep western europe clear of any rough competition.
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