After certain events occur in Harmel, you continue on to Venezzia.
From the entrance, go east, cross the bridge, and go around and into the house. On the first floor, talk to the woman standing by the fireplace to find out where Demitel went. You need to talk to her in order to reach the next part of the game.
Now go upstairs in this house and talk to the old man. You need to talk to him to be able to get a new spell later.
You will be able to rest for free soon, so don't bother spending money at the Inn.
If you talked to Nancy in Euclid, you can continue following Nancy and Elwyn's story here in Venezzia. (If you didn't talk to Nancy in Euclid, you can optionally go back there and talk to her, then return to Venezzia.) Nancy is in the inn. When Elwyn and Nancy are in front of the fountain, leave town and go back in, then go upstairs in the Trading Company building (in the northwest part of the city) to find them. After the scene, go out onto the balcony of Elwyn's father's office to find a chest, which contains a Protect Ring. Then go out and talk to Elwyn, who is standing in the shadows north of the fountain.
You need to ride the gondola to reach the weapon and armor shop. You will either find the gondola in the northeast part of the city, or if the gondola is not there, go west and south to the fountain, then east across the bridge and east to the harbor. Then go south, then west and you should find the gondola parked near the item shop. The gondola periodically moves between these two places, so if you can't find it in one of these places, check the other.
In the weapon shop, buy the Corsesque for Cless/Cress, even though you will get one for free later. Remember to take advantage of the Corsesque's stabbing power by holding the up button when you attack.
You can also get a Gem Rod for Mint.
In the armor shop, you might not want to get the Armet Helm, because you will get one free later.
Talk to the green-haired woman in the armor shop. She will sell you the Tempest combo for 3000 gold.
To reach the item shop, go east from the fountain, cross the bridge, and go east to the harbor. Then go south, then west, and you will find the item shop to the west.
Be sure to buy food at the supermarket (near the southern entrance to the harbor). I do not recommend the Steak or the Twinkies.
If you do not have at least 1600 gold, go outside of town and fight battles until you do. Then use the northern entrance to the harbor. Go east to board the ship. If you talked to the woman in city hall about Demitel's whereabouts, you can now talk to the captain to hire this ship to go to Demitel's island.