Spain’s Debt Battle Intensifies as Valencia Test Looms

Spanish Prime Minister Mariano Rajoy’s bid to fight off the European debt crisis is about to intensify as his government wields new powers to tame the country’s indebted regions.

Regional officials from Rajoy’s People’s Party will today face their first attempt to persuade Budget Minister Cristobal Montoro that Valencia, which accounts for 10 percent of the Spanish economy, can avoid default without intervention. Deficits beyond the grasp of Madrid helped push the nation’s 10-year bond yields to a five-month high of 6.5 percent yesterday.