Regional television and radio RTVV had tried to fire 1,000 of its 1,700 workers to keep the broadcaster running, but a court on Tuesday ruled that plan was not lawful, prompting the regional government to announce the station's closure.
"The only other course is sadly to close down the region's public radio and television service. Taking back more than a 1,000 employees makes its survival impossible," the Valencia regional government said in a statement.
"Just the cost of maintaining a workforce of 1,700 would require around €72 million," which on top of the company's operations "is a cost the regional government cannot meet at the moment," it said.
The regional government "will not shut down a school or a hospital so that we can have a regional television station", said regional President Alberto Fabra in an interview with Spain's Onda Cera radio station.
He said the closure of the network was non-negotiable and would happen as soon as possible.
RTVV has accumulated debts of more than €1 billion.
Fighting to stabilize the public finances, Spain's central government has imposed tough budget targets on the 17 regional authorities.
Valencia is one of the most heavily indebted of the regions, which spent big during a decade-long building boom in the eurozone's fourth-biggest economy that went bust in 2008.
RTVV broadcasts Radio 9 and leading television channel Canal 9 (Canal Nou) in the region, which includes the city of Valencia and the major seaside towns Alicante and Benidorm.
Spain has promised the European Union it will rein in its overall public deficit to 6.5 percent of output this year.
Under the latest central government targets, the regions must make €8 billion euros' ($10.7 billion) worth of savings through cost-cutting and extra taxes in 2014 and 2015.