The European Tour has confirmed the event - which was due to be played at Valderrama next month - has been cancelled.
Andalucia Masters scrapped amid concerns over cost of staging sports events in Spain
The European Tour have confirmed that next month's Andalucia Masters at Valderrama has been cancelled.
The event, which was won by Spain's Sergio Garcia last year, was due to be played from October 18-21, but local authorities warned earlier this week that the tournament at the Valderrama Golf Club would not go ahead, and have now formally confirmed that decision to the European Tour.
"The European Tour regrets to announce that the 2012 Andalucia Masters, due to be played at the Club de Golf Valderrama, Sotogrande, on October 18-21, will now be cancelled," the organisation confirmed in a statement.
"The Junta de Andalucia confirmed this decision by letter which they also announced by a press release on Monday September 10th.
"Despite discussions with the Royal Spanish Golf Federation, and a formal legal agreement with the Junta de Andalucia, the tournament will not take place."
News of Valderrama's cancellation comes amid continuing concerns over the cost of staging of major sporting events in Spain due to the country's financial crisis.
A change of government in the Andalucia region appears to have been the trigger for the move, with the new authorities keen to cut costs.
Speaking to Sky Sports News, George O'Grady, the chief executive of the European Tour, said the political situation in the region was the root cause of the issue and absolved Valderrama of any blame.
"This isn't Valderrama's problem. Valderrama has been tremendously helpful and supportive in the political arena," he said.
"This is really [down to] a change of leadership in the area and how they do things.
"We always felt this one would be rescued, and we were prepared to go the extra mile with our own money, whether we cut the prize fund or things like that - but you can't do it if people won't talk back the other way.
"This is a big change in political leadership. The individual concerned probably doesn't understand what he's got [with the Andalucia Masters]."
O'Grady expressed his disappointment at the news and stressed that steps would be taken to ensure the event returns to the calendar in future years.
''This is extremely disappointing news to receive, especially at such a late date," he said.
"We have been long-term partners with the Junta for over 25 years.
"We have worked together to promote the region, and the Junta de Andalucia and The European Tour have enjoyed an exceptionally strong and committed long-term partnership.
"We feel the disappointment not only for our Members and all committed to broadcasting and reporting this tournament and the region on a global scale, but also for the many visitors, especially from northern Europe, who coincide their holidays with the tournament.
"We will work with the Junta to rectify this situation both now and in the future".
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