So the debt crisis is back (did it ever really go away?) but it’s not yet anything like as acute as it was late last year.

Spain is coming under real market pressure, and dragging Italy with it to an extent, but there are good reasons to think it won’t fall over; banks well funded for now and the government’s savvy move to take advantage of benign early year conditions to shift almost half its 2012 debt issuance in three months.

Madrid faces another key test with a Thursday bond auction. Two weeks ago, it suffered its first wobbly debt sale for some months. The turning point is pretty clear – Prime Minister Mariano Rajoy’s decision to rip up Spain’s agreed deficit target for 2012 without consulting his partners. Since then, Spanish borrowing costs have soared though given the amount of debt Madrid has already shifted, that might not be as damaging as it was.

Aside from the auction, Rajoy is holding talks with his powerful regional leaders about where the axe should fall on health and education spending. The consensus so far is that having bitten this bullet, he is deadly serious about cutting debt and reforming the economy. Any backsliding in the face of regional recalcitrance could be taken very badly by the markets.

Aside from Spain, everything builds to the big IMF meeting in Washington at the back end of the week, which hopes to make some headway on boosting the Fund’s crisis-fighting resources.