Spain's new conservative government expects the country's banks to find up to 50 billion euros ($65 billion) to shore up balance sheets weakened by exposure to a burst real estate bubble.
Economy Minister Luis de Guindos told The Financial Times in an interview published Thursday this had to be done without posing a burden for public finances. That indicates that the government will be loathe to put more money into cash-strapped banks.
He said most of the country's banks could raise the money through their own earnings, while weaker lenders — such as savings banks called 'cajas' — could be absorbed in a new wave of consolidation.
The Bank of Spain says the country's financial sector holds about 176 billion euros ($228 billion) in bad loans or other toxic assets from the real estate sector. That is just over half of the sector's property-related exposure.
In a previous round of restructuring over the past two years or so, Spanish banks have set aside billions in provisions to cover non-performing loans or repossessed property.
De Guindos, part of the Popular Party government that took power the week before Christmas after scoring a crushing win in Nov. 22 general elections, is also reported as saying that the government plans strict new controls over the budgets of Spain's 17 semiautonomous regions.
The new government says these regions' overspending is responsible for most of a recent upward revision to Spain's 2011 budget deficit to around 8 percent of GDP from the 6 percent forecast by the last, Socialist government.
De Guindos said that under a new law to be passed in March, regional spending blueprints will need approval from the central government before they can be enacted.
The government has already announced an austerity package of 15 billion euros ($19.4 billion) in spending cuts and tax hikes, and on Thursday the Cabinet was expected to discuss ways to streamline or eliminate government agencies to save even more money and chip away at the deficit.
© Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.