Rajoy defends solvency of Spanish banks at NATO summit

Spain's prime minister has defended the solvency of Spanish banks, downplaying France's president's suggestion that they could benefit from a recapitalization using European funds.

Speaking to journalists on his arrival in Chicago for Sunday's NATO summit, Mariano Rajoy said Francois Hollande's comments were not based on accurate figures.

Hollande had said Friday it would be "useful" for Spain to recapitalize its shaky banks using "the mechanisms of European solidarity."

Rajoy said Sunday that "Hollande does not know the state of Spanish banks," adding that Spain had relied on official Bank of Spain statistics for its figures, and "commissioned external reviewers to tell us exactly how we are doing."

Rajoy on Friday revised Spain's 2011 budget deficit upwards for a second time to 8.9 percent, an embarrassing adjustment that had to be made after four of Spain's 17 semi-autonomous regions confirmed they had spent more than previously forecast. His new Conservative government had earlier revised the figure to 8.5 percent of GDP, from the 6 percent forecast by the outgoing Socialists.

He said Sunday that the latest revision showed his government's willingness to be transparent with public accounts. "Now we know where we are," he said, adding that all Spanish regions had "realized we cannot spend money we don't have'' and agreed to abide strictly by the government's future deficit targets.

Three of the regions that overspent, Madrid, Castilla y Leon and Valencia, are governed by Rajoy's Popular Party, something that has stung the PM who has all along maintained that the mess Spain is in is down to his predecessor's bungling of the economy.

Spain's budget deficit is higher than the 3 percent threshold that was supposedly part of the euro's economic framework.

The county is burdened with a euro-zone high 24.4 percent unemployment rate and its economy is predicted to contract by 1.7 percent this year. Two of Spain's main problems are overspending by regional governments and banks burdened with billions of euros in bad loans following a real estate implosion that began in 2008.

The Spanish PM is scheduled to meet with Germany's Angela Merkel on Sunday. Although Rajoy has said he had "nothing specific" to discuss, it was anticipated the two leaders would try to calm concern over the stability of Spain's place in the fragile eurozone economy after the deficit revision.