UPDATE 1-Iberia shareholder to Lufthansa: "Get on with it"

(Adds MADRID dateline, comments from Caja Madrid chairman, background)

MADRID/FRANKFURT Dec 13 (Reuters) - Iberia's biggest shareholder appeared to encourage Lufthansa's interest in the Spanish airline on Thursday after the German carrier's chief executive said he had not given up hope on a possible takeover.

Iberia has been at the centre of takeover speculation all year, first targeted by British Airways BAY.L and U.S. private equity group TPG [TPG.UL] and now courted by two Spanish groups, while all the time Air France and Lufthansa have circled from a distance.

Lufthansa Chief Executive Wolfgang Mayrhuber told Thursday's Frankfurter Allgemeine Zeitung newspaper: "We still think we have a chance with Iberia," before adding: "The price is still too high."

That criticism that Iberia's stock was too expensive was dismissed by Miguel Blesa, chairman of private bank Caja Madrid, which has become kingmaker at Iberia since it upped its holding to 23 percent from 10 percent last month.

In comments to journalists during an event celebrating the 80th anniversary of Iberia's maiden flight, Blesa appeared to encourage a move from Lufthansa.

"Iberia is not expensive at this price, we also bought at this price (3.60 euro/share). (They should) get on with it", he said.

Caja Madrid scuppered BA and TPG's 3.4 billion euro ($5 billion) approach after it raised its stake and so signalled it was not interested in the consortium's friendly approach. BA still owns 10 percent of Iberia.

Iberia shares were unchanged at 3.13 euros on Thursday afternoon, over 1 euro down on the stock's year high in April, when merger speculation reached fever pitch.

Lufthansa's Mayrhuber also told the Frankfurter Allgemeine Zeitung his airline had an advantage over rival approaches from the likes of financial investors because it offered an industrial partnership. (Reporting by Peter Starck and Robert Hetz; Editing by David Holmes)