Spanish savings bank merger talks gather pace

* Caja de Jaen says merger with Unicaja "unstoppable"

* Cajasur could join in, creating 6th largest unlisted bank

* Deal backed by Bank of Spain, Andalusian government

* Merger talks help lenders burnt by housing crisis

MADRID, July 14 (Reuters) - Caja de Jaen said plans to merge with larger rival Unicaja were unstoppable as a government-backed push to consolidate Spain's fragmented and weakened savings bank sector gathers pace.

A spokesman for the bank, based in the olive-growing province of Jaen, said on Tuesday he was confident of a deal backed by both the Bank of Spain and the Andalusian government, which controls the lender.

Spain's 46 savings banks have been left badly exposed to a soured domestic property market, and merger talks between them have mushroomed as the country's bad loan rate has quadrupled over the past year, heightening solvency risks.

Deteriorating finances have driven similar merger talks between regional lenders in Germany and prompted consolidation among mortgage banks in Britain.

"I have total confidence in this merger. It's unstoppable," the Jaen spokesman said.

It would be "the first shot of a bigger process," he added, alluding to speculation another unlisted Andalusian lender, Cajasur, joining Jaen and Unicaja to create what would be Spain's sixth biggest savings bank, with 52 billion euros of assets.

At one point Unicaja had been seen as a possible saviour for Caja Castilla la Mancha which in March became the first -- and to date only -- Spanish bank to be bailed out by the state.

On June 30, three savings banks based in Catalonia -- Caixa Terrassa, Caixa Sabadell and Caixa Manlleu -- said they were meeting with the Bank of Spain to propose ways of teaming up, including a possible merger.[ID:nLU9402]

GOV'T AID NOT REQUIRED

Caja de Jaen and Unicaja said any merger would be a private deal and not require aid from the government's Fund for Ordered Bank Restructuring (FROB).