"We've made sure Indra is in Spanish hands," Defence Minister Pedro Morenes told a group of foreign correspondents.

The government's industrial holding company SEPI bought the stake for 337 million euros in August when state-rescued lender Bankia sold it as it shed assets to cut debt.

Indra is a global company with annual sales of around 3 billion euros, that supplies everything from air traffic control systems to electronic polling stations, and from air defence systems to battlefield management systems.

Indra and other Spanish defence industry companies such as state-owned shippbuilder Navantia must consolidate and integrate to build on their strong areas and compete in the global defence industry, Morenes said.

"The Spanish defence industry has not done the task that France and Italy have done. Years ago they consolidated their industrial units," Morenes said.

He said the ministry was pushing a policy of consolidation in the industry, which has 30,000 direct employees in Spain and has invested 36 billion euros since 1996.

Areas where Spain can potentially compete globally include hi-tech naval vessels such as those Navantia builds and radar and communication systems such as those Indra supplies, and therefore the government is concentrating consolidation efforts around those two companies.

He said there were many ways that consolidation could come about, defence industry group TEDAE could form a nucleus to concentrate on areas where Spain can compete, or it could be done through joint ventures or a holding company.

He said one consolidation possibility would be some sort of a union between Indra and Navantia. But added that the government respects the business owners to take their own decisions.

"Spain's armed forces need a competitive defence industry. We won't buy inefficient defence products just because they are made in Spain," he said.

(Editing by Elisabeth O'Leary)

By Fiona Ortiz