BY SIMON NIXON

It has been nearly five years since Spain's property market imploded. Since then, the fallout from the real-estate bust has caused a banking crisis that in turn has led to a sovereign-debt crisis. It was, therefore, essential that Spain's new government did what its predecessor had failed to do: clean up the banking system.

But the package outlined late Thursday, which requires the banks to make an estimated €50 billion ($65.7 billion) in new provisions against their real-estate exposures, might not draw a line under the saga.

Madrid chose the right path. It rejected proposals ...