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Cablegate: Madrid Economic Weekly, Dec. 1-5

VZCZCXRO1645
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #1289/01 3440740
ZNR UUUUU ZZH
P 090740Z DEC 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 5738
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3699
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 MADRID 001289

SIPDIS

STATE FOR EUR/WE:SAMSON,ZERDECKI AND EEB/IFD/OMA
TREASURY FOR OIA/OEE/W.LINDQUIST
COMMERCE FOR 4212/DON CALVERT

E.O. 12958: N/A
TAGS: ECON EFIN EIND EINV ELAB SP
SUBJECT: MADRID ECONOMIC WEEKLY, DEC. 1-5

REF: A. MADRID 1257
B. MADRID 1226

MADRID 00001289 001.2 OF 002


Contents:

ELAB: October Unemployment Highest in EU
ECON: November Car Sales Down Almost 50 Percent from Year
Before
ECON/EIND: Industrial Production Down 12.8 Percent in October
ECON/EFIN: More Real Estate Companies in Financial
Difficulties
EFIN: GOS Debt Guarantees Heavily Sought by Banks
EINV: Citigroup Fund to Buy Sacyr Highway Business

October Unemployment Highest in EU

1. (U) According to the EU's Eurostat, Spain's unemployment
rate for the month of October reached 12.8 percent, giving
the country the highest rate in the EU for the 6th month
running. Second Vice President and Minister of Economy Pedro
Solbes has noted that unemployment is the primary concern of
the Zapatero Administration and is likely to increase into
2009. Much of the unemployment comes as a result of Spain's
residential construction crash, but it is also tied to the
international markets turmoil. According to Spain's National
Employment Institute, which uses a different methodology than
Eurostat, the number of registered unemployed increased by
171,000 in November, a 6 percent increase from October,
bringing the total number of unemployed to just under 3
million. The sectors suffering the highest rates of
unemployment are services, construction, industry and
agriculture. (All Media 12/2-12/3)

November Car Sales Down Almost 50 Percent from Year Before

2. (U) Car sales fell by almost 50 percent in November from
November of 2007 according to Spain's auto association,
Anfac. With over 50,000 auto workers affected by the sales
downturn through layoffs or a reduction in hours, this sector
has become a priority for the GOS. Last week's 10.85 billion
euro stimulus package (ref a) included 800 million euros for
the auto industry, while the regional government of Aragon
provided additional incentives. In a meeting December 3 with
union leaders, President Zapatero clarified that the GOS
would provide support only to those auto companies that do
not engage in layoffs. Press reports indicate Minister of
Industry Miguel Sebastian is also considering proposing that
car license fees be temporarily suspended. Spain has the
world's 8th largest auto industry. (ABC, 12/1; El Pais, 12/5)

Industrial Production Down 12.8 Percent in October

3. (U) According to the National Institute of Statistics,
industrial production dropped 12.8 percent year-on-year from
October 2007 to October 2008, the largest such decline in the
index's 15-year history. October 2008 is the sixth
consecutive month in which production has declined on a
year-on-year basis. (All Media, 12/5)

More Real Estate Companies in Financial Difficulties

4. (U) Real estate companies Habitat and Metrovacesa were the
latest economic casualties of falling property prices and
tight credit. Habitat, the fifth largest real estate company
in Spain, filed for bankruptcy on November 28. Its debts of
2.3 billion euros make this the second largest bankruptcy
filing after the Martinsa-Fadesa bankruptcy in early 2008.
On December 4, the core shareholder (the Sanajuha family) of
prominent property company Metrovacesa announced that it
would turn over a 50% stake in the company to its creditor
banks after the company was unable to meet its 2 billion
euros in outstanding loans. Media reports also indicate that
another prominent Spanish real estate company, Colonial,
which has been in trouble for months, may be on the verge of
not being able to meet its debt obligations. According to
the Bank of Spain, construction and real estate firms hold
over 25 percent of outstanding debt and represent over a
quarter of all companies and individuals suspending debt
payments. (Various Media, 11/1 -11/5)

GOS Debt Guarantees Heavily Sought After by Banks

5. (U) Most of Spain's major banks applied by the December 3
deadline to take advantage of the GOS offer to guarantee up
to 100 billion euros of new bank debt. Information about
which banks will be awarded these guarantees will not be made

MADRID 00001289 002.2 OF 002


public until December 31. This offer was heavily subscribed
to, unlike the GOS asset purchase auction of November 20 (ref
b). On December 3, Second Vice President and Minister of
Economy Pedro Solbes met with the heads of Spain's major
banks to assess the impact of the GOS economic stimulus
measures. (ABC, 12/3; El Pais 12/3)

Citigroup Fund to Buy Sacyr Highway Business

6. (U) On December 1, troubled construction company Sacyr
Vallehermoso announced plans to sell its highway business
Itinere Infraestructuras to a Citigroup-managed fund for 7.8
billion euros. The sale will help Sacyr trim its 19.7
billion euros in debt. A Sacyr spokesperson said that the
company will continue to seek a buyer for its 20 percent
stake in Repsol YPF, and maneuverings continue over the
possibility that the Russian company Lukoil may purchase that
stake (reftels). (El Pais, 12/2)


AGUIRRE

© Scoop Media

 
 
 
 
 
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