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Cablegate: Madrid Economic Weekly, Dec 13-19

VZCZCXRO1032
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #1339/01 3541515
ZNR UUUUU ZZH
P 191515Z DEC 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 5801
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3720
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 001339

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 13-19

REF: MADRID 1309

MADRID 00001339 001.2 OF 002


Contents

EFIN: Congress Approves 2009 Budget
ELAB: 90% Fewer Work Visas to be issued in 2009, but
Immigration Still Rising
EFIN: Impact of Madoff Fraud
EFIN/EINV: BBVA Increases Capital
EINV/EIND: Housing Market Decline Continues
EINV: ACS to Build, Operate NC Toll Bridge

Congress Approves 2009 Budget

1.(U) The lower house voted 178-165 to pass the 2009 budget
December 18, overriding the Senate's veto on the draft bill.
The unresolved dispute over regional government financing was
one of the hurdles to passing this budget. The GOS
characterizes the 2009 budget as "austere" with just a 3.3
percent nominal increase in program spending. However, Vice
President and Economy/Finance Minister Solbes acknowledged
that the budget was already out of date given the
macroeconomic changes that have taken place since its
introduction in September. In addition, the budget does not
include billions of euros in planned stimulus and financial
system measures that the GOS announced in October and
November of this year. Solbes acknowledged that Spain's
deficit will surpass the EU limit of 3 percent of GDP, but EU
officials have signaled that governments will be allowed to
exceed the limit. The Ministry of Labor and Immigration and
the Ministry of Housing will enjoy significant increases over
2008, while the budgets of the Ministries of Defense, Foreign
Affairs, and Economy and Finance (among others) will be
decreased. According to the GOS, the pillars of the 2009
budget are social spending, R&D, and infrastructure spending.
The bill will be sent to President Zapatero for signature in
time for its January 1 implementation date. (All Media,
Ministry of Economy and Finance, 12/19)

90% Fewer Work Visas to be Issued in 2009, but Immigration
Still Rising

2.(U) The Council of Ministers is set to approve on December
19 a more than 90 percent reduction in the number of work
visas for country origin workers in 2009. Fewer than 1,000
country of origin work visas will be given out in 2009,
compared with 15,731 in 2008. Minister of Immigration and
Labor Celestino Corbacho had warned earlier in September that
the hiring of immigrant workers abroad would soon diminish.
He has been strongly advertising Spain's immigrant "voluntary
return" program, which assists unemployed immigrant workers
to return to their country of origin. Press reports indicate
that so far, only several hundred immigrants have accepted
the voluntary return offer. Immigration to Spain continued
to increase in 2008. Recently released Eurostat data
indicates that Spain has the highest volume of immigration of
any EU country in 2008, with about 500,000 new immigrants,
particularly from Morocco and Romania. (EL Pais, December 16,
Eurostat, December 17)

Impact of Madoff Fraud

3.(U) Vice President/Minister Solbes and Bank of Spain
Governor Miguel Angel Ordonez Fernandez stated on December 15
that the impact of Madoff's investment scheme on the Spanish
financial sector as a whole would not be significant.
However, Banco Santander has reported a fairly significant
exposure of 2.33 billion euros, much of which was through its
Optimal hedge fund based in Geneva. Spain's second largest
bank, BBVA, announced a possible maximum loss of 300 million
euros. The National Securities Market Commission reported on
December 16 an additional exposure level of approximately 107
million euros of various Spanish funds. Local analysts
believe that the full impact in Spain of the Madoff scheme
may be greater -- one press report said 17,000 Spanish
accounts were affected -- although they do not appear to
question VP Solbes' assessment. (All Media, 12/15-12/19)

BBVA Increases Capital

4.(U) Spain's second largest bank, BBVA, announced on
December 19 that it had issued 1 billion euros in non-core
preferred shares to boost its capital base. The placement
took only four days, in part because of the attractive
interest rate of 6.5 percent for the first two years and the
euribor rate (with a minimum of 3.5 percent) after that.

MADRID 00001339 002.2 OF 002


Press reports suggested that the move was aimed at helping
BBVA keep up with banks elsewhere in Europe that have taken
advantage of government financing/capitalization programs.
Although BBVA has some exposure to Spain's declining housing
market, it has large Latin American and U.S. operations and
is widely viewed as a stable and solid institution. (El
Pais, 12/13; Expansion, 12/19)

Housing Market Decline Continues

5.(U) The housing market continued its decline in the
July-September quarter, according to housing ministry data.
The number of home sales in the quarter was 36 percent below
the level of a year ago. Builders are responding to the
overhang of unsold units and the difficulty of getting new
financing by further cutting back; the number of housing
starts was 49 percent below the level of a year earlier, and
building permit requests in September were down 63 percent.
(El Pais, 12/19)

ACS to Build, Operate NC Toll Bridge

6.(U) The ACS construction group announced that its Iridium
and Dragados subsidiaries had been selected by the North
Carolina Turnpike Authority to build and operate the 7-mile
$700 million Mid-Currituck Bridge. ACS has won
infrastructure concessions in Texas, Florida, and Canada in
the last six months. An ACS press release also highlighted
as an important growth opportunity the incoming
Administration,s announcement of plans to invest $500
billion in infrastructure projects. (El Pais, 12/19; ACS
press release, 12/18)
AGUIRRE

© Scoop Media

 
 
 
 
 
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