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Cablegate: Madrid Weekly Econ/Commercial/Ag Update - December

VZCZCXRO1743
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #2307/01 3631710
ZNR UUUUU ZZH
P 291710Z DEC 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 4016
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAS/AMEMBASSY ALGIERS 3983
RUEHBU/AMEMBASSY BUENOS AIRES 0376
RUEHRB/AMEMBASSY RABAT 6079
RUEHLA/AMCONSUL BARCELONA 3216

UNCLAS SECTION 01 OF 02 MADRID 002307

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/WE AND EEB/IFD/OMA

E.O. 12958: N/A
TAGS: ECON EFIN EIND ELAB ELTN KIPR PGOV TBIO SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE - DECEMBER
22-28


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Table of contents
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PGOV: Polling Suggests Economic Pessimism
EFIN: Bad Loan Rate Rises, Still Low
ENRG: Repsol Finalizes YPF Sale
ECON/ENRG: Largest Gas Storage Facility in Spain Planned
IND/ECON: Two High-Speed Trains Come on Line


-----------------------------------
Polling suggests economic pessimism
-----------------------------------

1. (U) An Expansion Ipsos poll conducted December 14-16, 2007
showed that 50% of those polled thought that the economy had
worsened during President Zapatero's tenure, 26% thought that
it had not changed and 20% thought that it had improved.
Curiously, however, 43% of Spaniards still think that the
PSOE would do a better job managing the economy than the PP
versus 41% who think the PP would do better. The socialists
have a bigger advantage on political issues according to
Expansion's polling - 50% think they would do better than the
PP versus the 35% who think the PP would do better. (Comment:
Inflation and higher interest rates have clearly caused the
government to take a bit of a hit on economic issues. So
far, however, it remains to be seen whether this will prove
to be a serious drag for the PSOE in the March 9, 2008
elections.) (Expansion, 12/24/07)

------------------------------
Bad Loan Rate Rises, Still Low
------------------------------

2. (U) The percentage of bank, savings bank, and credit
cooperative loans that are past due rose in October to 0.82
percent, the fourth consecutive monthly increase and the
highest level of the year, according to the Bank of Spain
figures. Each of the three types of institutions saw its
percentage of bad loans rise. The Spanish Banking
Association expressed confidence that the sector could handle
the increased delinquency rates, and a credit union
representative noted that the rate was still well below
European average. (ABC 12/26)

---------------------------------------------
Largest Gas Storage Facility in Spain Planned
---------------------------------------------

3. (U) Gas network operator Enagas recently partnered with
Spanish construction firm ACS and Eurogas Corporation to
invest 1.2 billion euros in what will be Spain's largest
natural gas storage facility. This facility, which will have
a storage capacity of 1.3 billion cubic meters of liquified
natural gas will be developed in an abandoned oilfield off
Spain's Mediterranean coast by the resort city of Castellon.
It is expected to come on line in 2010 and will supply
coastal areas such as Barcelona and Valencia. The gas is
expected to be imported from a variety of countries as Spain
does not produce natural gas. (El Pais, December 22)

-------------------------
Repsol Finalizes YPF Sale
-------------------------

4. (U) Repsol announced December 21 that it had finalized
the sale of 25 percent of its Argentinean subsidiary, YPF, to
Argentina's Eskenazi family. Repsol representatives
indicated that it would sell 14.9 percent immediately for
$2.24 billion with an option to buy the remaining 10.1
percent within the next four years. Once the deal is
completed, an additional 20 percent of YPF held by Repsol
would be floated on Argentina's stock market. This
transaction is in line with recent Repsol efforts to realign
larger portion of its investment towards Africa and the
Middle East. (El Pais, December 22)

----------------------------------
Two High-Speed Trains Come on Line
----------------------------------

5. (U) RENFE train officials expressed satisfaction with the
performance of the two new high speed "AVE" rail lines
between Madrid and Vallodolid in the north and Madrid and
Malaga in the south. The lines were inaugurated on December

MADRID 00002307 002.2 OF 002


23, and although the initial rides to Valladolid experienced
some delays, the majority reached their destination on time.
Meanwhile there is little news about when the AVE line
between Barcelona and Madrid, which originally was scheduled
to open this month, will be completed. Indications are that
it will not open until after the March 9 elections.

AGUIRRE

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