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Cablegate: Madrid Economic Biweekly, Aug 17-22

VZCZCXRO9328
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHMD #0852/01 2341036
ZNR UUUUU ZZH
R 221036Z AUG 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1136
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4104
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000852

C O R R E C T E D C O P Y (CORRECTED DATES IN THE SUBJ)
SIPDIS

STATE FOR EUR/WE, EEB/IFD/OMA
COMMERCE FOR 4212/D.CALVERT
TREASURY FOR OIA/OEE/R.JOHNSTON

E.O. 12958: N/A
TAGS: EAIR ECON EFIN EINV ELAB ETRD KFLU SP
SUBJECT: MADRID ECONOMIC BIWEEKLY, AUG 17-22

REF: MADRID 820

MADRID 00000852 001.4 OF 002


Contents:

EFIN/EINV: BBVA Buys Failed Texas Bank
ELAB: GOS Agrees to Extend Unemployment Benefits to More
Beneficiaries
EFIN: GOS Considering Difficult Steps for 2010 Budget
ETRD: Trade Deficit Falls; Imports, Exports Both Down
EAIR: Spanair Crash Anniversary Coincides With Release of
U.S., Spanish Documents
KFLU: H1N1 Could Cost Businesses More than 3 Billion Euros


BBVA Buys Failed Texas Bank

1.(U) BBVA, Spain,s second largest bank, strengthened its
position in Texas and entered California by purchasing the
banking operations of Guaranty Bank from the FDIC on August
21. The transaction marked the first time a foreign bank has
bought a failed U.S. bank. As is common in such
transactions, the FDIC agreed to bear most of the losses on
about $11 billion of Guaranty Bank's loans and other assets.
Texas-based Guaranty is the second largest U.S. bank to fail
this year and the tenth largest in U.S. history, and its
collapse is expected to cost the FDIC some $3 billion. The
transaction makes BBVA's U.S. division, Birmingham-based BBVA
Compass, the 15th largest commercial bank in the U.S., with
about $49 billion in deposits. (BBVA Compass Press Release,
8/21; AP, 8/22)

GOS Agrees to Extend Unemployment Benefits to More
Beneficiaries

2.(U) Facing strong criticism because the six-month
supplemental unemployment benefit announced August 13
(reftel) only applied to those whose regular benefits had
expired after August 1, President Zapatero said August 19
that the GOS would consult with labor and political parties
and provide benefits to some of those whose benefits ran out
earlier. Labor Minister Corbacho indicated that the GOS
planned to change the eligibility date to June 1. This would
add another 100,000 beneficiaries (at an estimated cost of
over 200 million euros) but would still leave half a million
others without assistance. (El Pais, 8/20)

GOS Considering Difficult Steps for 2010 Budget

3.(U) The GOS is considering several unpopular measures as it
prepares its 2010 budget, expected to be presented to the
Congress in September. This year's deficit is expected to
reach an unsustainable level around 10% of GDP, and with
economic activity expected to continue to decline into 2010,
revenues that year likely will fall from their 2009 level.
Infrastructure Development Minister Jose Blanco, perhaps the
key official in the ruling party, suggested that the GOS
would increase tax rates on high earners, though Finance
Ministry officials are reported to oppose this step. The GOS
is reported to be considering freezing public employees'
salaries or increasing them only slightly. (El Pais,
8/21-22)

Trade Deficit Falls; Imports, Exports Both Down

4.(U) Spain's trade deficit fell 53% in the first half of
2009 from its first-half 2008 level, reaching 24 billion
euros. A 32% decline in imports more than made up for a 21%
decline in exports. Energy imports fell 46%, while auto
exports fell 28%. (El Pais, 8/20)

Spanair Crash Anniversary Coincides With Release of U.S.,
Spanish Documents

5.(U) As Spain marked the one-year anniversary of the
8/20/2008 Spanair crash, Infrastructure Development Minister
Jose Blanco said that the accident could have been prevented
had the airlines implemented recommendations made prior to
the crash. The findings of the Civil Aviation Accidents
Commission (CIAIAC) investigation, released this week,
suggest that a combination of pilot error and mechanical
failure caused the Spanair crash: the pilots did not realize
that the wing flaps and slats were not properly extended
during their predeparture checks and the Take Off Warning
System (TOWS) failed to sound. The Minister cited a notice
issued earlier in the week by the U.S. National
Transportation Safety Board (NTSB), which found that the same

MADRID 00000852 002.4 OF 002


set of factors caused both the 1987 Detroit crash and a 2007
incident of a plane departing from Lanzarote in the Canary
Islands. Lessons from both could have prevented the Spanair
crash. However, the CIAIAC has yet to complete an
investigation of the Lanzarote incident -- had it followed
international norms, it would have completed it within a
year, before the Spanair crash -- and the NTSB's post-Detroit
recommendations of 1988 were not adopted by all airlines.
Spanair only required its pilots to check the TOWS system
once a day, as opposed to prior to each flight. Blanco
applauded the NTSB decision to adopt three of the seven
measures recommended in the CIAIAC report. He added that the
GOS would push for adoption of all of the measures by EU
member states during Spain,s EU Presidency next year. (El
Pais, 8/20; All Media, 8/18-8/19)

H1N1 Could Cost Businesses More than 3 Billion Euros

6.(U) The Ministry of Health now estimates that 25-30% of the
population in Spain could contract the H1N1 virus. At this
rate, businesses are calculating that costs due to sick leave
(with approximately 30% of the workforce out for around 6
days) would exceed 3 billion euros. To date, only around 25%
of Spanish companies have implemented contingency plans aimed
at preventing the spread of the virus. For its part, the GOS
plans to purchase 37 million doses of the H1N1 vaccine,
slated to be available by the end of the year. Spain had its
twelfth fatality on August 17, and estimates put the current
rate of infection at more than 14,000 a week. (Expansion,
8/19)
DUNCAN

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