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Cablegate: Madrid Economic Weekly, January 25-29

VZCZCXRO2564
RR RUEHIK
DE RUEHMD #0114 0312304
ZNR UUUUU ZZH
R 312304Z JAN 10
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1825
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4326
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS MADRID 000114

SIPDIS

STATE FOR EUR/WE, EEB/IFD/OMA, EEB/TPP/IPE
STATE PASS USTR FOR D.WEINER
COMMERCE FOR 4212/DON CALVERT
TREASURY FOR OIA/OEE R.JOHNSTON AND OTP:M.CORWIN


E.O. 12958: N/A
TAGS: ECON ECPS EFIN ELAB SP
SUBJECT: MADRID ECONOMIC WEEKLY, JANUARY 25-29

REF: MADRID 070

Contents:

ELAB: Unemployment at 18.8% in 2009 Q4
EFIN: First Merger of Cajas from Different Regions
EFIN: EC Approves FROB After 7 Months of Negotiations
ECPS: Telecommunication Frequency Auction Expected by Year-End

Unemployment at 18.8% in 2009 Q4

1. (U) The official National Institute of Statistics (INE)
fourth-quarter 2009 unemployment rate was 18.8%, a raise of
almost 1% from the previous quarter. This is the third
consecutive year that the unemployment rate has increased.
Over 4.3 million Spaniards were unemployed, up by 1.1 million
from the end of 2008. (INE, 1/29)

First Merger of Cajas from Different Regions

2. (U) The Bank of Spain recorded a win in its push to
restructure the savings bank ("caja") sector when the boards
of Cajasol (in Andalucia) and Caja Guadalajara (in
Castilla-La Mancha) approved on January 26 their merger, the
first between cajas of different autonomous communities
(regions). Cajasol will account for 94% of the total assets
in the new entity, and the Bank of Spain required Caja
Guadalajara to merge because it determined Caja Guadalajara
lacked economic viability because of limited economic
activity in its own region. Autonomous community governments
have opposed inter-regional mergers involving the cajas they
control. The Andalucia and Castilla-La Mancha autonomous
communities are both governed by the PSOE, which may have
helped reduce opposition. The merger will not require any
public resources, and it will have very little immediate
impact on employment, as the two cajas' operations do not
overlap. (El Confidencial, 1/27)

EC Approves FROB After 7 Months of Negotiations

3. (U) After 7 months of negotiations, the EC finally
approved Spain's Orderly Bank Restructuring Fund (FROB),
designed to provide public funds to facilitate the merger of
distressed cajas. However the EC only approved it until June
30, which will require an increase in the pace of mergers.
The EC confirmed an earlier announcement by Spanish First
Vice President and Economy/Finance Minister Elena Salgado
that the GOS will only be allowed to provide 2% of
risk-weighted assets to cajas, although the GOS will be able
to seek EC approval to provide more on a case-by-case basis.
(EuropaPress, 1/28)

Telecommunication Frequency Auction Expected by Year-End

4. (U) The GOS hopes to receive between 800 million and 1
billion euros from telecommunication frequency auctions that
will take place by the end of this year. The 800 and 900 MHz
bandwidths are valuable to mobile communication providers
because they require minimal investment but are ideal for
hosting the GSM service found in all mobile phones. However,
those frequencies will not be available until 2015. 2,600
MHz frequencies will also be auctioned, and they will be
available immediately. Currently, digital televisions use
the 800 MHz frequency, and the GOS will use much of the
proceeds of the auction to foot the cost of migrating them to
other frequencies. (Expansion, 1/26)
SOLOMONT

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