VZCZCXRO1439
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #1205/01 3191719
ZNR UUUUU ZZH
R 141719Z NOV 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 5579
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHMO/AMEMBASSY MOSCOW 0919
RUEHLA/AMCONSUL BARCELONA 3652
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 001205 
 
SIPDIS 
SENSITIVE 
 
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 EINV ELAB ENRG EPET SP
SUBJECT: MADRID ECONOMIC WEEKLY, NOV. 10-14 
 
REF: MADRID 1189 
 
MADRID 00001205  001.2 OF 002 
 
 
Contents: 
 
ECON/EFIN: Zapatero Prepares for G-20 Financial Crisis Summit 
ECON: 2009 Growth Projections Continue to Fall 
EFIN: 2009 Budget Passes Lower House 
EPET/EINV: Gazprom Considering Purchase of 20% Stake in Repsol 
EFIN: Santander Issues New Shares to Add Capital 
EFIN/ENRG: Iberdrola First Spanish Company to Issue Bonds 
Since Lehman Bankruptcy 
ECON/ELAB: Violent Protest Against Nissan Job Cuts 
 
Zapatero Prepares for G-20 Financial Crisis Summit 
 
1.(U) President Zapatero prepared for Saturday's G-20 summit 
by meeting separately on November 10 with members of the 
Spanish business community, bankers, and labor leaders and on 
November 11 with opposition leader Mariano Rajoy.  Media 
reports suggest that he will use his summit statement to 
explain the benefits of Spain's banking regulations.  The 
Bank of Spain's countercyclical loss provisioning has been 
frequently cited, including by a Nov. 10 Wall Street Journal 
article, and the central bank's refusal to allow banks to 
hold certain assets off their balance sheets is something 
Zapatero may also mention.  GOS officials have attempted to 
lower public expectations that the summit itself will result 
in immediate changes, emphasizing the importance of the 
followup process.  Press reports suggest that Zapatero may 
call for broader participation than just the G-20 in the 
followup process. (All media, 11/11 and 11/12) 
 
2.(SBU) Comment: Zapatero had risked domestic political 
damage by very publically insisting the Spain would 
participate even though it does not belong to the G-20.  By 
successfully jockeying for a position at the summit, he has 
accomplished two things.  First, focusing on the summit makes 
it easier for him to continue to blame Spain,s economic 
difficulties on outside forces rather than on the domestic 
housing slump.  Second, it somewhat addresses the recurring 
opposition criticism that under Zapatero Spain has not been a 
relevant player in the international arena.  On the other 
hand, any perception that he has led Spain to a greater role 
is affected by the widespread understanding that he owes his 
presence at the summit to French president Sarkozy.  We 
expect Spain to seek to be involved in the followup process. 
End Comment. 
 
2009 Growth Projections Continue to Fall 
 
3.(U) Secretary of State for Economy David Vegara said on 
November 12 that the GOS would revise in December its GDP 
growth estimate for 2009.  In its proposed 2009 budget, the 
GOS had estimated 1% growth for 2009, but this now looks to 
be too high.  The IMF has estimated that the economy will 
contract by 0.7% (which Vegara said seemed pessimistic), and 
BBVA bank estimated on November 12 that the contraction would 
be 1.0%. (El Pais, 11/12) 
 
2009 Budget Passes Lower House 
 
4.(U)  On November 11, the lower house of Parliament passed 
the Zapatero-proposed 2009 budget with few amendments. 
Although the budget must be confirmed by the Senate and 
signed by the President before becoming final, passage in the 
lower house is considered practically a guarantee of final 
approval. The ruling Socialist party pushed the bill through 
after obtaining support from the National Basque Party (PNV) 
and the National Block of Galicia, traditional allies in the 
budget process.  The 2009 proposed budget envisions a 2% 
increase over 2008 with a projected deficit of 1.5% of GDP. 
Secretary of State for the Economy and Finance Carlos Ocana 
noted November 13 during a conference that the prevailing 
themes of the 2009 budget are 1)austerity, 2)redistribution 
of funds towards R&D and infrastructure investments, and 
3)social spending, particularly to support the unemployed. 
(El Pais, Embassy, November 13) 
 
Gazprom Considering Purchase of 20% Stake in Repsol 
 
5.(U) Russian Vice President Alexander Zhukov confirmed 
November 12 during a meeting with Spanish Minister of 
 
MADRID 00001205  002.2 OF 002 
 
 
Industry Miguel Sebastian that Gazprom is studying the 
possibility of purchasing 20% of oil and gas company Repsol. 
The purchase would make Gazprom the largest single 
stakeholder in Repsol, which is the world,s eighth largest 
oil company.  Troubled Spanish construction firm Sacyr 
Vallehermoso is offering its stake, currently valued at 3.5 
billion euros.  Russian analysts suggest the announcement to 
be more of a wish than a reality, as Gazprom,s current 
priority is debt reduction.  EC Energy Commissioner Piebalgs 
told reporters he did not believe Gazprom could carry out the 
purchase because of the recent decline in oil and gas prices, 
adding that if an offer was formalized, the EC would have to 
analyze it "taking into account all the factors."  Media 
report that President Zapatero and Vice President/Minister of 
Economy Pedro Solbes oppose the sale of the stock to Gazprom, 
and opposition leader Mariano Rajoy is quoted as being 
"radically against" such a purchase.  Gazprom is not the only 
Russian company interested in Sacyr,s Repsol stake, 
according to Sacyr President Luis del Rivero. (All Media) 
 
Santander Issues New Shares to Add Capital 
 
6.(U) Spain's largest bank, Banco Santander, informed 
regulators that it would issue shares worth 7.2 billion euros 
to increase its core capital ratio by 25%.  It had said in 
October that it would sell assets to raise capital, but it 
decided to issue shares instead and hold onto the assets 
until market conditions improve.  Some press reports 
interpreted the move as a sign that Santander would not seek 
to take advantage of GOS funds available to buy assets from 
banks.  Santander's stock fell afterwards.  Rival bank BBVA 
said it had sufficient capital and would not need to issue 
new shares.  (El Pais, 10/10; MarketWatch.com, 10/10; El 
Confidencial 10/11) 
 
Iberdrola First Spanish Company to Issue Bonds Since Lehman 
Bankruptcy 
 
7.(U) Electricity company Iberdrola raised 1.6 billion euros 
on November 13 in the first Spanish bond issuance since the 
Lehman Brothers bankruptcy in September.  Interest rates were 
high; for 1 billion euros in three-year bonds it paid 290 
basis points over the relevant index (or 6.375%), while for 
600 million euros in seven-year bonds it paid 365 basis 
points over a different index (or 7.5%).  For comparison, 
Iberdrola had paid 83 and 110 basis points over the relevant 
indices when it issued bonds for five and ten years (on which 
spreads should be higher than on three- and seven-year bonds) 
in April of this year.  A company official said Iberdrola 
would use the proceeds to add liquidity and refinance debt. 
(El Confidencial, 11/14) 
 
Violent Protest Against Nissan Job Cuts 
 
8.(U) Several hundred protestors pelted Nissan headquarters 
offices in Barcelona with bottles, eggs, rocks, and 
crowd-control barriers on November 11 in protest of Nissan's 
decision to cut 1,680 jobs in Barcelona.  Nissan's 
announcement comes on the heels of especially poor car sales 
in Spain due to falling demand.  Volkswagen and Ford have 
also announced that they will cut down on labor hours in 
their Spanish factories. The auto industry is particularly 
important for the Spanish economy, as Spain is the eighth 
largest auto manufacturer in the world. (El Pais 11/13) 
 
AGUIRRE