VZCZCXRO1645
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #1289/01 3440740
ZNR UUUUU ZZH
P 090740Z DEC 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 5738
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3699
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 MADRID 001289 
 
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. 1-5 
 
REF: A. MADRID 1257 
     ¶B. MADRID 1226 
 
MADRID 00001289  001.2 OF 002 
 
 
Contents: 
 
ELAB: October Unemployment Highest in EU 
ECON: November Car Sales Down Almost 50 Percent from Year 
Before 
ECON/EIND: Industrial Production Down 12.8 Percent in October 
ECON/EFIN: More Real Estate Companies in Financial 
Difficulties 
EFIN: GOS Debt Guarantees Heavily Sought by Banks 
EINV: Citigroup Fund to Buy Sacyr Highway Business 
 
October Unemployment Highest in EU 
 
¶1. (U) According to the EU's Eurostat, Spain's unemployment 
rate for the month of October reached 12.8 percent, giving 
the country the highest rate in the EU for the 6th month 
running.  Second Vice President and Minister of Economy Pedro 
Solbes has noted that unemployment is the primary concern of 
the Zapatero Administration and is likely to increase into 
¶2009.  Much of the unemployment comes as a result of Spain's 
residential construction crash, but it is also tied to the 
international markets turmoil. According to Spain's  National 
Employment Institute, which uses a different methodology than 
Eurostat, the number of registered unemployed increased by 
171,000 in November, a 6 percent increase from October, 
bringing the total number of unemployed to just under 3 
million.  The sectors suffering the highest rates of 
unemployment are services, construction, industry and 
agriculture.  (All Media 12/2-12/3) 
 
November Car Sales Down Almost 50 Percent from Year Before 
 
¶2. (U) Car sales fell by almost 50 percent in November from 
November of 2007 according to Spain's auto association, 
Anfac.  With over 50,000 auto workers affected by the sales 
downturn through layoffs or a reduction in hours, this sector 
has become a priority for the GOS.  Last week's 10.85 billion 
euro stimulus package (ref a) included 800 million euros for 
the auto industry, while the regional government of Aragon 
provided additional incentives.  In a meeting December 3 with 
union leaders, President Zapatero clarified that the GOS 
would provide support only to those auto companies that do 
not engage in layoffs.  Press reports indicate Minister of 
Industry Miguel Sebastian is also considering proposing that 
car license fees be temporarily suspended.  Spain has the 
world's 8th largest auto industry.  (ABC, 12/1; El Pais, 12/5) 
 
Industrial Production Down 12.8 Percent in October 
 
¶3. (U) According to the National Institute of Statistics, 
industrial production dropped 12.8 percent year-on-year from 
October 2007 to October 2008, the largest such decline in the 
index's 15-year history.  October 2008 is the sixth 
consecutive month in which production has declined on a 
year-on-year basis.  (All Media, 12/5) 
 
More Real Estate Companies in Financial Difficulties 
 
¶4. (U) Real estate companies Habitat and Metrovacesa were the 
latest economic casualties of falling property prices and 
tight credit.  Habitat, the fifth largest real estate company 
in Spain, filed for bankruptcy on November 28.  Its debts of 
2.3 billion euros make this the second largest bankruptcy 
filing after the Martinsa-Fadesa bankruptcy in early 2008. 
On December 4, the core shareholder (the Sanajuha family) of 
prominent property company Metrovacesa announced that it 
would turn over a 50%  stake in the company to its creditor 
banks after the company was unable to meet its 2 billion 
euros in outstanding loans.  Media reports also indicate that 
another prominent Spanish real estate company, Colonial, 
which has been in trouble for months, may be on the verge of 
not being able to meet its debt obligations.  According to 
the Bank of Spain, construction and real estate firms hold 
over 25 percent of outstanding debt and represent over a 
quarter of all companies and individuals suspending debt 
payments.  (Various Media, 11/1 -11/5) 
 
GOS Debt Guarantees Heavily Sought After by Banks 
 
¶5. (U) Most of Spain's major banks applied by the December 3 
deadline to take advantage of the GOS offer to guarantee up 
to 100 billion euros of new bank debt.  Information about 
which banks will be awarded these guarantees will not be made 
 
MADRID 00001289  002.2 OF 002 
 
 
public until December 31.  This offer was heavily subscribed 
to, unlike the GOS asset purchase auction of November 20 (ref 
b).  On December 3, Second Vice President and Minister of 
Economy Pedro Solbes met with the heads of Spain's major 
banks to assess the impact of the GOS economic stimulus 
measures.   (ABC, 12/3; El Pais 12/3) 
 
Citigroup Fund to Buy Sacyr Highway Business 
 
¶6. (U) On December 1, troubled construction company Sacyr 
Vallehermoso announced plans to sell its highway business 
Itinere Infraestructuras to a Citigroup-managed fund for 7.8 
billion euros.  The sale will help Sacyr trim its 19.7 
billion euros in debt.  A Sacyr spokesperson said that the 
company will continue to seek a buyer for its 20 percent 
stake in Repsol YPF, and maneuverings continue over the 
possibility that the Russian company Lukoil may purchase that 
stake (reftels). (El Pais, 12/2) 
 
 
 
 
 
 
 
 
 
 
 
 
AGUIRRE