VZCZCXRO1032
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #1339/01 3541515
ZNR UUUUU ZZH
P 191515Z DEC 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 5801
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3720
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 001339 
 
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 13-19 
 
REF: MADRID 1309 
 
MADRID 00001339  001.2 OF 002 
 
 
Contents 
 
EFIN: Congress Approves 2009 Budget 
ELAB: 90% Fewer Work Visas to be issued in 2009, but 
Immigration Still Rising 
EFIN: Impact of Madoff Fraud 
EFIN/EINV: BBVA Increases Capital 
EINV/EIND: Housing Market Decline Continues 
EINV: ACS to Build, Operate NC Toll Bridge 
 
Congress Approves 2009 Budget 
 
1.(U) The lower house voted 178-165 to pass the 2009 budget 
December 18, overriding the Senate's veto on the draft bill. 
The unresolved dispute over regional government financing was 
one of the hurdles to passing this budget.  The GOS 
characterizes the 2009 budget as "austere" with just a 3.3 
percent nominal increase in program spending.  However, Vice 
President and Economy/Finance Minister Solbes acknowledged 
that the budget was already out of date given the 
macroeconomic changes that have taken place since its 
introduction in September.  In addition, the budget does not 
include billions of euros in planned stimulus and financial 
system measures that the GOS announced in October and 
November of this year.  Solbes acknowledged that Spain's 
deficit will surpass the EU limit of 3 percent of GDP, but EU 
officials have signaled that governments will be allowed to 
exceed the limit.  The Ministry of Labor and Immigration and 
the Ministry of Housing will enjoy significant increases over 
2008, while the budgets of the Ministries of Defense, Foreign 
Affairs, and Economy and Finance (among others) will be 
decreased.  According to the GOS, the pillars of the 2009 
budget are social spending, R&D, and infrastructure spending. 
 The bill will be sent to President Zapatero for signature in 
time for its January 1 implementation date.  (All Media, 
Ministry of Economy and Finance, 12/19) 
 
90% Fewer Work Visas to be Issued in 2009, but Immigration 
Still Rising 
 
2.(U) The Council of Ministers is set to approve on December 
19 a more than 90 percent reduction in the number of work 
visas for country origin workers in 2009.  Fewer than 1,000 
country of origin work visas will be given out in 2009, 
compared with 15,731 in 2008.  Minister of Immigration and 
Labor Celestino Corbacho had warned earlier in September that 
the hiring of immigrant workers abroad would soon diminish. 
He has been strongly advertising Spain's immigrant "voluntary 
return" program, which assists unemployed immigrant workers 
to return to their country of origin.  Press reports indicate 
that so far, only several hundred immigrants have accepted 
the voluntary return offer.  Immigration to Spain continued 
to increase in 2008.  Recently released Eurostat data 
indicates that Spain has the highest volume of immigration of 
any EU country in 2008, with about 500,000 new immigrants, 
particularly from Morocco and Romania. (EL Pais, December 16, 
Eurostat, December 17) 
 
Impact of Madoff Fraud 
 
3.(U) Vice President/Minister Solbes and Bank of Spain 
Governor Miguel Angel Ordonez Fernandez stated on December 15 
that the impact of Madoff's investment scheme on the Spanish 
financial sector as a whole would not be significant. 
However, Banco Santander has reported a fairly significant 
exposure of 2.33 billion euros, much of which was through its 
Optimal hedge fund based in Geneva.  Spain's second largest 
bank, BBVA, announced a possible maximum loss of 300 million 
euros. The National Securities Market Commission reported on 
December 16 an additional exposure level of approximately 107 
million euros of various Spanish funds.  Local analysts 
believe that the full impact in Spain of the Madoff scheme 
may be greater -- one press report said 17,000 Spanish 
accounts were affected -- although they do not appear to 
question VP Solbes' assessment. (All Media, 12/15-12/19) 
 
BBVA Increases Capital 
 
4.(U) Spain's second largest bank, BBVA, announced on 
December 19 that it had issued 1 billion euros in non-core 
preferred shares to boost its capital base.  The placement 
took only four days, in part because of the attractive 
interest rate of 6.5 percent for the first two years and the 
euribor rate (with a minimum of 3.5 percent) after that. 
 
MADRID 00001339  002.2 OF 002 
 
 
Press reports suggested that the move was aimed at helping 
BBVA keep up with banks elsewhere in Europe that have taken 
advantage of government financing/capitalization programs. 
Although BBVA has some exposure to Spain's declining housing 
market, it has large Latin American and U.S. operations and 
is widely viewed as a stable and solid institution.  (El 
Pais, 12/13; Expansion, 12/19) 
 
Housing Market Decline Continues 
 
5.(U) The housing market continued its decline in the 
July-September quarter, according to housing ministry data. 
The number of home sales in the quarter was 36 percent below 
the level of a year ago.  Builders are responding to the 
overhang of unsold units and the difficulty of getting new 
financing by further cutting back; the number of housing 
starts was 49 percent below the level of a year earlier, and 
building permit requests in September were down 63 percent. 
(El Pais, 12/19) 
 
ACS to Build, Operate NC Toll Bridge 
 
6.(U) The ACS construction group announced that its Iridium 
and Dragados subsidiaries had been selected by the North 
Carolina Turnpike Authority to build and operate the 7-mile 
$700 million Mid-Currituck Bridge.  ACS has won 
infrastructure concessions in Texas, Florida, and Canada in 
the last six months.  An ACS press release also highlighted 
as an important growth opportunity the incoming 
Administration,s announcement of plans to invest $500 
billion in infrastructure projects.  (El Pais, 12/19; ACS 
press release, 12/18) 
AGUIRRE