VZCZCXRO8354
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #0184/01 0511731
ZNR UUUUU ZZH
P 201731Z FEB 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 0247
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3832
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000184 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/WE, EEB/IFD/OMA 
TREASURY FOR OIA/OEE/D.WRIGHT 
COMMERCE FOR 4212/DON CALVERT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EIND ELAB PREL SP
SUBJECT: MADRID ECONOMIC WEEKLY, FEB. 16-20 
 
REF: MADRID 125 
 
MADRID 00000184  001.2 OF 002 
 
 
Contents: 
 
EFIN/PREL: President Zapatero Invited to London Economic 
Summit 
ECON: Sharp Inflation Decreases Prompt Deflation Worries 
EIND: GOS Unveils "New" Car Support Measures 
ELAB: Transfer of EADS Military Aircraft Line Sparks Fears of 
Job Losses 
EFIN: Troubled CCM Savings Bank Planning Merger With Unicaja 
 
President Zapatero Invited to London Economic Summit 
 
1.(SBU) On February 13, UK Prime Minister Brown sent a letter 
to President Zapatero officially inviting him to participate 
in the April 2 London Economic Summit.  Comment: The Zapatero 
Administration has lobbied strongly to be able to participate 
in G-20-type financial reform discussions, partially as a way 
to be seen as a world player at home.  Spanish media has not 
yet reported that Second Vice President and Minister of 
Economy/Finance Pedro Solbes was not invited to accompany 
Zapatero although his counterparts from G-20 countries were 
invited.  (El Pais, 2/19). 
 
Sharp Inflation Decreases Prompt Deflation Worries 
 
2.(U) Amidst falling consumption and petroleum prices, the 
consumer price index fell by 0.8 percent in January according 
to the National Statistics Institute (INE), the third 
consecutive monthly decline.  The drop brought the 
year-on-year inflation rate to 0.8 percent, the lowest in 40 
years, spurring concern over the possibility of deflation in 
the near future. (ABC, 2/13; INE website) 
 
GOS Unveils "New" Car Support Measures 
 
3.(U) The GOS announced on February 13 a 4 billion euro 
package to help Spain's ailing auto sector, although the 
majority of the measures under the "new" auto package had 
been previously announced as part of other support packages. 
Included in the 4 billion euro plan is 1.2 billion euros in 
state credit for those wishing to replace older cars with new 
environmentally friendly cars, 800 million euros for 
carmakers to implement production upgrades (reftel), and 950 
million euros in rail, road, and sea infrastructure 
improvements.  The package also includes state credit lines 
for small and medium-sized firms.  Among the newer items, the 
plan will allow auto manufacturers to defer their social 
security contributions in 2009.  ANFAC, Spain's auto industry 
association, expressed disappointment in the plan and 
expressed desire for more measures that would increase demand 
for new cars in Spain.  Spain's auto manufacturing sector 
employs 70,000 directly and contributes between 2-5 percent 
of Spain's GDP.  In 2007, Spain was the 8th largest auto 
producer worldwide.  (All Media, 2/14) 
 
Transfer of EADS Military Aircraft Line Sparks Fears of Job 
Losses 
 
4.(U) Local media was dominated this week by the news that 
EADS-CASA's Military Transport Aircraft Division (MTAD), 
which is based in Madrid and employs over 9000, would soon be 
subsumed under EADS subsidiary Airbus.  Although the decision 
to transfer MTAD to Airbus is not new, recent concerns over 
job losses and the loss of the Spanish "brand" have sparked 
controversy.  The move comes after cost overruns and delays 
on the part of MTAD on its 20 billion euros A400M military 
plane project.  Minister of Industry Miguel Sebastian met 
with EADS representatives February 18 to discuss GOS 
concerns, and on February 19 EADS CEO Louis Gallois made 
assurances that Spanish jobs would not be affected. 
EADS-CASA, a Spanish aircraft manufacturer, is the Spanish 
branch of EADS, which is the parent company of Airbus.  SEPI, 
the GOS's public industrial holding company, has a 5.5 
percent stake in EADS.  (All Media, 2/16-2/20) 
 
Troubled CCM Savings Bank Planning Merger With Unicaja 
 
5.(U) Although Spanish financial institutions have fared 
better during the global financial turmoil than some of their 
European counterparts, smaller savings banks ("cajas") that 
were most exposed to Spain's housing sector are showing signs 
of financial stress.  Castilla La Mancha Savings Bank (CCM) 
is reportedly facing financial difficulties, leading the 
 
MADRID 00000184  002.2 OF 002 
 
 
institution to move forward on a merger with prominent 
Andalucian savings bank Unicaja.  If successful, the merger 
would result in the 6th largest financial institution in 
Spain and the first merger between cajas from different 
Autonomous Communities.  Many of Spain's 45 savings banks are 
run or influenced by regional governments, and they 
reportedly occasionally engage in transactions reflecting the 
political agenda of those local governments.  Spain's cajas 
hold over half of the nation's loans. (Expansion, 2/19; El 
Pais, 2/18-19-20) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CHACON