VZCZCXRO5787
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #0220/01 0591508
ZNR UUUUU ZZH
P 281508Z FEB 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 0310
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHQT/AMEMBASSY QUITO 1447
RUEHLA/AMCONSUL BARCELONA 3868
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000220 
 
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 ECPS EFIN EIND EINV ENRG ETRD SP
SUBJECT: MADRID ECONOMIC WEEKLY, FEB. 23-27 
 
MADRID 00000220  001.2 OF 002 
 
 
Contents: 
 
EFIN: Budget Deficit Balloons, Spurring EC Warning 
ECON: Inflation Rate Drops Again 
ETRD: Falling Consumption Contributes to Trade Deficit Decline 
ECON: Tourist Arrivals Down 10 Percent in January from Year 
Before 
EIND: Auto Industry, Suppliers Request 4 Billion Euros in Aid 
EINV/ENRG: Acciona Sells Shares in "National Champion" Endesa 
To Italian Enel 
ENRG: Repsol Ends Dispute with Government of Ecuador 
ECPS: E-Commerce Transactions Value Rose 40 Percent in 2008 
 
 
Budget Deficit Balloons, Spurring EC Warning 
 
1.(U) According to figures released February 24 by the 
Secretary of State for Economy, Spain's public deficit in 
2008 reached  41.8 billion euros or 3.8 percent of GDP, 0.4 
percent above the latest official projection.  This data 
comes on the heels of a European Commission report urging 
Spain (along with five other EU countries) to bring its 
budget deficit back in line with the EU's fiscal rules.  The 
GOS predicts unemployment will rise to 15.9 percent in 2009, 
that GDP will shrink by 1.6 percent and that the budget 
deficit will widen to 5.8 percent.  Comment: Many private 
forecasters expect unemployment and the budget deficit to be 
higher this year than the GOS is predicting. (All media, 
2/25) 
 
Inflation Rate Drops Again 
 
2.(U) February consumer prices were only 0.7 percent above 
their February 2007 level, according to the National 
Statistics Institute (INE) advanced EU-harmonized CPI.  This 
is the seventh consecutive monthly decline in the annual 
rate, and is the lowest annual rate in 40 years.  Embassy 
Comment:  It will not be clear until the full CPI is released 
in two weeks whether prices actually fell during February, as 
they had in the three previous months. (INE press release, 
2/27) 
 
Falling Consumption Contributes to Trade Deficit Decline 
 
3.(U) Spain's trade deficit decreased by 4.9 percent in 2008, 
a decline largely attributed to falling domestic consumption 
and imports.  Silvia Iranzo, State Secretary for Commerce at 
the Ministry of Industry, Tourism, and Commerce, indicated 
that the trade deficit would continue to fall with the 
depreciation of the euro and the decline in oil prices. 
 
Tourist Arrivals Down 10 Percent in January from Year Before 
 
4.(U) According to the Ministry of Industry, Tourism, and 
Commerce, international tourist arrivals fell 10 percent in 
January from the year before, marking further deterioration 
in a sector important to the Spanish economy.  More 
international tourists visit Spain than any other country 
except France, and the tourism sector represents about 10 
percent of GDP. (AFP, 2/23). 
 
Auto Industry, Suppliers Request 4 Billion Euros in Aid 
 
5.(U) Car makers and suppliers in Spain have applied for than 
4 billion euros in GOS loan and support assistance.  This 
amount is five times higher than the 800 million euros 
offered by the Ministry of Industry to support the ailing 
auto industry, a sector which contributes 2-5 percent to GDP. 
 Minister of Industry Miguel Sebastian indicated February 24 
that the Ministry had received a total of 413 project 
assistance requests.  In 2007, Spain was the world's eighth 
largest producer of autos. (El Pais, 2/25) 
 
Acciona Sells Shares in "National Champion" Endesa to Italian 
Enel 
 
6.(U) Infrastructure and energy conglomerate Acciona 
announced February 20 that it would sell its 25 percent stake 
in electricity utility Endesa to the Italian electricity firm 
Enel, which already owns a 67 percent stake, for 11.1 billion 
euros.  This transaction, which is expected to be completed 
in about six months, will mark the end of Spanish control of 
Endesa, which the GOS had owned until 1998.  In 2006 and 
2007, Endesa had been the subject of takeover bids from first 
the Spanish firm Gas Natural, then the German firm E.ON, and 
 
MADRID 00000220  002.2 OF 002 
 
 
finally from the Enel-Acciona venture.  The GOS originally 
had sought to promote the Gas Natural bid and then to block 
the E.ON bid before allowing the Enel-Acciona bid.  It was 
censured by the European Commission for its actions to 
discourage the E.ON bid and its requirement that Endesa be 
maintained as an independent company based in Spain.  Acciona 
will receive cash and some of Endesa's wind and 
hydroelectricity generation assets.  According to Acciona, 
the transaction will make it the world's second largest 
renewable energy provider, up from third. (All media 2/24) 
 
Repsol Ends Dispute with Government of Ecuador 
 
7.(U) Oil and gas giant Repsol indicated that it had reached 
this past week an agreement with the GOE under which it will 
pay the taxes it had disputed with the GOE and will drop its 
complaint against the GOE with the World Bank's International 
Center for the Settlement of Investment Disputes. 
Additionally, Repsol has agreed to shift away from its 
current cost-sharing contract to a service provider contract 
instead, giving ownership of petroleum directly to the GOE. 
The agreement comes soon after a visit by Spanish Foreign 
Minister Moratinos, who helped resolve this longstanding 
dispute amidst threats by President Correa that Repsol assets 
in Ecuador would be frozen.  Repsol is one of Ecuador's 
largest foreign investors. (EFE, Reuters 2/26) 
 
E-Commerce Transactions Value Rose 40 Percent in 2008 
 
8.(U) According to Spain's telecoms regulator the CMT, the 
value of e-commerce transactions increased by 40 percent in 
2008 from the year before, surpassing 4 billion euros.  This 
increase is perhaps reflective of GOS action to promote a 
strong information society in Spain through its "Plan 
Avanza." (El Pais, 2/24) 
CHACON