VZCZCXRO2435
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #0245 0651707
ZNR UUUUU ZZH
R 061707Z MAR 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 0348
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3882
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS MADRID 000245 
 
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 SP
SUBJECT: MADRID ECONOMIC WEEKLY, MARCH 2-6 
 
REF: MADRID 220 
 
Contents: 
 
ELAB: Official Unemployment Continues to Rise Steeply 
ELAB: GOS Approves Employment/Unemployment Measures 
ECON: 2008 Home Sales Down 33 Percent; Glut Expected Until 
2011-12 
EIND: Industrial Production Falls by Over 20 Percent 
EFIN: Standard & Poor's Downgrades Banks 
 
 
Official Unemployment Continues to Rise Steeply 
 
1.(U) In February 2009, an additional 154,000 people were 
reported unemployed, for a total of just under 3.5 million. 
According to the Ministry of Labor, this is the highest 
number of unemployed since the current calculation method was 
introduced in 1996.  This level is a 4.6 percent increase 
from the previous month, and the 11th consecutive monthly 
increase.  (Comment: Spain has the highest unemployment rate 
in the EU - the latest rate published by the EU was 14.4 
percent in December.  The GOS projects that the unemployment 
rate will reach 15.9 percent by the end of the year, but 
independent analysts suggest that the rate will be much 
higher.) (All Media, 3/3). 
 
GOS Approves Employment/Unemployment Measures 
 
2.(U) After the GOS failed to get agreement from business and 
labor, the Council of Ministers unilaterally approved on 
March 6 six measures to encourage employment and increase 
payments to the unemployed in certain circumstances.  Labor 
Minister Corbacho estimated that the measures would cost 1.5 
billion euros.  The GOS continued to resist calls from 
business groups and the OECD to reduce the cost of firing 
employees.  (El Pais, 3/3 and 3/4; Council of Ministers, 3/6) 
 
2008 Home Sales Down 33 Percent; Glut Expected Until 2011-12 
 
3.(U) The number of home sales fell 33 percent in 2008 from 
the year before, according to the Ministry of Housing. 
Decreasing sales, combined with an oversupply of new 
properties, have resulted in approximately 1 million unsold 
new homes.  The glut of new properties will not disappear 
until the end of 2011 or the middle of 2012, according to the 
head of Spain's property registrars association.  (Comment: 
This suggests that significant additional adjustment will be 
necessary before Spain's housing property situation 
stabilizes.  In the meantime, activity in the residential 
construction sector, which once contributed 10 percent of 
GDP, has fallen greatly and has contributed to Spain's 
unemployment problem.)  (Expansion, 3/5; ABC, 3/5) 
 
Industrial Production Falls by Over 20 Percent 
 
4.(U) Industrial production fell by 20 percent in January 
from January 2007, marking the 9th consecutive month in which 
production was below its level of a year earlier.  The fall 
in auto sales and production played a strong role in this 
decrease, with manufacturing in Spain of auto parts 
decreasing more than 50 percent in January year-on-year and 
February sales falling to a level not seen since 1993.  One 
of the few areas that did not experience a decrease was 
coal/mineral production.  (El Pais, 3/3 and 3/5) 
 
Standard & Poor's Downgrades Banks 
 
5.(SBU) Standard & Poor's lowered the long-term credit rating 
March 4 on four banks or savings banks, including Caja 
Madrid, Banco Sabadell, and Banco Popular, each among the 
country's seven largest financial institutions.  Standard & 
Poor's maintained its rating for Spain's two largest banks, 
Santander and BBVA, but changed its perspectives on those two 
from "stable" to "negative."  (Comment: So far, Spanish 
financial institutions have fared relatively better than 
their counterparts in other countries, and the GOS has touted 
this as a result of Spain's strict regulations and economic 
strength - despite problems in other areas of the domestic 
economy.  However, it is clear that Spanish banks, exposed to 
bad assets related to Spain's domestic housing market 
downturn, are beginning to feel the effects of the downturn.) 
(All Media, 3/5) 
CHACON