VZCZCXRO5626
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #0294/01 0791552
ZNR UUUUU ZZH
R 201552Z MAR 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 0401
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1369
RUEHLA/AMCONSUL BARCELONA 3908
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000294 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/WE, EEB/IFD/OMA, EEB/CIP/BA 
TREASURY FOR OIA/OEE/T.O'KEEFFE,D.WRIGHT 
COMMERCE FOR 4212/D.CALVERT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ECPS SP
SUBJECT: MADRID ECONOMIC WEEKLY, MARCH 16-20 
 
REF: CARACAS 247 
 
MADRID 00000294  001.2 OF 002 
 
 
Contents: 
 
ECON: IMF Says Spain Can Increase Stimulus 
EFIN: Loan Delinquency Rate Rises to 3.8% 
EFIN: Savings Bank Association President Says GOS 
Intervention Needed 
EFIN: Chavez Re-Announces Intention to Nationalize Banco 
Santander Subsidiary 
ECPS: Telefonica to Reduce Phone Bills for Unemployed and for 
Small Businesses 
 
 
IMF Says Spain Can Increase Stimulus 
 
1.(U) In a Washington teleconference March 19, the IMF 
pointed to Spain as one of the countries that can do more to 
address its economic difficulties through additional stimulus 
measures for 2010.  Comment: So far, the GOS has implemented 
two major stimulus packages including an 18 billion-euro tax 
rebate package in April and an 11 billion-euro infrastructure 
plan in November.  This effort and increased unemployment 
spending have taken Spain from a 2 percent of GDP surplus in 
2007 to around a 6 percent deficit this year.  However, the 
stimulus packages announced to date focus more on 2008 and 
2009, perhaps because of initial GOS projections that the 
economy would begin to recover by the end of 2009.  Hence 
there may be room for measures to address 2010. (ABC, 3/20). 
 
Loan Delinquency Rate Rises to 3.8% 
 
2.(SBU) According to the Bank of Spain, the average 
delinquency rate reached 3.79 percent in January, almost four 
times the January 2008 rate of 0.96%.  Experts say that 
delinquency may reach 9% in the upcoming year.  Especially 
affected are Spain's savings banks ("cajas"), which are more 
exposed to Spain's housing market crash, and which are 
suffering a delinquency rate of 4.45 percent.  Comment: 
Presidency Economic Office officials told post that the steep 
rise in delinquency is a concern, however, they believe that 
strict provisioning requirements imposed by the central bank 
have given Spain's financial institutions a sufficient 
cushion to deal with high default and delinquency levels. 
One staff member said that Spain's financial system as a 
whole would be able to deal with a delinquency rate of 9 
percent "comfortably."  (Europa Press, 3/16) 
 
Savings Bank Association President Says GOS Intervention 
Needed 
 
3.(U) During a March 18 Congressional hearing, the President 
of Spain's Savings Banks Association (CECA), Juan Ramon 
Quintas, urged the GOS to take firm action to strengthen the 
solvency of Spain's financial institutions as well as to 
assist those families having difficulty paying their 
mortgages.  Quintas warned that failure to do so would result 
in the risk of "systematic failures."  These comments 
conflict with those made by the head of Spain's banking 
association, Miguel Martin Fernandez, who in recent weeks has 
stated that Spain's financial institutions were in a strong 
position and that government intervention was not necessary. 
Additionally, Martin Fernandez suggested to Congress in 
testimony that those financial entities that were not viable 
should be allowed to fail, presumably referring to smaller 
cajas facing problems from high exposure to Spain's housing 
market downturn.  Spain's cajas are responsible for about 
half of Spain's loans.   (All Media, 3/18) 
 
Venezuela's Chavez Re-Announces Intention to Nationalize 
Banco Santander Subsidiary 
 
4.(U) Media reported heavily March 20 on the announcement 
made by Venezuelan President Chavez for the second time that 
the GOV would nationalize Banco de Venezuela (BdV), which is 
owned by Spain's largest bank, Banco Santander.  President 
Chavez initially made an announcement last July that the GOV 
would purchase BdV, but subsequent negotiations on the actual 
transfer had appeared to lose steam (reftel).  News reports 
indicate that GOV had offered last year 1.1 billion euros to 
purchase the bank but that Santander had asked for 1.3 
billion.  Santander's stock price fell 2.5% on the news. (All 
 
MADRID 00000294  002.2 OF 002 
 
 
Media, 3/20) 
 
Telefonica to Reduce Phone Bills for Unemployed and for Small 
Businesses 
 
5.(U) Spain's largest telecoms company, Telefonica, has 
announced plans to forgive half of phone charges, up to 40 
euros per month, for the first 250,000 unemployed clients 
that apply.  The program will be in effect until the end of 
the year.  In addition, Telefonica will provide a discount of 
up to 50% for small businesses created after March 1, 2009. 
The program is unique in Spain, and is a reflection of the 
financial stability Telefonica is experiencing, particularly 
because of its profitable operations in Latin America.  Its 
competitors have labeled the offer a marketing ploy.  (El 
Pais, 3/18) 
 
 
 
 
CHACON