VZCZCXRO2469
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #0323/01 0861616
ZNR UUUUU ZZH
R 271616Z MAR 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 0433
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3916
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000323 
 
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 ETRD SP
SUBJECT: MADRID ECONOMIC WEEKLY, MARCH 23-27 
 
REF: MADRID 294 
 
MADRID 00000323  001.2 OF 002 
 
 
Contents: 
 
ECON/EFIN: Zapatero Open to More European Stimulus, but Not 
Yet 
ECON: Forecasts Show GDP Falling at Unprecedented Pace 
EFIN: Savings Banks Likely to Require Official Action 
EFIN: Central Bank Deputy Governor Resigns for IMF Position 
EFIN: GOS London Summit Priorities 
ECON: European Commission Tells GOS to Cut Deficit by 2012 
ETRD: Exports, Imports, Trade Deficit All Plunge 
KIPR: Authorities Break Up TV Signal Theft Ring 
 
Zapatero Open to More European Stimulus, but Not Yet 
 
1.(U) President Zapatero told foreign newspapers in an 
interview published March 27 that European governments should 
wait until the summer to see the impact of existing stimulus 
measures.  If these were insufficient, he would support 
additional spending focused on renewable energy and 
biotechnology.  He said Spain had room for additional 
stimulus if necessary, acknowledging the government,s high 
budget deficit but noting that its absolute level of debt 
remained relatively low.  Zapatero said he would push at the 
London Summit for Spanish-style countercyclical banking 
regulation.  He plans to use Spain,s EU presidency in the 
first half of 2010 to promote renewable energy and 
biotechnology.  (WSJ Europe, 3/27; Financial Times, 3/27) 
 
Forecasts Show GDP Falling at Unprecedented Pace 
 
2.(U) According to forecasts by the savings bank foundation 
FUNCAS and BBVA bank,  GDP will fall at an annualized rate of 
between 5 and 6 percent in the year,s first quarter.  This 
would be the fastest quarterly decline in at least the last 
50 years.  Expressed in the year-on-year terms that are 
customary here, this will be a decline of about 2.5% from 
2008,s first quarter, the worst year-on-year decline since 
¶1993.  The forecasts predict that the quarterly GDP declines 
will moderate during the rest of the year and turn slightly 
positive, ending the recession, at the end of this year or 
early next year.  (El Confidencial, 3/24) 
 
Savings Banks Likely to Require Official Action 
 
3.(U) Statements by GOS officials and bankers suggest that 
some form of intervention in individual savings banks (cajas) 
or banks is becoming more and more likely.  Second Vice 
President and Finance/Economy Minister Solbes said on March 
23 that the GOS had begun talks with legislators about a road 
map to define the conditions under which the GOS might use 
the authority granted last year to inject capital into 
troubled institutions.  Solbes reportedly had been reluctant 
to begin talks earlier because of the signal it would send 
that institutions might be in trouble.  He emphasized that 
institutions that were not viable would need to be merged or 
taken over.  The next option would be use of the deposit 
guarantee fund, which the institutions themselves fund and 
which currently has 7 billion euros.  Only as a last resort 
would the GOS use its funds.  Cajas, hit harder by the 
construction and real estate collapse, are generally thought 
to be in worse shape than banks.  While some small cajas are 
in different stages of merging or are considered vulnerable, 
the first action of significant size is the likely merger of 
the troubled and politically sensitive Caja Castilla La 
Mancha (CCM) into Unicaja.  This step is expected to consume 
a significant portion of the resources of the deposit 
guarantee fund resources available to savings banks.  (El 
Pais, 3/24; Expansion, 3/26; Embassy) 
 
Central Bank Deputy Governor Resigns for IMF Position 
 
4.(U) Bank of Spain Deputy Governor Jose Vinals resigned 
March 25 to take a position as the head of the IMF's monetary 
department.  Press reports suggest that Vinals and Governor 
Miguel Angel Fernandez Ordonez may have disagreed on actions 
to facilitate the Caja Castilla La Mancha-Unicaja merger. 
Vinals was replaced by the Bank's Director General of 
Supervision, Javier Ariztegui.  (All Media, 3/26; Council of 
Ministers, 3/27) 
 
GOS London Summit Priorities 
 
5.(U) Secretary of State for Economy David Vegara told 
reporters that Spain's priorities for the London Economic 
 
MADRID 00000323  002.2 OF 002 
 
 
Summit included requiring hedge funds and venture capital 
funds to disclose their indebtedness and liquidity levels. 
Other priorities include creating a clearinghouse for credit 
default swaps and requiring financial institutions to 
maintain higher levels of capital.  (El Confidencial, 3/26) 
 
European Commission Tells GOS to Cut Deficit by 2012 
 
6.(U) The European Commission announced March 24 its 
recommendation that Spain reduce its deficit by 2012 to under 
3 percent, the level established in the EU's stability and 
growth pact.  The GOS budget situation has deteriorated 
rapidly.  In 2007, the surplus was over 2% of GDP, while in 
2008 the deficit was over 3%, and the 2009 deficit is 
expected to be around 6%.  Once the recommendations have been 
adopted by the European Council, the GOS will have six months 
to specify what measures it will take.  Spain's debt level 
was slightly over 40 percent of GDP in 2008, and is expected 
to exceed 50 percent by 2010, still relatively low by EU 
standards. (All Media, 3/24) 
 
Exports, Imports, Trade Deficit All Plunge 
 
7.(U) Spanish exports and imports of goods in January were 
far below their level of January 2008.  Exports were down 25% 
from a year ago, while imports were down 35%.  The monthly 
trade deficit was down 50% to 4.5 billion euros.  Imports and 
exports of every main category of goods fell, with the value 
of oil imports down 65% (because of lower prices) and 
automotive imports and exports each down by 45%.  Trade in 
equipment also fell significantly, while trade in food and 
consumer goods did not fall as much.  (Ministry of Industry, 
Tourism, and Commerce, 3/26) 
 
Authorities Break Up TV Signal Theft Ring 
 
8.(U) The Civil Guard conducted an operation against a group 
of seven people distributing British television signals 
without authorization to 7,000 mostly British expatriate 
customers in Alicante and Murcia (southeastern Spain). 
According to media reports, the group purchased individual 
cable packages in the United Kingdom and, using decoders and 
parabolic antennae, broadcast the channels to its customers 
along the Mediterranean coast of Spain to the detriment of 
the local rights-holder, Sogecable.  Authorities estimate 
that the pirate activity may have generated 30 million euros 
(about USD 40 million) before being broken up.  This second 
major television signal enforcement action by the authorities 
in recent months is a sign that Spanish law enforcement is 
becoming more sophisticated and active in its efforts to 
enforce IPR laws.  (El Pais, 3/24) 
CHACON