VZCZCXRO0183
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHMD #0721 1981338
ZNR UUUUU ZZH
R 171338Z JUL 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 0959
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS MADRID 000721 
 
SIPDIS 
 
STATE FOR EUR/WE, EEB/IFD/OMA 
COMMERCE FOR 4212/D.CALVERT 
ENERGY FOR PIA/K.BALLOU 
TREASURY FOR OIA/OEE/T.O'KEEFFE,D.WRIGHT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV EAIR SP
SUBJECT: MADRID ECONOMIC WEEKLY, JULY 13-17 
 
REF: MADRID 688 
 
CONTENTS: 
 
ECON, EFIN: Economy Minister announces increased funding for 
autonomous regions 
EFIN: Andalucian cajas merge without use of public funds; may 
signal beginning of larger merger movement 
EAIR: Spain seeing large reduction in airport users 
EINV: Foreign direct investment in Spain increases in 2008, 
but fewer jobs created 
 
Economy Minister Announces Increased Funding for Autonomous 
Regions 
 
¶1. (U) The Minister of Economy and Finance announced 11 
billion Euros of new financing for Spain,s autonomous 
regions.  Under the plan, Cataluna will receive the largest 
share, at 3.9 billion Euros, followed by Andalucia at 3.1 
billion, Madrid at 1.7 billion, and Valencia at 1.2 billion. 
The controversial plan provides funding through 2012 for 
essential public services such as health, education and 
social services.  This plan was preliminarily approved by the 
autonomous communities, and Congressional approval followed 
on July 15, but the new financing model must still be 
ratified by the communities if they want to receive the 
funds. ALL MEDIA, EMBASSY) 
 
Andalucian Cajas Merge Without Use of Public Funds 
¶2. (U) Unicaja and Caja de Jaen, Andalucia,s largest and 
smallest regional savings banks ("cajas8), announced that 
they would merge without the use of public funds, which has 
been viewed by some as a rejection of Zapatero,s bank 
restructuring fund (FROB).  Following the merger, the caja 
will have 32 billion Euros in assets and over 6000 employees. 
 Caja de Jaen struggled to remain independent, but was forced 
to accept a merger because, as their directors stated, this 
is &the worst time for the cajas in the last 30 years.8 
The Bank of Spain has been pushing many of the regional cajas 
to merge in order to ensure their solvency, fueling 
speculation that this may be just the beginning of a merger 
movement among the cajas.  (Comment: Many cajas that had 
previously balked at the idea of mergers may have to 
reconsider their positions, as their solvency has been 
threatened by losses in the real estate and construction 
industries.  The cajas prefer to merge with other cajas in 
their same region because it is easier for them to 
consolidate and gain market share.  End comment.)(El Pais 
7/14). 
Spain Seeing Large Reduction in Airport Users 
 
¶3. (U) AENA, the state-owned airport operator responsible for 
all Spain's domestic and international airports, recorded a 
13 percent reduction in airport users during the first six 
months of 2009.  This is much larger than the 3.5 percent 
reduction in passengers that Spain suffered in the first half 
of 2002, after the 9/11 attacks.  All Spanish airlines, such 
as Spanair, Iberia, and Air Europa, have recorded sharp 
declines in number of passengers during the first part of 
¶2009.  One reason for the decline in air travel is that a 
significant portion of travelers are choosing to use the AVE, 
Spain,s high-speed train, which connects Madrid to 
Barcelona, Sevilla, and Malaga, with more routes being 
developed. (EL PAIS) 
 
Foreign Direct Investment in Spain Increases in 2008, but 
Fewer Jobs Created 
 
¶4. (U) Foreign direct investment (FDI) in Spain rose 0.4 
percent in 2008 over the previous year, a sharp contrast to 
the 36.9 percent decline in FDI experienced by the EU.  Spain 
received almost 38 billion euros in FDI in 2008, with the 
heaviest investment coming from the UK and Germany. Spain now 
ranks as the fourth largest recipient of FDI in Europe, and 
the seventh largest in the world. Spanish investment in 
foreign markets, however, has fallen 64.6 percent since 2007. 
 Despite the uptick in investment in Spain, jobs created as a 
result of FDI fell 31 percent in 2008.  Ernst and Young 
reported that new investment projects declined 8 percent in 
the first quarter of 2009 compared to the same period in 
2008, and expects FDI to decline substantially over the rest 
of the year. (La Gaceta 7/16). 
CHACON