VZCZCXRO9328
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHMD #0852/01 2341036
ZNR UUUUU ZZH
R 221036Z AUG 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1136
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4104
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000852 
 
C O R R E C T E D  C O P Y (CORRECTED DATES IN THE SUBJ) 
SIPDIS 
 
STATE FOR EUR/WE, EEB/IFD/OMA 
COMMERCE FOR 4212/D.CALVERT 
TREASURY FOR OIA/OEE/R.JOHNSTON 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EFIN EINV ELAB ETRD KFLU SP
SUBJECT: MADRID ECONOMIC BIWEEKLY, AUG 17-22 
 
REF: MADRID 820 
 
MADRID 00000852  001.4 OF 002 
 
 
Contents: 
 
EFIN/EINV: BBVA Buys Failed Texas Bank 
ELAB: GOS Agrees to Extend Unemployment Benefits to More 
Beneficiaries 
EFIN: GOS Considering Difficult Steps for 2010 Budget 
ETRD: Trade Deficit Falls; Imports, Exports Both Down 
EAIR: Spanair Crash Anniversary Coincides With Release of 
U.S., Spanish Documents 
KFLU: H1N1 Could Cost Businesses More than 3 Billion Euros 
 
 
BBVA Buys Failed Texas Bank 
 
1.(U) BBVA, Spain,s second largest bank, strengthened its 
position in Texas and entered California by purchasing the 
banking operations of Guaranty Bank from the FDIC on August 
¶21.  The transaction marked the first time a foreign bank has 
bought a failed U.S. bank.  As is common in such 
transactions, the FDIC agreed to bear most of the losses on 
about $11 billion of Guaranty Bank's loans and other assets. 
Texas-based Guaranty is the second largest U.S. bank to fail 
this year and the tenth largest in U.S. history, and its 
collapse is expected to cost the FDIC some $3 billion.  The 
transaction makes BBVA's U.S. division, Birmingham-based BBVA 
Compass, the 15th largest commercial bank in the U.S., with 
about $49 billion in deposits.  (BBVA Compass Press Release, 
8/21; AP, 8/22) 
 
GOS Agrees to Extend Unemployment Benefits to More 
Beneficiaries 
 
2.(U) Facing strong criticism because the six-month 
supplemental unemployment benefit announced August 13 
(reftel) only applied to those whose regular benefits had 
expired after August 1, President Zapatero said August 19 
that the GOS would consult with labor and political parties 
and provide benefits to some of those whose benefits ran out 
earlier.  Labor Minister Corbacho indicated that the GOS 
planned to change the eligibility date to June 1.  This would 
add another 100,000 beneficiaries (at an estimated cost of 
over 200 million euros) but would still leave half a million 
others without assistance. (El Pais, 8/20) 
 
GOS Considering Difficult Steps for 2010 Budget 
 
3.(U) The GOS is considering several unpopular measures as it 
prepares its 2010 budget, expected to be presented to the 
Congress in September.  This year's deficit is expected to 
reach an unsustainable level around 10% of GDP, and with 
economic activity expected to continue to decline into 2010, 
revenues that year likely will fall from their 2009 level. 
Infrastructure Development Minister Jose Blanco, perhaps the 
key official in the ruling party, suggested that the GOS 
would increase tax rates on high earners, though Finance 
Ministry officials are reported to oppose this step.  The GOS 
is reported to be considering freezing public employees' 
salaries or increasing them only slightly.  (El Pais, 
8/21-22) 
 
Trade Deficit Falls; Imports, Exports Both Down 
 
4.(U) Spain's trade deficit fell 53% in the first half of 
2009 from its first-half 2008 level, reaching 24 billion 
euros.  A 32% decline in imports more than made up for a 21% 
decline in exports.  Energy imports fell 46%, while auto 
exports fell 28%.  (El Pais, 8/20) 
 
Spanair Crash Anniversary Coincides With Release of U.S., 
Spanish Documents 
 
5.(U) As Spain marked the one-year anniversary of the 
8/20/2008 Spanair crash, Infrastructure Development Minister 
Jose Blanco said that the accident could have been prevented 
had the airlines implemented recommendations made prior to 
the crash.  The findings of the Civil Aviation Accidents 
Commission (CIAIAC) investigation, released this week, 
suggest that a combination of pilot error and mechanical 
failure caused the Spanair crash:  the pilots did not realize 
that the wing flaps and slats were not properly extended 
during their predeparture checks and the Take Off Warning 
System (TOWS) failed to sound.  The Minister cited a notice 
issued earlier in the week by the U.S. National 
Transportation Safety Board (NTSB), which found that the same 
 
MADRID 00000852  002.4 OF 002 
 
 
set of factors caused both the 1987 Detroit crash and a 2007 
incident of a plane departing from Lanzarote in the Canary 
Islands.  Lessons from both could have prevented the Spanair 
crash.  However, the CIAIAC has yet to complete an 
investigation of the Lanzarote incident -- had it followed 
international norms, it would have completed it within a 
year, before the Spanair crash -- and the NTSB's post-Detroit 
recommendations of 1988 were not adopted by all airlines. 
Spanair only required its pilots to check the TOWS system 
once a day, as opposed to prior to each flight.  Blanco 
applauded the NTSB decision to adopt three of the seven 
measures recommended in the CIAIAC report.  He added that the 
GOS would push for adoption of all of the measures by EU 
member states during Spain,s EU Presidency next year.   (El 
Pais, 8/20; All Media, 8/18-8/19) 
 
H1N1 Could Cost Businesses More than 3 Billion Euros 
 
6.(U) The Ministry of Health now estimates that 25-30% of the 
population in Spain could contract the H1N1 virus.  At this 
rate, businesses are calculating that costs due to sick leave 
(with approximately 30% of the workforce out for around 6 
days) would exceed 3 billion euros.  To date, only around 25% 
of Spanish companies have implemented contingency plans aimed 
at preventing the spread of the virus.  For its part, the GOS 
plans to purchase 37 million doses of the H1N1 vaccine, 
slated to be available by the end of the year.  Spain had its 
twelfth fatality on August 17, and estimates put the current 
rate of infection at more than 14,000 a week.  (Expansion, 
8/19) 
DUNCAN