VZCZCXRO2564
RR RUEHIK
DE RUEHMD #0114 0312304
ZNR UUUUU ZZH
R 312304Z JAN 10
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1825
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4326
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS MADRID 000114 
 
SIPDIS 
 
STATE FOR EUR/WE, EEB/IFD/OMA, EEB/TPP/IPE 
STATE PASS USTR FOR D.WEINER 
COMMERCE FOR 4212/DON CALVERT 
TREASURY FOR OIA/OEE R.JOHNSTON AND OTP:M.CORWIN 
 
 
E.O. 12958: N/A 
TAGS: ECON ECPS EFIN ELAB SP
SUBJECT: MADRID ECONOMIC WEEKLY, JANUARY 25-29 
 
REF: MADRID 070 
 
Contents: 
 
ELAB: Unemployment at 18.8% in 2009 Q4 
EFIN: First Merger of Cajas from Different Regions 
EFIN: EC Approves FROB After 7 Months of Negotiations 
ECPS: Telecommunication Frequency Auction Expected by Year-End 
 
Unemployment at 18.8% in 2009 Q4 
 
¶1. (U) The official National Institute of Statistics (INE) 
fourth-quarter 2009 unemployment rate was 18.8%, a raise of 
almost 1% from the previous quarter.  This is the third 
consecutive year that the unemployment rate has increased. 
Over 4.3 million Spaniards were unemployed, up by 1.1 million 
from the end of 2008.  (INE, 1/29) 
 
First Merger of Cajas from Different Regions 
 
¶2. (U) The Bank of Spain recorded a win in its push to 
restructure the savings bank ("caja") sector when the boards 
of Cajasol (in Andalucia) and Caja Guadalajara (in 
Castilla-La Mancha) approved on January 26 their merger, the 
first between cajas of different autonomous communities 
(regions).  Cajasol will account for 94% of the total assets 
in the new entity, and the Bank of Spain required Caja 
Guadalajara to merge because it determined Caja Guadalajara 
lacked economic viability because of limited economic 
activity in its own region.  Autonomous community governments 
have opposed inter-regional mergers involving the cajas they 
control.  The Andalucia and Castilla-La Mancha autonomous 
communities are both governed by the PSOE, which may have 
helped reduce opposition.  The merger will not require any 
public resources, and it will have very little immediate 
impact on employment, as the two cajas' operations do not 
overlap.  (El Confidencial, 1/27) 
 
EC Approves FROB After 7 Months of Negotiations 
 
¶3. (U) After 7 months of negotiations, the EC finally 
approved Spain's Orderly Bank Restructuring Fund (FROB), 
designed to provide public funds to facilitate the merger of 
distressed cajas.  However the EC only approved it until June 
30, which will require an increase in the pace of mergers. 
The EC confirmed an earlier announcement by Spanish First 
Vice President and Economy/Finance Minister Elena Salgado 
that the GOS will only be allowed to provide 2% of 
risk-weighted assets to cajas, although the GOS will be able 
to seek EC approval to provide more on a case-by-case basis. 
(EuropaPress, 1/28) 
 
Telecommunication Frequency Auction Expected by Year-End 
 
¶4. (U) The GOS hopes to receive between 800 million and 1 
billion euros from telecommunication frequency auctions that 
will take place by the end of this year.  The 800 and 900 MHz 
bandwidths are valuable to mobile communication providers 
because they require minimal investment but are ideal for 
hosting the GSM service found in all mobile phones.  However, 
those frequencies will not be available until 2015.  2,600 
MHz frequencies will also be auctioned, and they will be 
available immediately.  Currently, digital televisions use 
the 800 MHz frequency, and the GOS will use much of the 
proceeds of the auction to foot the cost of migrating them to 
other frequencies.  (Expansion, 1/26) 
SOLOMONT