VZCZCXRO6308
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #1309/01 3501152
ZNR UUUUU ZZH
P 151152Z DEC 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 5770
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3711
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 02 MADRID 001309
SIPDIS
STATE FOR EUR/WE:SAMSON,ZERDECKI AND EEB/IFD/OMA
TREASURY FOR OIA/OEE/W.LINDQUIST
COMMERCE FOR 4212/DON CALVERT
ENERGY FOR EERE
E.O. 12958: N/A
TAGS: ECON EFIN EINV ENRG SP
SUBJECT: MADRID ECONOMIC WEEKLY, DEC 9-12
REF: MADRID 1289
MADRID 00001309 001.2 OF 002
Contents
ECON: IMF Report Suggests Continued Contraction in 2009
ECON: Housing Starts to Reach 50-Year Low
EFIN: GOS Buys Over 7 Billion Euros in Mortgage-Backed Debt
EFIN: Telefonica Gets Sole Use of High-Performance Fiber
Optic Lines
ENRG/EINV: Iberdrola, GM Europe to Study Electric Car
Infrastructure
IMF Report Suggests Continued Contraction in 2009
1.(U) The IMF released on December 9 the executive summary of
its Title IV consultations report, which predicts that output
will decrease by at least 1 percent in 2009. The report
praises the government's aggressive fiscal policy measures as
well as Spain's strong banking retail model. However, it
asserts that deeper structural changes are needed for Spain's
economy to recover in the medium term, including Spain's
inflexible labor market policies, which include wage indexing
and inflexible layoff policies. Without comprehensive
structural reform, the IMF warns that Spain could place
itself in a hard-to-escape situation of low growth and high
unemployment in the medium term. President Zapatero is
quoted as saying that it is not infrequent for well-respected
international organizations to be incorrect in their
predictions. (IMF, 12/9, El Pais 12/12)
Housing Starts to Reach 50-Year Low
2.(U) Housing starts for 2009 will only reach 250,000
according to industry forecasts, with only 50,000 of those
starts thought to be taking place in the last six months of
the year. These figures are extremely bleak, given that
housing starts reached 800,000 just two years ago. Forecasts
indicate that only 150,000 homes will be built in 2009, the
lowest number since this data began being monitored in 1960.
Home prices overall have fallen by 8.8% compared with a year
ago. Spain's 10-year housing boom began to slow down in
mid-2007 when higher interest rates on adjustable-rate
mortgages, decreasing levels of demand, an oversupply, and
tighter credit finally took their toll. This slowdown
affected the labor market, resulting in burgeoning
unemployment now estimated at 12.8 percent according to
Eurostat October figures (about a 50% increase from a year
ago). Especially affected are immigrants, many of whom came
to Spain over the past 10 years to work in the booming
construction sector. (El Pais, 12/10)
GOS Buys Over 7 Billion Euros in Mortgage-Backed Debt
3.(U) In what is largely being touted as a success, Spain's
Treasury bought over 7.2 billion euros in mortgage-backed
debt from 31 banks December 11 in its second "asset purchase
auction." This is in contrast to the November 20
asset-purchase auction in which less than half of the GOS
funds offered were taken advantage of. This stimulus measure
is aimed at injecting more liquidity into Spain-based banks.
In total, the GOS expects to purchase up to 50 billion euros
worth of high-quality asset-backed debt, urging banks that
take advantage of this program to increase lending to
families and business. Experts speculate the heavier demand
for these funds comes as a result of more favorable interest
rates, among other reasons. Although the list of banks taking
advantage program has not yet been made public, the country's
two largest banks, Banco Santander and BBVA, said they did
not participate. (All media 12/12)
Telefonica Gets Sole Use of High-Performance Fiber Optic Lines
4.(U) Local press reports indicate that an informal agreement
was reached between the EC and Spain's Telecoms regulator,
the CMT, to allow Telefonica to provide internet access at
above 30 megabits per second without being required to share
that high performance network with competitors at wholesale
prices. In exchange, the CMT would change a regulation which
currently designates certain regions in Spain as
"sufficiently competitive", a designation which frees
Telefonica from any obligations to competitors in those
regions. The press reports are based on conversations that
took place during a Dec. 9 conference in Barcelona
MADRID 00001309 002.2 OF 002
celebrating 10 years of telecoms deregulation. Despite 10
years of deregulation, Telefonica, one of Spain's recognized
"national champions," continues enjoying a dominant, almost
monopolistic position in Spain. Telefonica has suggested in
the past that it might not lay down high performance fiber
optic lines if it is forced to share those lines with
competitors. (All media 12/10)
Iberdrola, GM Europe to Study Electric Car Infrastructure
5.(U) Iberdrola and General Motors Europe signed an agreement
to study the requirements of a recharging infrastructure for
plug-in electric cars. The companies will study in Spain and
the UK the needs for plug-in sockets and electricity meters
at homes and offices. A joint press release said the study
reflected the companies, interest in encouraging the
development of electric vehicles like the Chevrolet Volt.
(GM/Iberdrola Press Release, 12/11)
AGUIRRE