MADRID ECONOMIC WEEKLY, MARCH 9-14

UNCLAS MADRID 000266 SENSITIVE SIPDIS STATE FOR EUR/WE, EEB/IFD/OMA TREASURY FOR OIA/OEE/T.O'KEEFFE,D.WRIGHT COMMERCE FOR 4212/DON CALVERT ENERGY FOR EERE:D.BIRNS,J.TENG, PIA:K.BALLOU,D.COLOMBO E.O. 12958: N/A TAGS: EAIR ECON EFIN EIND ENRG EPET SP SUBJECT: MADRID ECONOMIC WEEKLY, MARCH 9-14 REF: MADRID 245 Contents: EFIN: Spain Invited to Join Financial Stability Forum ECON: Consumer Prices Unchanged in February EAIR: Domestic Air Travel Down 23% ENRG: Electricity Demand Down, Wind/Hydroelectric Production Up EPET/EINV: Repsol to Reduce Investment Abroad Spain Invited to Join Financial Stability Forum 1.(SBU) Spain, along with emerging market G-20 countries and the European Commission, was invited to become a member of the Financial Stability Forum (FSF) on March 12. The FSF, a financial market supervision advising body made up of finance ministers and central bank officials, was tasked at the November G-20 summit with following up on recommendations for financial sector reform. Comment: This makes the GOS more of a full player in efforts to address the international financial crisis. The GOS is likely to continue seeking full G-20 membership. (All Media, 3/13) Consumer Prices Unchanged in February 2.(U) After declining for three consecutive months, consumer prices apparently did not change during the month of February, according to the National Statistics Institute. February consumer prices were only 0.7 percent above their February 2008 rate, representing one of the lowest annual inflation rates since the index was begun in 1976. Comment: The declines of the previous three months appear to have been partly the result of lower oil prices but also partly the result of reduced consumption. This had raised concerns about the possibility of deflation as the economic slump continues, but February results may reduce those concerns somewhat. (National Statistics Institute, 3/12) Domestic Air Travel Down 23% 3.(U) In another sign of the economic slump, January passenger traffic on domestic flights was 23% below the January 2008 level. Not all of the decline was caused by the economic crisis, however; the number of passengers taking the Madrid-to-Barcelona air shuttle has fallen significantly since high-speed train service between the two cities began last March. (El Pais, 3/9) Electricity Demand Down, Wind/Hydroelectric Production Up 4.(U) Largely because of a sharp decline in industrial demand, total electricity consumption is down almost 7% from the start of the year to March 13 compared to the same period in 2008. At the same time, increased rains have more than doubled hydroelectric production from its level during the 2008 drought, and strong winds and continued capacity increases have boosted wind electricity production by over 25%. With less total demand and more wind and hydro generation, gas, coal, and nuclear generation have each declined significantly. At least for this period, wind and hydro generation have combined for over 25% of the country's total generation, approaching an EU goal of 29% by 2010. The reduced use of gas and coal is likely to result in lower Spanish CO2 emissions as well. (El Pais, 3/9; Red Electrica de Espana) Repsol to Reduce Investment Abroad 5.(U) Repsol President Antonio Brufau told a Barcelona conference audience on March 11 that the oil and gas company would likely reduce its planned investment for 2008-2012 by 4 billion euros to 28 billion euros. The decision to reduce investments is attributed to the fall in petroleum prices as well as the worsening global economic situation. (El Pais, 3/12) CHACON