MADRID ECONOMIC WEEKLY, MAY 25-JUNE 5

UNCLAS SECTION 01 OF 02 MADRID 000542 SIPDIS STATE FOR EUR/WE, EEB/IFD/OMA COMMERCE FOR 4212/D.CALVERT TREASURY FOR OIA/OEE/T.O'KEEFFE,D.WRIGHT E.O. 12958: N/A TAGS: ECON EFIN EINV ELAB ENRG PRELSP PBTS SP SUBJECT: MADRID ECONOMIC WEEKLY, MAY 25-JUNE 5 REF: A. MADRID 497 ¶B. 08 MADRID 879 MADRID 00000542 001.2 OF 002 Contents: EFIN/EINV: Banco Santander, Venezuela Agree on Billion-Dollar Price for Nationalized Bank ELAB: Unemployment Numbers Register First Decline in 14 Months EFIN: Banco Santander Reaches Agreement to Return $235 Million in Madoff Funds EFIN: Interest Rate on Spanish 10-year Bonds Falls to 4.415 Percent; Signals Increase in Confidence ENRG: Power Company Sells 10-percent Stake in Gamesa PREL/EWWT: Odyssey Ruling Sets Important Precedent, Says Culture Minister Banco Santander, Venezuela Agree on Billion-Dollar Price for Nationalized Bank ¶1. (U) The Venezuelan government agreed May 22 to pay Banco Santander $1.05 billion (755 million euros) for the Santander-owned Banco de Venezuela. The price is 110 million euros less than the amount Santander had sought from the GOV, which was the same as the price it had agreed upon last year with a private Venezuelan purchaser before President Chavez blocked the sale and announced that the GOV would purchase the bank (Ref B). Nonetheless, Santander will make a healthy profit on its Venezuelan operations; it had invested a total of 430 million euros in two banks it purchased in 1997 and ¶2000. The letter of intent for the sale also authorizes Santander to repatriate 220 million euros in dividends; this was reported to be a key issue, and other Spanish companies have large amounts (over 1.4 billion euros in the case of Telefonica) of dividends pending authorization for repatriation. The GOV will take over the bank on July 3 and will pay Santander the $1.05 billion in July, October, and December. The sale will leave BBVA as the only Spanish bank with operations in Venezuela. (El Pais, 5/23) Unemployment Numbers Register First Decline in 14 Months ¶2. (U) According to the National Employment Institute, the number of registered unemployed workers decreased by approximately 25,000 (-0.68) in the month of May, registering the first decline in 14 months. In April 2008 the number of registered unemployed rose by 40,000. Spanish government officials welcomed the good news, but warned against reading too much into this new data. The media reports that decreases in May are common due to hiring for temporary summer employment. (Europa Press, 6/2) Banco Santander Reaches Agreement to Return $235 million of Madoff Funds ¶3. (U) Banco Santander, Spain's largest bank, has agreed to return $235 million of funds withdrawn from investments associated with Bernie Madoff shortly before his arrest. In return, the U.S. Government has agreed not to pursue any other claims against Banco Santander with regards to the Madoff funds. The agreement absolves Banco Santander of any wrongdoing and represents 85% of the fundsYC|Qh7 issued 7 billion Euros worth of 10-year bonds at an interest rate of 4.415%. With this latest issuance, the spread between German bonds and Spanish bonds fell from 136.7 basis points to 78.6 basis points. German bonds are often used as a benchmark, and the narrowing of the spread between German and Spanish bonds signals an increase in market confidence in Spanish debt. (El Pais 5/27/09) Power Company Sells 10-percent Stake in Gamesa ¶5. (U) Spain's Ibedrola announced it had sold a 10-percent stake in Spanish wind-turbine manufacturer Gamesa Corporation Technologica for 391.7 million euros. The stake was sold at Euros 16.10 per share. Gamesa's share price closed Wednesday down 8.16 percent at Euros 15.41. The stock had closed up over 6 percent on June 1. Iberdrola's shares closed up 1.14 percent on June 2. The power company said it would book a MADRID 00000542 002.2 OF 002 capital gain from the sale of 112 million euros. Despite the stake sale, Iberdrola remains Gamesa's leading shareholder with a 14.1-percent interest. Iberdrola's renewable energy unit, Iberdrola Renovables, is Gamesa's biggest wind turbine customer. (El Pais, 6/3) Odyssey Opinion Sets Important Precedent, Says Culture Minister ¶6. (U) Minister of Culture Angeles Gonzalez-Sinde said she was pleased with a Florida magistrate's opinion that the shipwreck and treasure recovered by US company Odyssey off the coast of Cadiz rightfully belongs to the GOS. She also said that the decision sets an important precedent for future shipwrecks. The treasure, determined to be from the Spanish ship "Nuestra Senora de las Mercedes," consists of $500 million of gold and silver coins. The court's ruling was widely covered in the press, making the front page of several dailies. Most stories highlight the fact that Odyssey has 10 days to return the treasure or file an objection. (ABC 6/5/2009, Europa Press 6/4/2009) CHACON