MADRID ECONOMIC WEEKLY, JULY 20-24

UNCLAS MADRID 000746 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 EAIR ELTN EIND SENV SUBJECT: MADRID ECONOMIC WEEKLY, JULY 20-24 REF: MADRID 721 CONTENTS: EIND,ECON: Tourism Industry Struggles Due to Economic Downturn EFIN: Merger Movement among Spanish Savings Banks Accelerates EAGR, SENV: Wildfires Ravage Spain, Temporarily Shut Down High Speed Train to Barcelona EIND: Infrastructure Company INECO to Open Headquarters in Washington EAIR, ELTN:Pasenger Airline and Bus Operators Speak Out Against the AVE Tourism Industry Struggles due to Economic Downturn ¶1. (U) Spain,s tourism industry, traditionally one of the pillars of the Spanish economy, has fallen victim to the economic crisis. Spain experienced an 11.4% decrease in visitors in the first half of 2009 compared with the same period in 2008, when the country received a record high number of tourists. The decline is being felt all over Spain, with every autonomous community but Madrid experiencing a drop in tourism. (Comment: The drop in tourism may have a noticeable macroeconomic impact given that the tourism industry represents 10 percent of Spain's GDP and employs 2.4 million workers. End Comment). (All media, 7/22). Merger Movement among Spanish Savings Banks Accelerates ¶2. (U) The merger movement among Spain,s savings banks ("cajas") appears to be accelerating. Days after announcing its merger with Caja de Jaen (ref A),Unicaja announced it would merge with a third Andalucian bank, Cajasur. Cajasur, which is controlled by the Catholic Church, was forced to accept a merger in order to remain solvent. It is widely expected that the merger will require the use of public funds. The merger would create Spain,s 6th largest caja, with total assets of just over 50 billion euros and over 9,000 employees. Meanwhile, three smaller Catalonian cajas have tentatively agreed to a merger which would create Spain,s 9th largest caja (El Pais, 7/21, 7/22). Wildfires Ravage Spain, Temporarily Shut Down High-Speed Train to Barcelona ¶3. (U) Twenty-one separate major wildfires continue to burn uncontrollably, primarily in central and northeastern Spain. The fires have left 5 firefighters dead and displaced thousands of residents. The fires forced Spain's high speed train service, the AVE, to temporarily shut down service to Barcelona, though it has since been reestablished. In response to the devastation, the GOS announced it will provide 25.1 million euros to the autonomous communities for fire prevention and firefighting (El Pais 7/23, Expansion 7/23). Infrastructure Company INECO to Open Headquarters in Washington ¶4. (U) Company representative Jose Angite told Econoff that INECO plans to open a new headquarters in Washington, D.C. in October or November of this year. INECO currently has business with the World Bank, necessitating travel to the capital on a regular basis. With the approval of the American Recovery and Reinvestment Act, INECO sees an opening in the US market and hopes to secure new contracts. The company is particularly interested in high speed rail projects. Angite says that they already have good contacts in railway sector in the US. The public business entity under Spain's Ministry of Infrastructure oversees planning and execution of transportation and telecommunication infrastructure projects. They are currently operating in 28 countries. (Cinco Dias, 7/24; Embassy) Passenger Airline and Bus Operators Speak Out Against the AVE ¶5. (U) Airline and bus operators are complaining that RENFE, the operator of the AVE Spain,s high-speed rail service, is fixing its prices below cost. They say it amounts to a government subsidy and is contributing to a 10-20% decline in passenger traffic by plane and bus. Airlines and bus operators are considering petitioning national and European competition authorities. They want more transparency in pricing and are recommending that the GOS privatize RENFE and other public transportation entities to promote fair and competitive pricing among all modes of travel. (All Media, 7/22) CHACON