Qatar funding promise bolsters Spain's savings banks and industry

The first leg of Prime Minister José Luis Rodríguez Zapatero's tour of the Middle East bore fruit on Monday after the Gulf state of Qatar announced plans to investthree billion eurosin Spanish business.

Zapatero said 300 million eurosof that was destined for Spain's troubled savings banks, speaking at a joint press conference held with Prime Minister Hamad bin Jaber Al-Thani, in the Qatari capital of Doha on Monday morning.

Al-Thani said the oil-and-gas-rich state has "confidence in the Spanish economy -the government has taken many measures." The emirate has pledged to make "very significant" investments in Spanish companies from the telecommunications and energy sectors, according to Zapatero.

He did not specify which firms would scoop shares of the 2.7-billion-euro boost.

In addition, Spanish firms may now stand to benefit from lucrative contracts as Qatar embarks on a $150-billion building spree to prepare for hosting the soccer World Cup in 2020, after the two countries signed an infrastructure agreement. Spanish construction company OHL is already working on a Doha airport expansion program, a contract worth 2.8 billion euros.

Qatar was the first stop on Zapatero's journey after leaving Spain on Sunday in search of investment from wealthy Gulf states.

Keen to reassure investor confidence, Spain has tightened up capital requirements for its savings banks, which were left exposed to billions in bad loans after the housing market bubble burst in 2007. Zapatero did not say which cajas would benefit from the cash injection.

Savings banks have until next September to comply with government rules geared at boosting solvency. They are under pressure to source funds from private investors.

On the subject of the economy, Zapatero said recovery was "underway" and would be evident from the first quarter's growth figures. But he acknowledged that unemployment would take longer to fall from the current rate of 20.2 percent.

The Spanish leader arrived in Abu Dhabi on Monday evening for the second leg of his Gulf tour, seeking to open doors for Spanish business in the prosperous region. He is expected in Dubai on Tuesday.