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Cablegate: Madrid Weekly Econ/Commercial/Ag Update - November

VZCZCXRO2057
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #2183/01 3371305
ZNR UUUUU ZZH
R 031305Z DEC 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 3884
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3189

UNCLAS SECTION 01 OF 02 MADRID 002183

SIPDIS

SENSITIVE
SIPDIS

EUR/WE
EEB/IFD/OMA

E.O. 12958: N/A
TAGS: EAGR ECON ELAB ENRG ETRD KGHG KIPR PGOV SENV
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE - NOVEMBER
26 - 30

MADRID 00002183 001.2 OF 002


1. Table of Contents:

EFIN: Inflation up again
PGOV: Solbes agrees to run with Zapatero
PGOV/SENV/KGHG/ENRG: Socialist climate change policy ideas in
flux
PGOV/ELAB: Opposition conservative PP proposes labor market
change
EAGR: Livestock producers receive subsidies; biotech could
address problems
ETRD/EAGR/KIPR: USEU Brussels trade officer visits Madrid

2. (U) Inflation up again: November prices were 4.1 percent
above their level of a year ago, according to preliminary
estimates. As recently as September, the inflation rate was
below 3 percent. With the rate continuing to be above the EU
average, Spanish goods are gradually becoming less
competitive.

3. (SBU) Solbes agrees to run with Zapatero: President
Zapatero has convinced Second Vice President and Finance
Minister Pedro Solbes to run with him in Madrid as the number
two on the Socialist list. Should the Socialists win in
March 2008, Solbes has also agreed to stay in the government
as Finance Minister. (Comment: Running in Madrid is
traditionally high profile. Solbes, agreeing to run and to
stay is widely interpreted as Zapatero,s shoring up his
right wing. It is also an example of the PSOE,s strategy of
getting prominent candidates to run in areas where the
Socialists are weak; Madrid is a bastion of the opposition
conservative PP party. The question is whether Solbes,
running in Madrid will boost the Socialists, numbers in the
capital. It is hard to say, because Solbes, reputation is
not as stellar as it was four years ago, as he has been
forced to accept some spending he openly disagreed with such
as the 2500-euro "baby check" for every newborn. Still,
Solbes remains a prestigious figure, so it is something of a
coup for Zapatero to have convinced the 65-year-old to run
and to stay in government. Given the likelihood of a tight
race, Solbes, presence is likely to be an asset for the
Socialists.) (El Pais, 11/27/07)

4. (U) Socialist climate change policy ideas in flux: El
Pais reported on November 27 that the draft party electoral
program called for charging one cent for every liter of
gasoline to fight climate change, the creation of a
cabinet-level Vice Presidency of Sustainability, an emphasis
on renewables, and the gradual closing of nuclear electricity
plants, starting with the Garona facility in 2009. PSOE
Secretary Jose Blanco shot down the tax idea that same day

SIPDIS
and noted that the question of creating a Vice Presidency for
Sustainability was an issue for President Zapatero. (Comment:
The most notable element of the socialist plan is the
rejection of nuclear energy. The rejection is justified by
positing that nuclear waste is inconsistent with
sustainability, though reducing nuclear generation will
increase Spain's dependency on power generation methods that
emit greenhouse gases. The document calls for increased
renewable electricity generation, but despite the rapid
increase of wind power over the last five years, total
electricity consumption has increased by a slightly larger
amount. El Pais ran a photo of former President Bill Clinton
and President Zapatero that described Clinton as Moncloa,s
"new advisor on climate change." It is not likely that
Clinton directly influenced the PSOE climate change electoral
program, although Clinton and Zapatero have had several
meetings and Spain is a donor to the Clinton Global
Initiative. It is also interesting that senior Socialists
seem to have determined that promising new taxes is clearly
not the way to go as in the runup to the March 9 elections.)
(El Pais 11/27/07 and 11/28/07)

5. (SBU) Opposition conservative PP party proposes labor
market changes: The proposals are not fully developed, but
two elements have been announced. First, measures to promote
working beyond 65 on a voluntary basis. Second, longer
maternity or paternity leave. (Comment: What Spain needs is
additional labor market flexibility in terms of hiring and
firing. Spain has more of this flexibility than, for
instance, France, because of the widespread use of short-term
contracts, but most economists think Spain could use more of
it. Interestingly, the PP has not made proposals on this
highly controversial topic, which is consistent with the
party,s moderate or even centrist orientation on economic
issues, coupled with a much more conservative hard-line
stance on political, social, and constitutional questions.)
(Expansion, 11/27/07)

MADRID 00002183 002.2 OF 002

6. (U) Livestock producers receive subsidies; biotech could
address problems: While the EU agricultural biotechnology
approvals progress creeps along, holding down crop yields,
Spanish livestock producers have asked for and received 300
million euros in GOS subsidies to help offset the high cost
of feed ingredients. EU Farm Commissioner Mariann Fischer
Boel had predicted that this would happen, saying on various
occasions that any potential biotechnology moratoriums
(including the current glacial approvals process) could
seriously jeopardize the EU livestock industry, possibly even
forcing meat production to move outside Europe. She
correctly noted that if the EU cannot quicken its approvals
process, member state livestock producers will be further
disadvantaged, because grain exporters like the US,
Argentina, and Brazil will export biotechnology-based grains
to their competitors.

7. (SBU) USEU Brussels trade officer visits Madrid: USTR,s
Dan Mullaney visited Madrid on 11/26/07 and met with Embassy
and Ministry of Industry, Tourism and Trade officials.
Mullaney emphasized USG Special 301 concerns and exchanged
views on Geographical Indications (GIs) with the Ministry's
Subdirector General for EU Trade Policy, Inigo Febrel.
Febrel is a strong GI proponent; Mullaney said that the USG
continues to be unconvinced that the TRIPS agreement and the
trademark system do not provide sufficient protection for
GIs. Mullaney expressed to Subdirector General Teresa
Zapatero our concerns over French, Italian, and Austrian
biotechnology developments, coupled with Commissioner Dimas,
calls to reject two biotech events (genetic modifications of
organisms) that have been cleared by the European Food Safety
Agency (EFSA). Zapatero said that as far as the Ministry of
Industry was concerned, as long as events are approved,
Member States should vote in favor of them. However, she
indicated that it was often a struggle to sustain this view
within the GOS because of opposition from the Ministry of
Environment.

8. (SBU) Mullaney spent the most time on Special 301 with the
Ministry's Subdirector General for the Information Society,
Salvador Soriano Maldonado. Soriano said he understood that
the USG was looking for some sign of tangible progress on
dealing with illegal internet downloads. He said he was
"optimistic" that the GOS could convince the Internet Service
Providers (ISPs) and content providers on a voluntary notice
system, leaving takedown for later. Mullaney also spoke with
Subdirector General for Industrial Products Rafael Marques
Osorio about our concerns over the EU,s classification of
certain products so that they are not covered by the
Information Technology Agreement (ITA) zero-import-tariff
requirement. Marques said that the EU,s understanding was
that the ITA was not meant to include "consumer electronics,"
although he conceded that there was nothing in the agreement
itself that said so. He was very open in saying that
Spain,s defensive interest was that Sony produced TVs in
Spain, and that there were 4,000 jobs in this sector.
Therefore, he implied, classifying flat screen computer
monitors that can also be configured for television as TVs
(and thus making them subject to import tariffs) was
understandable. Marques also claimed that the Commission had
the lead on these matters, as well as the Customs
authorities.
LLORENS

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