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Cablegate: Madrid Weekly Econ/Commercial Update June 9 - June

VZCZCXRO8690
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0671/01 1651210
ZNR UUUUU ZZH
R 131210Z JUN 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 4944
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3466

UNCLAS SECTION 01 OF 02 MADRID 000671

SIPDIS

STATE FOR EUR/WE AND EEB/IFD/OMA

E.O. 12958: N/A
TAGS: ECON EINV ELAB ENRG SOCI SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL UPDATE JUNE 9 - JUNE
13

REF: A. MADRID 641
B. MADRID 616

MADRID 00000671 001.2 OF 002


Table of Contents:

ECON/ELAB: Strikes lead to empty grocery shelves
ECON: Financial Times special report on Spain
SOCI/ECON: Spain strongly opposes EU proposal to allow longer
work week
ENRG/EINV: Iberdrola rules out bid for British Energy
ENRG/EINV: Repsol files suit against Ecuador
ECON: May inflation 4.6 percent


STRIKES LEAD TO EMPTY GROCERY SHELVES

1. (U) The combination of various strikes in Spain, primarily
led by independent truckers and fishermen, have led to
notable shortages in fresh produce and a potential shortage
in medical supplies nationwide. Store owners reported June
12 that supplies of fresh fish and vegetables were extremely
low and close to being depleted. A prominent pharmaceutical
distributor added that pharmaceutical stocks could hold until
Monday, June 16 at which point there could be problems in
supply should the strike continue. The strikes come in large
part as a result of the impact of high fuel prices, but are
also based on complaints by workers who say they are being
undercut by larger businesses and cheaper imports (as in the
case of the fishermen's strike). The fishermen's strike
began on May 30 and came to an end on June 11, but the
truckers' strike continues, although the GOS has now broken
blockades so that the 80% of truckers who are not striking
will be able to deliver shipments. The strikers are seeking
GOS responses to rising fuel prices that they say are causing
them to operate at a loss. Madrid taxi drivers also
announced a strike beginning June 13, saying that the fare
increase offered by the GOS would not fully compensate for
the increased fuel price, but as of midday June 13 taxis
appeared to be operating normally. Post will report in more
detail on the trucking strike septel. (All Media)


FINANCIAL TIMES SPECIAL REPORT ON SPAIN

2. (U) The lead article is called "After the bust, a time for
adjustment." The piece explains how the slowdown has come
faster than people expected and how sharp it is. Two years
ago, Spain was creating about a third of new jobs in Europe.
This year, unemployment is rising faster than anywhere else
in the EU. However, belying the FT's reputation in Spanish
government and business circles as the purveyor of doom and
gloom about Spain, the FT also quotes Spanish Banking
Association adviser Federico Prades' "glass half full"
perspective. He says that public and corporate finances are
strong, much external borrowing has gone to modernize Spain's
manufacturing sector, and the banking system is healthy. But
critics insist that additional labor market reform is
essential and that public spending must be more efficient. A
more efficient judicial system would also be very beneficial.
The FT Special Report also contains articles on banks, real
estate, the Prince of Asturias awards, Expo 2008 in Zaragoza,
small firms in the Basque Country, and energy. (Comment:
While not underplaying the problems affecting the Spanish
economy, the report also highlights some of the Spanish
economy's strengths, including the economy's
internationalization. For instance, the Ibex-35 blue-chip
companies earned almost half of their income outside of Spain
in 2007.) (FT 6/11)


SPAIN STRONGLY OPPOSES EU PROPOSAL TO ALLOW LONGER WORK WEEKS

3. (U) Spain remained strongly opposed to the European
Council's approval of a measure to allow member states to
increase the maximum work week from 48 to 65 hours. Foreign
Minister Moratinos and Minister of Labor Celestino Corbacho
have vowed that Spain will act to change the directive -
which must be approved in the European Parliament -- before
it takes effect. Minister Corbacho criticized the measure,
saying that it would represent a strong setback to the social
agenda in Europe. Others, including Spanish unions such as
the UGT, have warned that the proposal sets a dangerous
precedent and hinted at the possibility of "confrontations"
should the measure near approval by the parliament.
Meanwhile opposition Partido Popular spokesperson Jose
Ignacio Echaniz accused the government of confusing public
opinion on this matter noting that increasing work hours
would be optional and not obligatory for member states. (EL
Pais, 6/10)

MADRID 00000671 002.2 OF 002


IBERDROLA RULES OUT BID FOR BRITISH ENERGY

4. (U) Iberdrola Chairman Ignacio Sanchez Galan told
reporters that the company would not bid on Britain's largest
nuclear energy producer, British Energy, because the asking
price was too high. Earlier this week, British Energy said
it had rejected the proposals it had received so far because
they were not high enough. Galan said Iberdrola remained
interested in the British nuclear power sector. (El Pais,
6/13)


REPSOL FILES SUIT AGAINST ECUADOR

5. (U) Spanish petroleum company Repsol YPF was the fifth
petroleum company to file suit against the government of
Ecuador for the controversial Law 42, which increases taxes
on Repsol,s "extraordinary earnings" from 50 percent to 99
percent. The suit has been filed with the International
Center for Settlement of Investment Disputes (ICSID), which
is based in Washington. In Ecuador, Repsol operates block 16
and produces over 50,000 barrels per day. (El Pais, 6/13)


MAY INFLATION 4.6 PERCENT

6. (U) Official Spanish year-to-year consumer price inflation
for May (May 2008 compared to May 2007) was 0.1 percent below
the 4.7 percent estimate announced two weeks ago (ref b) for
the EU-harmonized index. This is still a significant
increase from April's figure. (All Media)
AGUIRRE

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