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

VZCZCXRO2456
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #1295/01 1841446
ZNR UUUUU ZZH
R 031446Z JUL 07
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 2912
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAS/AMEMBASSY ALGIERS 3945
RUEHLA/AMCONSUL BARCELONA 2864

UNCLAS SECTION 01 OF 02 MADRID 001295

SIPDIS

SIPDIS

EUR/WE

E.O. 12958: N/A
TAGS: EAGR ECON EFIN EIND ELAB ETRD TBIO SP EINV
UK, SMIG
SUBJECT: MADRID WEEKLY ECON/AG/COMMERCIAL UPDATE REPORT -
JUNE 25 - JUNE 29


MADRID 00001295 001.2 OF 002


ECON/ENRG: Ambassador and AMCHAM promote renewable energy
ECON/EINV: UN report warns real estate crisis is inevitable
in Spain
ECON: Spaniards unhappy with their job situation
SENV: Proposed amendment to tax cars based on CO2 emissions
EINV/ETRD: Spanish economic outreach abroad - China, South
Korea, and Senegal
ENRG/ETRD: Gas pipeline woes between Spain and Algeria
ETRD: New plan to market Spanish wine abroad
ELTN: Increased high speed trains to northern Spain


AMBASSADOR PROMOTES ENERGY EFFICIENCY AT AMCHAM CONFERENCE

1. (U) In a June 25 energy conference organized by the
American Chamber of Commerce, the Ambassador spoke on the
security, environmental and economic benefits of diversifying
our energy sources. The Ambassador discussed the President's
new initiative on climate change and our commitment to
renewable energy sources. Other speakers at the two-day
conference included Minister of Industry, Tourism, and
Commerce Joan Clos as well as high-level representatives from
the US Department of Energy, and notable industry leaders.
The two day conference was a success, bringing together
Spanish and US counterparts including executives and
entrepreneurs of leading edge renewable energy firms from
both countries.

THE UN WARNS THAT SPAIN WILL FACE A REAL ESTATE CRISIS

2. (U) According to the UN Special Rapporteur on Adequate
Housing, Miloon Kothari, Spain should intervene more in the
real estate market and adopt a transparent approach on
informing investors and citizens of the risks of a potential
housing price bust. According to Spanish press, this advice
will be presented in a report to the UN in November. Kothari
notes that in the long term, the housing market is not
sustainable, particularly given that a large portion of
Spaniards dedicate more than 40 percent of their income on
variable-interest rate mortgages. Kothari further believes
that the average Spaniard might not be able to absorb the
increases in interest rates to already existing mortgages.
Kothari urges the government to intervene and curb
speculation while also be more open to the public about
potential problems related to the volatility of the market.
According to various local surveys, the potential collapse of
the real estate market ranks alongside concerns about
terrorism and unemployment.

SPANIARDS ARE UNHAPPY WITH THEIR WORK SITUATION

3. (U) According to a 2007 European barometer on work issues,
45 percent of Spanish workers reported that they were
dissatisfied with their work situation, primarily due to low
salaries and weakened purchasing power. In fact, Spain has
one of the highest index of dissatisfied workers in Europe,
surpassed only by Turkey with a rate of 55%. However, those
Spanish workers with higher level or management
responsibilities reported higher satisfaction rates (82%).

PROPOSED NEW AMENDMENT TO TAX CARS BASED ON CO2 EMISSIONS

4. (U) The Spanish Congress is scheduled to debate two
amendments to the Air Quality law that would charge car
owners for their CO2 emissions. The first proposal would
exempt ecologically sound cars from the currently mandated
vehicle registration tax, while the second would increase
registration taxes on "polluting cars" by about 14.5 and 17
percent of the total value of the vehicles. If both of these
measures were adopted, experts estimate that this could
significantly impact the market for different kinds of
vehicles.

SPAIN ECONOMIC OUTREACH ABROAD - CHINA, SOUTH KOREA, AND
SENEGAL

5. (U) The week of June 25 was busy for Spanish economic
diplomacy. A delegation from the telecom giant Telefonica
visited South Korea to strengthen ties with Korean companies.
The King and Queen of Spain's visit to China received
positive press over the past week. The Spanish leaders were
accompanied by 300 business representatives representing 163
Spanish companies from a wide range of sectors such as
agriculture, finance, tourism, and telecommunications. In
fact, thanks to these efforts, the Chinese may be eating more
Spanish ham next year given a recent promise by the Chinese
to lift trade restrictions on ham products beginning next

MADRID 00001295 002.2 OF 002


February. Meanwhile, the Spanish Labor and Interior Ministry
officials traveled to Senegal last week accompanied by 30
Spanish businessmen in an effort to promote legal
immigration.

GAS PIPELINE WOES BETWEEN SPAIN AND ALGERIA

6. (U) Members of the Spanish-Algerian gas pipeline
cooperative Medgaz issued a condemnation this past week
against the Spanish National Commission of Energy's (CNE)
decision to prevent Algeria's Sontrach from obtaining more
shares in the pipeline cooperative. The Presidents of the
various Medgaz member companies say that they will appeal
this decision directly to the GoS Ministry of Industry. This
issue created considerable anger in Algeria where the
Minister of Energy Chakib Khalil suggested several weeks ago
that Algeria might cut off gas supplies to Spain over this.

MORE SPANISH WINE EXPORTS

7. (U) The Ministry of Agriculture announced June 25 its new
plan to market Spanish wine abroad. Spain faced an
unexpected fall in domestic demand in 2006, leaving producers
with an unused surplus of wine. The Ministry of Agriculture
says that they will not only invest in promoting Spanish
wines abroad, particularly to non-European countries such as
the US, they will also more actively promote long-term
improvements in the quality and diversity of wines throughout
Spain.

INFRASTRUCTURE: INCREASED HIGH SPEED TRAINS TO THE NORTH

8. (U) As part of the Ministry of Fomento's 10-year plan,
Spain will soon expand their high speed velocity trains
(known as AVE) to northern Spain. The AVE trains have opened
up increased travel options, both tourist and otherwise.
Until now, however, these high speed trains have been focused
primarily on southern Spain. By the end of 2007, the AVE
will expand to the north, shortening travel times
considerably to Cantabria, the Basque Country, Asturias, and
Castilla y Leon. These investments may also provide
subcontracting opportunities for U.S. businesses.
AGUIRRE

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