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Cablegate: Madrid Economic Weekly, Nov. 21-28

VZCZCXRO1830
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #1257/01 3331622
ZNR UUUUU ZZH
R 281622Z NOV 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 5682
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3682
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 001257

SIPDIS

STATE FOR EUR/WE:SAMSON,ZERDECKI AND EEB/IFD/OMA
TREASURY FOR OIA/OEE/W.LINDQUIST
COMMERCE FOR 4212/DON CALVERT

E.O. 12958: N/A
TAGS: ECON EFIN EIND EPET KIPR SP
SUBJECT: MADRID ECONOMIC WEEKLY, NOV. 21-28

REF: MADRID 1226

MADRID 00001257 001.2 OF 002


Contents:

ECON: Zapatero Unveils Additional Stimulus Package
EIND: Difficulties Continue for Auto Industry
EFIN/ECON: Inflation Falls to 2.4% in November
KIPR: Culture Minister Launches Anti-IPR-Piracy Campaign
KIPR: Digital Content and IPR Conferences
KIPR: Counterfeiting Ring Broken Up
EPET/EINV: Lukoil-Repsol Deal Faces Obstacles


Zapatero Unveils Additional Stimulus Package

1.(U) President Zapatero, speaking before the Congress on
November 27, unveiled a 10.85-billion-euro spending package
to revive the economy and boost employment. 8 billion euros
will go to municipal governments for new infrastructure
projects to be started between mid-January and mid-April of
2009 and finished by the first quarter of 2010. This doubles
the amount of municipal investment expected in 2009 and is
expected to employ many of those who have lost construction
jobs. The remainder will go to the struggling auto sector,
environmental initiatives, research and development spending,
the handicapped, and other sectors. Zapatero told the
Congress that the aid package, which will amount to just over
1% of Spain's GDP, will create 300,000 jobs in 2009. The
package will be financed with extraordinary borrowing during
this year. According to Second Vice President and
Economy/Finance Minister Solbes, these and previous
anti-crisis measures will keep the public sector deficit
close to 3% of GDP in 2008 and 2009. The package was
approved by the Council of Ministers on November 28 and must
be approved by the Congress. Zapatero also announced that he
would establish within two weeks a working group with the
opposition Partido Popular and other parties to seek
consensus on initiatives to modernize the economy's
productive capacity. (All Media, 11/28)

Difficulties Continue for Auto Industry

2.(U) 800 million euros of the stimulus package is to go to
the auto industry to reduce labor costs and improve training
and innovation, including the development of electric
vehicles. In exchange, firms would have to agree to maintain
employment. Before the announcement, Ford became the latest
company to reduce hours, saying that it would temporarily
idle 5,600 workers at its Almussafes, Valencia factory, not
resuming production after the holidays until January 20 and
closing one day every two weeks until June. Separately, the
president of Aragon region said the region intended, pending
its legislature's approval, to provide a guarantee for 200
million euros in lending so that General Motors can produce a
new Opel model at its Figueruelas plant. Spain's auto
factories produced 25% fewer vehicles in October than in
October 2007. (All Media, 11/28; El Pais, 11/26)

Inflation Falls to 2.4% in November

3.(U) Inflation fell to 2.4% (November 2008 prices compared
to November 2007 prices), according to a preliminary National
Statistics Institute estimate. This is a rapid drop from
October's 3.6% and July's 5.3%. The drop in oil prices
played a large role, but some articles cited concern that the
slowdown in domestic consumption also contributed and that
deflation was a possibility in 2009. Second Vice President
and Finance/Economy Minister Solbes has said that inflation
may fall below 1% by the middle of next year before starting
to increase again. (All Media, 11/28; El Pais, 11/26)

Culture Minister Launches Anti-IPR-Piracy Campaign

4.(U) On November 25, Culture Minister Molina launched
Spain,s 3rd Anti-Piracy Public Awareness Campaign. Noting
Spain,s status as a "cultural power," the Minister stated
that without strong IPR protection, Spanish cultural
production would decline. Ministry officials estimated the
campaign,s budget at 1.95 million euros. The campaign will
broadcast public-service messages, aimed largely at young
people, on television, the Internet and other media, as well
as in schools, with the slogan, "si eres legal, eres legal"
(roughly, "if you,re legal, you,re all right"). (Embassy,
11/25)

Digital Content and IPR Conferences

MADRID 00001257 002.2 OF 002

5.(U) On November 25-26, the GOS held its second annual
International Conference on Intellectual Property in the
Digital Environment. The IPR conference, part of a larger
conference on digital content, brought Spanish government
officials together with counterparts from other European
countries and the U.S., the EC, the OECD, and other
international bodies, along with a broad range of private
sector representatives from the community of copyright
holders and the telecommunications and internet service
industries. Dr. Michael Shapiro, Attorney-Advisor at the
U.S. Patent and Trademark Office (USPTO), spoke on two
panels. Minister of Industry, Tourism, and Commerce Miguel
Sebastian, who is responsible for telecommunications,
emphasized the importance of fighting IPR piracy without
discouraging the development of new technologies. The
conference also marked the first public appearance of the
Anti-Piracy Coalition's recently hired spokesman, Aldo Ocese,
who is seeking to encourage progress in the ongoing
negotiations between the Coalition (of content providers) and
the internet services providers' association Redtel.
(Embassy, 11/26)

Counterfeiting Ring Broken Up

6.(U) The Presidency on November 27 announced that the
Revenue Agency (Agencia Tributaria) detained five people at
the end of last week and seized counterfeit merchandise with
an estimated value of 500 million euros in Malaga, ending a
year-long investigation into an Indian/Pakistani ring. The
operation is said to be the largest of its kind in European
history. The merchandise, which is still being documented,
may include over a million watches, as well as thousands of
handbags, wallets, perfumes, movies and video games.
(Presidency Press Release, 11/27)

Lukoil-Repsol Deal Faces Obstacles

7. (U) Political and economic obstacles remain to the
potential purchase by Russian oil and gas company Lukoil of
29.9% of the stock of Spanish oil and gas company Repsol YPF
as reported in reftel. The current proposal is for Lukoil to
take over the 5 billion euros of debt used to fund the
purchase of 20% of Repsol in 2006 by the now-troubled
construction company Sacyr Vallehermoso. However, the 50
banks that hold that debt are demanding more collateral from
Lukoil than just the Repsol shares in question. In the face
of some political opposition to the deal, Lukoil announced
its agreement to the GOS condition that Repsol continue to be
directed by Spaniards. If the purchase goes through, Lukoil
will be able to choose four of the sixteen members of
Repsol's board. Opposition PP leader Mariano Rajoy has
expressed opposition to the deal. Industry, Tourism, and
Commerce Minister Sebastian has toned down his public
statements since President Zapatero expressed support for the
deal, but some press reports suggest that he may still be
seeking to prevent it. (El Confidencial, 11/28 and 11/24; El
Pais, 11/26 and 11/25)

AGUIRRE

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