Cablegate: Madrid Economic Weekly, Sept. 7-11

VZCZCXRO4118
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHMD #0913/01 2550930
ZNR UUUUU ZZH
R 120930Z SEP 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1207
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4122
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000913

SIPDIS

STATE FOR EUR/WE, EEB/IFD/OMA
COMMERCE FOR 4212/D.CALVERT AND ITA/A.PARRIS
TREASURY FOR OIA/OEE:R.JOHNSTON
ENERGY FOR PIA:K.BALLOU

E.O. 12958: N/A
TAGS: ECON EIND EINV ELAB ENRG KGHG SP
SUBJECT: MADRID ECONOMIC WEEKLY, SEPT. 7-11

REF: A. MADRID 901
B. MADRID 172

MADRID 00000913 001.2 OF 002

Contents:

ECON: Zapatero Previews 15 Billion Euro Tax Increase
EIND/EINV/ELAB: GM Decision to Sell Opel Likely to Cost 1,700
Spanish Jobs
ECON: GDP Revision Shows Recession Started Earlier
ECON: Prices Rose 0.3% in August
ENRG/KGHG: GOS, Cities to Plug In Electric Vehicles

Zapatero Previews 15 Billion Euro Tax Increase

1.(U) Appearing before Parliament on September 9, President
Zapatero said the GOS' proposed 2010 budget would impose tax
increases equal to 1.5 percent of Spain,s GDP. He said that
the "moderate rise" in taxes was needed to "guarantee
sufficient capacity to meet the needs of providing social
protection (unemployment benefits) and investing in
infrastructure." He did not specify which taxes would be
increased but again assured that taxes on earned income would
not be among them. The GOS expects the 2009 budget deficit
will be 9.5 percent of GDP (Note: financial analysts predict
that it will surpass 10%). Zapatero argued that the increase
would bring tax revenues as a share of GDP only to the level
he inherited upon taking office in 2004 and would remain
below the European average. Opposition leader and PP
President Rajoy criticized the proposal, calling the tax
hikes "counterproductive" and suggesting that increases will
only create more unemployment. Other parties, legislators
were also critical. (All Media, 9/10)

GM Decision to Sell Opel Likely to Cost 1,700 Spanish Jobs

2.(U) Spanish press reports suggest that GM's decision to
sell a controlling stake in Opel to the Canadian/Russian
consortium led by Magna likely will cost 1,700 of the 7,500
jobs at Opel's Figueruelas plant in Zaragoza. Union leaders
reacted negatively to the September 10 announcement of the
decision, as they favored a competing bid by RHJ that was
expected to cost the plant only around 1,000 jobs. A number
of steps remain before the deal can be completed. (All
Media, 9/11)

GDP Revision Shows Recession Started Earlier

3.(U) Revised GDP figures from the National Statistics
Institute show that Spain,s recession began in the second
quarter of 2008, not the third quarter as previously
reported. Instead of growing by 0.1% in the quarter, GDP
fell by 0.02%. The revised figures showed that full-year
2008 growth was 0.9%, down from the previously reported 1.2%.
Comment: While the practical impact of the difference in
growth between 0.1% and negative 0.02% was very small, the
revision may give the opposition more ammunition and further
damage the government's credibility, as it shows that the
recession had already begun at a tQ'PQ_H%
0.8% below that of August 2008. Comment: Annual inflation
rates are expected to remain negative for a few more months
while they still include the impact of the late-2008 oil
price decline. Underlying inflation (not including energy or
food prices, which are more volatile) remains low but
positive. (EXPANSION)

GOS, Cities to Plug In Electric Vehicles

5.(U) Industry and Trade Minister Sebastian, along with the
mayors of Madrid, Barcelona, and Seville, rolled out on
September 8 the "Movele" electric car project, which will
make the three cities Spain's first to have significant
numbers of electric vehicles. The project has budgeted 8
million euros for purchase grants for 2,000 vehicles by the
end of 2010. Grants will range from 750 to 20,000 euros for
each vehicle from a catalog the GOS has prepared. The grants
are intended to cover 15-20% of the vehicles' cost. While
the project originally was aimed at government and corporate
fleets (see ref B), we understand that individual purchasers

MADRID 00000913 002.2 OF 002

will be eligible for the grants as well. The project also
will fund infrastructure development -- a total of 546
charging points will be established in the three cities --
and technical assistance. The vehicles are expected to save
2,700 tons of oil per year and reduce CO2 emissions by 4,400
tons. Minister Sebastian said that electric vehicles would
be addressed in the sustainable economy legislation the GOS
will soon propose. He added that the GOS will use its EU
presidency in the first half of 2010 to promote the
implementation of electric and hybrid cars in the EU market.
Spain currently has no domestic suppliers of electric
vehicles or their components but is competing with Norway and
the UK to attract an electric car plant planned by the Indian
company Tata Motors. (El Pais, 9/9; www.IDAE.es)
CHACON

© Scoop Media