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Cablegate: Madrid Economic Weekly, Nov. 2-6

VZCZCXRO1250
RR RUEHLA
DE RUEHMD #1088/01 3101314
ZNR UUUUU ZZH
R 061314Z NOV 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1432
INFO RUEHLA/AMCONSUL BARCELONA 4199
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 001088

SIPDIS

STATE FOR EUR/WE, EEB/IFD/OMA
COMMERCE FOR 4212/DON CALVERT
TREASURY FOR OAI/OEE R.JOHNSTON
ENERGY FOR PIA:K.BALLOU

E.O. 12958: N/A
TAGS: ECON EFIN ELAB KIPR SP
SUBJECT: MADRID ECONOMIC WEEKLY, NOV. 2-6

REF: MADRID 1061

Contents:

ELAB: More Negative News on Unemployment
EFIN: Failed Caja CCM to be Taken Over by Cajastur
ECON: 400-Euro Tax Deduction May Be Retained
KIPR: Culture Minister Rules Out Punishing Internet Users for
IPR Violations
EFIN: Taxation of Foreigners: "Rolando Law" to replace
"Backham Law"

More Negative News on Unemployment

1.(U) Eurostat reported that Spanish unemployment rose to
19.3% in September from 18.8% in August. Separately, the
Labor Ministry reported that the number of people seeking
unemployment benefits rose for the third consecutive month in
October, this time by 98,000. Job losses from the service
sector accounted for almost two-thirds of all new unemployed.
Secretary General of Employment Maravillas Rojo commented
that the 2.6% increase was in line with expectations and half
the 192,000 increase of October 2008. The European
Commission predicted that unemployment will average 20% in
2010 and 20.5% in 2011. Comment: Many analysts expect that
the unemployment rate will continue to rise for several
months after total production stops falling, so the political
trouble for the GOS is likely to continue even after the
expected official end of the recession sometime next year.
(Eurostat, 11/2; Ministry of Labor, 11/3; All Media, 11/4;)


Failed Caja CCM to be Taken Over by Cajastur

2.(U) The Bank of Spain has approved the bid of Cajastur, an
Asturias-based savings bank ("caja"), to take control of the
banking operations of Caja Castilla La Mancha, the only
financial institution in which the GOS has intervened during
the financial crisis. The cost of the bailout will be borne
by the caja-financed deposit guarantee fund, which has agreed
to cover up to 2.5 billion euros of CCM's future loan losses
and provide additional aid. Cajastur is the 20th largest of
Spain's 40-plus cajas, and CCM was the 12th largest, so the
combined caja will still be relatively small -- the country's
eighth largest. The socialist-controlled regional
governments of Asturias and Castilla-La Mancha have
informally agreed to the transaction, which still needs
formal approval by the two cajas' boards and the two regional
governments. Final approval is epxected by year-end.
(Expansion, 11/3; El Pais, 11/4-5)

400-Euro Tax Deduction May Be Retained

3.(U) Parliamentary spokespeople for the United Left (IU) and
Galician Nationalist Bloc (BNG) parties announced that they
had reached agreement with the governing Socialists to retain
for low-income taxpayers the 400-euro income tax deduction
that the GOS budget proposal would eliminate. The agreement
calls for taxpayers with annual incomes below 8,000 euros to
get the full deduction, which would be phased out for those
earning between 8,000 and 12,000 euros. (Expansion, 11/3)

Culture Minister Rules Out Punishing Internet Users for IPR
Violations

4. (U) Minister of Culture Angeles Gonzalez-Sinde told a
television interviewer that the Spanish government is not
planning to introduce punishment, such as suspension of
Internet access, for users engaged in unauthorized
downloading or file-sharing of copyright-protected content.
Rather, Spain proposes to attack the problem at its source by
going after pirate websites and the people who make money off
them, she said. The Minister made her comments in the
context of media reports that the the European Parliament and
Council had reached an agreement whereby member state
governments would be able to cut off offenders' Internet
access without a court order. Gonzalez-Sinde pointed to the
establishment last month by Spain's Council of Ministers of
an Inter-Ministerial Commission to address the phenomenon of
IPR violations on Internet websites. She said the goal is to
find mechanisms to promote broad distribution of culture via
the Internet without damaging this interests of content
providers or service providers. (ABC, Cinco Dias, 11/6)

Taxation of Foreigners: "Rolando Law" to Replace "Beckham Law"

MADRID 00001088 002 OF 002

5. (U) The Spanish government proposes to raise taxes in 2010
for foreigners working in Spain from 24% to 43% on income in
excess of 600,000 euros per year. The new plan, dubbed the
"Rolando Law," would replace the so-called "Beckham Law,"
which reduced the maximum taxation to 24% for highly skilled
foreign professionals in an effort to attract them to Spain.
It will especially affect elite foreign soccer players,
though the clubs are expected to bear the burden since such
players usually negotiate their salaries in after-tax terms.
The new law will not affect players already signed to
contracts in Spain. According to the ruling Socialist Party,
the initiative is part of a move towards tax neutrality. The
Professional Football League is reported considering a
strike, arguing that the government's action will deter
talented soccer players from coming to Spain. (Cinco Dias,
11/6; Embassy)
CHACON

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