VZCZCXRO7544
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0056/01 0220839
ZNR UUUUU ZZH
R 220839Z JAN 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 4096
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3243

UNCLAS SECTION 01 OF 02 MADRID 000056 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EUR/WE AND EEB/IFD/OMA 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ENRG EPET SCUL SOCI FR SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE - JANUARY 
7 - JANUARY 11 
 
MADRID 00000056  001.2 OF 002 
 
 
Table of Contents: 
 
ECON/EFIN: More Predictions of Financial Downturn 
ECON/EPET: Repsol to Increase Diesel, Biodiesel Production 
ECON/SCUL: Spanish Culture Minister Very Satisfied with 
Florida Court Ruling on Odyssey 
ECON/EINV: Showdown Between European Commission and GOS over 
Endesa Takeover Restrictions 
ECON/ENRG: More Electricity Connectivity Anticipated Between 
France and Spain 
SOCI/ECON: GOS Amends Housing Incentives to Encourage Renting 
 
More Predictions of Financial Downturn 
 
¶1. (U) The FT,s Leslie Crawford says: International 
financial gridlock has destroyed the country,s recent bout 
of economic euphoria.  The article describes December,s bad 
inflation and unemployment numbers, the international credit 
squeeze, lower growth estimates and signs of falling house 
prices.  The article says that provincial towns are being 
especially hard hit.  Crawford notes that both political 
parties are now emphasizing economics much more in the 
election campaigns. (Comment: This FT page 3 story will 
surely irritate the GOS.  Government officials and even 
PP-leaning businessmen complain about FT coverage of Spain. 
The government,s line is best expressed by Labor Minister 
Jesus Caldera: One bad quarter does not cancel out 15 good 
ones.  The opposition argues that the PSOE squandered a 
PP-generated bonanza.  The trend, if not the overall record, 
benefits the opposition.) (Financial Times, 1/9/08) 
 
Repsol to Increase Diesel, Biodiesel Production 
 
¶2. (U) Spanish oil company Repsol announced on January 8 that 
it had approved plans to invest 3.2 billion euros to increase 
diesel production at its Cartagena (Spain) refinery.  The 
project would double the refinery's production to 11 million 
tons per year and would partially focus on biodiesel 
production.  Repsol representatives anticipate that this 
project will be completed in 2011 and will employ more than 
6,000 workers along the way.  Spain is the largest producer 
of bioethanol in Europe and is rapidly expanding its 
biodiesel production.  Repsol is one the 10 largest oil and 
gas companies in the world. (Repsol press release, 1/8/08). 
 
Spanish Culture Minister Very Satisfied with Florida Court 
Ruling on Odyssey 
 
¶3. (U) Spanish media reported heavily on the January 10 US 
Magistrate Court judgment requiring Odyssey Marine 
Exploration to hand over to the GOS all details pertaining to 
the Black Swan shipwreck site and treasure find, including 
its location.  Odyssey has thus far been reluctant to share 
this information unless the GOS agreed to certain 
confidentiality restrictions; the ruling does include some 
 
SIPDIS 
confidentiality restrictions.  The Florida judge also set a 
 
SIPDIS 
date of March 5 for parties to return to the court to 
determine whether Odyssey has fulfilled its obligations.  The 
GOS has consistently asserted that the Black Sawn shipwreck 
is of Spanish provenance and that the U.S. company was not 
authorized to conduct salvage operations on it.  The Spanish 
Culture Ministry has pronounced itself "very satisfied" with 
the ruling and says that it validates past GOS claims about 
the find.  We have a previously-scheduled meeting with an 
Odyssey representative on January 17 and will report on the 
company's reaction.  (All Media/Embassy, 1/11/08) 
 
Showdown between European Commission and GOS over Endesa 
Takeover Restrictions 
 
¶4. (U) In defiance of a European Commission (EC) ruling, the 
GOS has indicated it will not back off on conditions it 
imposed on the 2007 takeover of formerly state-owned 
electricity giant Endesa.  Italian firm Enel and Spain's 
Acciona won their takeover bid for Endesa Spain (one of the 
largest utilities in the world) after a controversial and 
drawn out battle in which the GOS was heavily involved.  In 
an effort to maintain a "Spanish fingerprint" on the company, 
the GOS mandated that Endesa be maintained as an independent 
company and brand and required that the company maintain its 
decision making center in Spain.  The EC overruled these and 
other restrictions on December 5, giving the GOS until 
January 10 to repeal them.  On January 10, the Spanish 
government sent a letter to the EC insisting that the 
conditions it imposed were legal.  This matter will likely 
proceed to the European Court of Justice.  (El Pais, 1/11/08) 
 
More Electricity Connectivity Anticipated Between France and 
Spain 
 
MADRID 00000056  002.2 OF 002 
 
 
 
¶5. (U) During the January 10 Spain-France summit, President 
Zapatero and President Sarkozy agreed to construct a new 
high-tension electricity line between the two countries.  The 
agreement includes plans to establish a consortium between 
Spain's electricity grid operator REE and its French 
counterpart RTE to oversee the construction.  Spain, which 
already imports electricity from France, is a net exporter of 
electricity overall, transmitting large amounts of 
electricity to Portugal and some to Morocco. (Cinco Dias, 
1/11/08) 
 
GOS Amends Housing Incentives to Encourage Renting 
 
¶6. (U) The GOS approved on January 11 amendments to its 
2005-08 Housing Plan aimed at increasing the number of 
renters, especially among lower- and middle-income families. 
One change reduces the requirements on property owners 
seeking to qualify for a 6,000-euro subsidy for renting out 
their properties; they now can charge higher rents and rent 
out larger apartments and still qualify.  Another allows 
autonomous community governments to add to the federal 
government subsidy for low-income renters.  Another gives 
subsidized renters the ability to enter into contracts with 
their landlords that include the the option of buying the 
homes they rent.  This option already exists in many regions 
of the country, but the national government action will 
strengthen the protection of such clauses.  The amendments 
also contain incentives for real estate developers to convert 
their unsold property into rental or other properties 
designated as "Officially-Protected Homes" (Viviendas de 
Proteccion Oficial.)  Under Spanish law, builders can receive 
subsidies for building homes in exchange for agreeing to 
price caps and other conditions.  Typically these 
"Officially-Protected Homes" are newly constructed 
residences, but the new amendments would provide the option 
of adding used homes to the pool.  The amendments also raise 
slightly the amount sellers are allowed to charge for 
properties in this pool. (GOS press release, 1/11/08) 
 
 
 
 
 
 
 
AGUIRRE