VZCZCXRO5360
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0317/01 0741504
ZNR UUUUU ZZH
P 141504Z MAR 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 4489
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3364

UNCLAS SECTION 01 OF 02 MADRID 000317 
 
SIPDIS 
 
SIPDIS 
 
EUR/WE, EEB/IFD/OMA 
 
E.O. 12958: N/A 
TAGS: ECON EINV ELAB ENRG KIPR SENV SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL UPDATE MARCH 10-14 
 
MADRID 00000317  001.2 OF 002 
 
 
Table of Contents: 
 
ECON: Lower forecasts for GDP 
ECON/ELAB: Unemployment continues to rise 
ECON: Inflation reaches twelve-year high of 4.4 percent 
ENRG/EINV: Iberdrola takeover maneuvering update 
KIPR: Police shut down big CD/DVD copying operation, arrest 
six 
KIPR: Largest-ever seizure of counterfeit goods 
KIPR: Judge rules selling modified PlayStations not illegal 
SENV: More Spanish consumers willing to pay premium for 
environmentally-friendly electronics 
 
LOWER FORECASTS FOR GDP 
 
¶1. (U) Two days after the elections, Second Vice President 
and Finance Minister Solbes told reporters that (GOS) 
analysts were now predicting 2008 GDP growth of between 2.5 
and 2.7 percent.  This is well below the 3.1 percent figure 
Solbes had cited earlier and much closer to other forecasts. 
The German bank Commerzbank on March 10 repeated its earlier 
forecast that 2008 growth would only be 1.5 percent, adding 
that 2009 growth would be around 1 percent.  (Comment: 1.5 
percent growth this year would almost certainly result in a 
recession; the Central Bank has said that if output were to 
maintain the level of 2007's fourth quarter through 2008, 
growth for the year would be 1.9 percent.  Commerzbank had 
made the same 2008 forecast last August, but it may get more 
attention now that other forecasts have dropped.)  (Expansion 
3/11/08, EFE 3/10/08) 
 
UNEMPLOYMENT CONTINUES TO RISE 
 
¶2. (U) Unemployment increased by 50,000 for the month of 
February, according to Ministry of Labor statistics.  While 
this was less than the January increase of 132,000, experts 
are convinced that this trend will continue throughout the 
year, with immigrants and others in the construction field 
being disproportionately affected.  Although Spain continues 
to experience job growth, its growing labor force is 
outpacing the economy's ability to generate a sufficient 
number of jobs.  The unemployment rate appears to be between 
8.6 and 8.8 percent (sources differ), which is still low 
compared with prior years in Spain when double-digit 
unemployment rates were common.  Nonetheless, continuous 
press coverage about increasing unemployment coupled with 
Spain's relatively high rate vis a vis other European 
countries has affected consumer confidence. The Ministry of 
Labor is working with labor unions and business associations 
to develop an employment stimulus plan.  (Ministry of Labor 
statistics, INEM, El Pais). 
 
INFLATION REACHES TWELVE-YEAR HIGH OF 4.4 PERCENT 
 
¶3. (U) Consumer price inflation during the twelve months 
ending in February was 4.4 percent, up from 4.2 percent in 
the January-to-January period.  This is the highest rate 
since November 1995.  The rate of underlying inflation (not 
counting food or energy) also rose 0.2 percent, to 3.3 
percent.  Comment: The government has said for some time that 
it expects the rate to fall in the second quarter of 2008. 
(EFE, 03/14/08) 
 
IBERDROLA TAKEOVER MANEUVERING UPDATE 
 
¶4. (U) Press reports indicate that President Zapatero and 
French President Sarkozy have agreed on a deal that the GOS 
would not oppose in which GOF-owned electricity firm EDF 
would purchase between 15 and 18 percent of the Spanish firm 
Iberdrola in return for giving Iberdrola nuclear power plants 
located in France.  Press reports say that the deal would end 
the possibility of a hostile EDF bid for Iberdrola shares. 
They do not indicate that Iberdrola's management and 
controlling owner have lifted their opposition to EDF. 
Separately, an El Pais lead editorial laments that Spain does 
not have an "efficient" way to protect Spanish energy 
companies from foreign takeovers.  The editorial notes that 
French, German and Italian companies are effectively and 
legally protected from takeovers, whereas the Spanish 
government's measures to prevent the takeover of Endesa by 
Germany's E.ON have been struck down by the European Court of 
Justice.  It suggests that the GOS insist on reciprocity with 
the French government, i.e. the possibility that a Spanish 
company could buy a major French energy company. (ABC 
3/14/08, El Pais 3/13/08) 
 
POLICE SHUT DOWN BIG CD/DVD COPYING OPERATION, ARREST SIX 
 
¶5. (U) In what is believed to be Spain's largest operation 
ever against audiovisual piracy, the Spanish National 
 
MADRID 00000317  002.2 OF 002 
 
 
Police's IPR Crimes Group and its Judicial Police dismantled 
on March 12 a Madrid province piracy operation and 
confiscated 240 CD/DVD burners.  This was not a minor league 
operation - the machines had the capacity to produce over 
half a million copies a week.  Some of the movies copied have 
not yet opened in Spain.  All the individuals involved were 
of Chinese origin.  Unlike most operations these individuals 
were producing, preparing, packaging and distributing the 
items themselves.  The operation was the result of a 
three-month investigation.  (El Pais 3/13/08, Europa Press 
3/13/08) 
 
LARGEST-EVER SEIZURE OF COUNTERFEIT GOODS 
 
¶6. (U) In the largest operation of its kind in Spanish 
history, the Guardia Civil and the tax agency have 
confiscated in the port of Algeciras more than 230,000 
counterfeit articles worth over 200 million euros.  The 
operation took place in late February and early March and was 
announced March 14.  The six 40-foot containers on two boats 
included counterfeit goods with 45 different brands of 
clothes, accessories, and watches.  There have been no 
arrests yet. (EFE 3/14/08) 
 
JUDGE RULES SELLING MODIFIED PLAYSTATIONS NOT ILLEGAL 
 
¶7. (U) A Valencia provincial judge ruled that it was not 
illegal for a Valencia store to stock and sell Sony 
PlayStations that had been modified in a way that would allow 
them to use and reproduce pirated games.  The penal code 
prohibits possessing or selling merchandise specifically 
aimed at facilitating the suppression of anti-copying 
features.  The judge reportedly ruled that because the 
modified machines could also play legitimate games from other 
parts of the world, the store's actions were not criminal. 
The AntiPiracy Federation noted that at least eight times 
since 2000 Spanish courts had ruled that such actions were 
crimes.  (El Mundo 3/12/08, Metro 3/12/08) 
 
MORE SPANISH CONSUMERS WILLING TO PAY PREMIUM FOR 
ENVIRONMENTALLY-FRIENDLY ELECTRONICS 
 
¶8. (U)  Two-thirds of Spanish consumers - the highest among 
the five European nationalities measured - say they would pay 
up to ten percent more for electronic products manufactured 
so as to reduce the impact on the environment, according to a 
recent study by the Canalys consulting firm.  The 
corresponding figures for consumers in Italy, Germany, and 
France were 55 percent, and for the UK 40 percent.  A 
separate study found that 12 percent of Americans were 
willing to pay more for technology that consumes less energy 
or for brands that respect the environment.  However, not 
everyone is convinced; a Sony spokesperson noted that 
actually paying more for products was different than 
answering a survey.  (El Pais 3/13/08) 
AGUIRRE