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PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHMD #0443/01 1120831
ZNR UUUUU ZZH
P 210831Z APR 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 4631
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3397

UNCLAS SECTION 01 OF 03 MADRID 000443 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EPET KIPR KNNP PGOV SENV SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL UPDATE APRIL 14 - 18 
 
MADRID 00000443  001.2 OF 003 
 
 
Table of Contents: 
 
¶1. ECON: Euros 10 billion fiscal stimulus package announced 
and approved 
¶2. ECON/EFIN: Solbes insists he is in charge of the economy 
¶3. SENV: Drought leads to "Water War" 
¶5. KNNP: Nuclear accident cover-up sparks controversy 
¶7. ECON/EFIN: Caja Madrid buys Florida bank 
¶8. EPET: REPSOL stake in large oil find off Brazil 
¶9. KIPR: Sale of pirated software remains a problem 
 
 
EUROS 10 BILLION FISCAL STIMULUS PACKAGE ANNOUNCED AND 
APPROVED 
 
¶1. (U)   While in Washington for the IMF/World Bank spring 
meetings, Second Vice President and Finance and Economy 
Minister Solbes announced that the government would quickly 
use an amount equal to half of the 2007 budget surplus (10 
billion euros) to stimulate the economy in 2008.  Six billion 
euros will be returned to taxpayers directly - each taxpayer 
will get a euros 400 tax cut per a PSOE electoral promise, 
and a wealth tax will be eliminated.  Two billion euros will 
go to guarantee mortgages on subsidized housing.  Two billion 
euros will be used to guarantee additional bank credits for 
small and medium-sized companies.  The Council of Ministers 
approved the measures on April 18.  It also approved a 
350-euro monthly increase for three months for certain 
unemployed workers, as well as the hiring of 1,500 staff to 
help the unemployed retrain and/or find new jobs.  The GOS is 
also working on an agreement with lenders that would 
eliminate commissions on lengthening mortgages, and it has 
eliminated government charges on these transactions.  The 
measures approved by the Council will cost approximately 8 
billion euros in 2009. (El Pais, 4/14; Council of Ministers, 
4/18; AFP, 4/18) 
 
 
SOLBES INSISTS HE IS IN CHARGE OF THE ECONOMY 
 
¶2. (U) With the appointment of Miguel Sebastian, the former 
head of the presidency economic office and unsuccessful 2007 
Madrid mayoral candidate, as Minister of Industry, Tourism 
and Trade, there has been lots of press speculation that 
Solbes, authority in the economic arena has undermined by 
President Zapatero.  Solbes told journalists emphatically 
that that was not the case.  "I am the Vice President.  It is 
up to me to take the big economic decisions, and I will 
continue doing so during this legislature."  Solbes is 
generally considered more fiscally conservative and less 
interventionist than Sebastian.  (Comment: At least with 
respect to big macroeconomic policy decisions, Solbes will 
likely continue to prevail.  However, the energy portfolio 
remains under the control of Sebastian's ministry despite 
speculation that Solbes had wanted it.  This suggests that 
the GOS will work to ensure that Iberdrola is not taken over 
by the majority state-owned French utility EDF.) (El Pais, 
4/14) 
 
 
DROUGHT LEADS TO "WATER WAR" 
 
¶3. (U) In what one newspaper is calling the "Water War," 
Spain,s severe drought conditions along its Mediterranean 
coast are causing political tensions to heat up between 
autonomous communities and the GOS.  For the country as a 
whole, the last six months have been the driest such period 
in 60 years.  Barcelona, whose reservoirs have dipped below 
20 percent of capacity, has further restricted water use and 
will soon begin importing water by ship from France and other 
regions in Spain.  This week, in an effort to provide relief 
to Catalonia, the GOS approved the urgent construction of a 
62-kilometer pipeline to divert water from the Ebro River to 
Barcelona.  The decision came after the GOS denied the same 
for other regions.  The Partido Popular government that held 
office until 2004 had planned to build a series of canals to 
transfer water from the Ebro to the agricultural areas of 
Valencia, Murcia and Almeria.  When the PSOE took office, it 
repealed the plan, citing environmental concerns. 
Environmentalists have criticized such water transfer plans 
as well, citing the need to first reduce consumption of water 
by increasing its cost. 
 
¶4. (U) In an apparent effort to save political face, the GOS 
referred to the move this week as a "temporary measure" that 
was not a "transfer" of water and was aimed to cover the 
period until the scheduled June 2009 opening of a Barcelona 
desalinization plant.  The GOS' semantics have drawn 
criticism, with pro-government El Pais calling the project 
"the pipe that is not a transfer."  As expected, the decision 
has also been challenged by the opposition.  The PP is 
 
MADRID 00000443  002.2 OF 003 
 
 
demanding that President Zapatero explain to Congress his 
changed view on water transfers.  The Presidents of Valencia 
and Murcia (both PP members) announced their intention to 
bring the matter to the Constitutional Court.   While the 
Aragon region also objects to the water diversion, its 
PSOE-affiliated President has toed the party line and not 
objected to the decision.  Environment, Rural Development and 
Marine Affairs Minister Espinosa has invited representatives 
from the autonomous communities to an April 19 meeting in 
Madrid to explain the Council of Ministers April 18 decision 
to approve the water transfer to Barcelona. 
 
 
NUCLEAR ACCIDENT COVERUP SPARKS CONTROVERSY 
 
¶5. (U) The coverup of a November leak at a the Asco I nuclear 
power plant in Tarragona province has led to the firing of 
the plant supervisor and renewed calls by opponents of 
nuclear power for the closing of all Spain's nuclear plants. 
The accident occurred when 50 liters of radioactive water 
were dumped into a pool from where water vapor was sucked 
into the plant's chimney and disseminated to the surrounding 
area.  About 150 particles of radioactive cobalt, manganese, 
zirconium, and other metals were dispersed into the air, 
although 95 percent settled within the plant compound.  The 
managers of the plant, which is jointly owned by Endesa and 
Iberdrola and operated by Endesa, learned of the leak March 
¶14.  They did not notify Spain's Nuclear Security Council 
(CSN) until early April, after Greenpeace had announced that 
contamination had been found in the area around the station. 
Even then, they downplayed the incident, leading the CSN to 
classify it as a level 1 on the International Nuclear 
Incident Scale (1 is an anomaly and 7 a grave accident). 
However, the CSN's deputy told reporters April 14 that the 
CSN had been deceived, that radioactivity around the plant 
was 100 times greater than what the plant managers had said, 
and that the accident was one of Spain's four worst ever. 
The CSN reclassified the event as a level 2, or an "incident." 
 
¶6. (U) The severity of the incident itself still does not 
appear to be overly alarming.  The CSN has said that even the 
higher levels of radiation should not affect nearby 
residents.  Plant workers are being tested, and students who 
visited the plant have been offered tests.  However, the 
coverup has been strongly criticized, and the firing of the 
plant supervisor may not be enough to satisfy critics. 
Newspapers reported that plant management continued to allow 
schoolchildren to tour the plant after it knew of the 
radiation.  Mayors of fourteen nearby municipalities have 
insisted that Endesa dismiss all those responsible for the 
cover-up.  A labor union blamed the plant's use of 
subcontracted workers, and school officials and parents have 
expressed concern about the students who toured the plant. 
The furor will not make it any easier for those who are 
trying to convince the ruling PSOE to rethink its plans to 
gradually close Spain's seven nuclear power plants.  (El 
Pais, 4/16; Metro, 4/16 and 4/17) 
 
 
CAJA MADRID BUYS FLORIDA BANK 
 
¶7. (U)  The savings bank, which is Spain's fourth largest 
financial institution (behind Santander, BBVA, and La Caixa), 
is buying City National Bank of Florida for USD 927 million. 
City National is the sixth largest bank in Florida.  This 
acquisition is part of Caja Madrid's "Plan 2010" overseas 
expansion drive.  It already has corporate offices in Miami, 
Lisbon, Dublin and Vienna.  City National has euros 1.75 
billion in assets, 421 employees, and 19 branches.  (ABC, 
4/14) 
 
 
REPSOL STAKE IN LARGE OIL FIND OFF BRAZIL 
 
¶8. (U) After Brazil,s chief petroleum regulator confirmed 
the existence of a giant oil field off the coast of Sao 
Paolo, Repsol's stock price rose by 11 percent in the Spanish 
market.  Repsol owns 25 percent of the group responsible for 
exploring the "Carioca" block in the Santos basin, which is 
said to potentially contain 33 billion barrels of oil and 
possibly be the world's third largest field.  Industry 
representatives have urged caution over the find, which is 
not yet definitive, and have noted that oil production would 
not begin for several years.  (El Pais 4/15 and 4/16, Rio de 
Janeiro 00091) 
 
 
SALE OF PIRATED SOFTWARE REMAINS A PROBLEM 
 
¶9. (U) Pirated software costs the industry 690 million euros 
annually and accounts for almost 40 percent of the software 
 
MADRID 00000443  003.2 OF 003 
 
 
sold in Spain, according to a Microsoft study.  A Microsoft 
spokesman faulted the lack of "sensibility" of consumers and 
distributors about the real value of software.  Although the 
overall Spanish piracy index reportedly dropped by 7.7 
percent in 2007, two regions registered notable increases, 
Andalucia with 11.2 percent and Valencia with 7.1 percent. 
More than half of the software installed in these regions is 
pirated.  Madrid's piracy index has fallen by 12 percent in a 
year, to 28 percent.  (Comment: Software piracy remains high 
in Spain, although the Business Software Alliance (BSA) does 
not estimate it to be higher than in, for instance, France. 
This year, the BSA did not recommend that Spain be placed on 
the Special 301 Watch List, because it says it is receiving 
satisfactory cooperation from the Spanish government.) 
(Metro, 4/16) 
AGUIRRE