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UNCLAS SECTION 01 OF 04 MADRID 000467 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/WE - STACIE ZERDECKI AND ELAINE SAMSON 
TRANSPORTATION FOR EDDIE CARAZO 
 
E.O. 12958: N/A 
TAGS: ELTN OVIP PGOV PREL SP
SUBJECT: SCENESETTER FOR SECRETARY LAHOOD'S VISIT, MAY 
29-30, 2009 
 
¶1. (SBU) Embassy Madrid warmly welcomes your visit to Spain. 
U.S.-Spain relations are strong and based on shared global 
interests, including the fight against terrorism, the 
bilateral military relationship, our association in NATO, and 
economic ties.  Since the November election, a strong 
atmosphere of goodwill and optimism has emerged for 
increasingly closer bilateral relations and cooperation. 
President Obama,s recent remarks about Spain,s high-speed 
train network were widely reported in the press and prompted 
responses by Development (Public Works) Minister Blanco and 
other officials.  You are the first Cabinet member to visit 
Spain since the election, and your visit will be welcomed as 
a sign of a desire for warm relations.  Minister Blanco and 
President Zapatero will want to explain Spain,s success in 
high-speed rail and promote opportunities in the U.S. for 
Spanish companies. 
 
BILATERAL RELATIONS 
 
¶2. (SBU) Spain is an important friend and ally of the U.S., 
and we value its cooperation in the fights against terrorism 
and narcotics and on security issues.  Spanish troops are 
carrying out important missions in countries such as 
Afghanistan and Lebanon.  Spain has long fought a domestic 
terrorist threat from the Basque terrorist group ETA and 
suffered tragically from Islamic extremist terrorism in the 
2004 Madrid train bombings.  Since winning a second term in 
March 2008, President Zapatero has publicly and privately 
stressed his desire to further improve bilateral relations. 
The relationship will be of increasing importance when Spain 
takes over the EU presidency in January 2010. 
 
¶3. (SBU) Despite differences over Spain,s withdrawal from 
Iraq in 2004 and more recently over support for an 
independent Kosovo, Spain values its relations with the U.S. 
and is a strong bilateral defense partner.  Even after 
withdrawing its military forces, Spain remained a donor to 
Iraq reconstruction and maintained its diplomatic presence 
there.  Spain has troops in Afghanistan and operates a 
Provincial Reconstruction Team. It also allows us the use of 
two military bases that are critical transit points between 
the U.S. and Iraq and Afghanistan.  Counter-terrorism and 
law-enforcement cooperation is strong, as are commercial and 
cultural relations (e.g., tourism).  Finally, Spain is a 
leader in renewable energy technologies and has important 
investments in the U.S. in this field (e.g., wind and solar), 
as well as in road construction projects. 
 
¶4. (SBU) Although we expect that your meetings and press 
interviews will focus on high-speed rail, two issues that 
might possibly be raised by the press during your visit are 
activist judge Baltasar Garzon's universal jurisdiction 
claims and Spain's aspirations to join the G-20 group that 
meets to address the international economic crisis.  Judge 
Garzon, assigned to the Spanish National Court, gained 
international publicity in 1998 when he attempted to have 
General Augusto Pinochet extradited from Britain to Spain for 
human rights abuses.  On April 29, he announced an 
investigation into allegations that the U.S. tortured 
terrorism detainees at Guantanamo.  This came days after he 
was forced to give up a related complaint filed by an NGO 
against six Bush Administration officials.  At the urging of 
Spanish prosecutors, the earlier case was reassigned to 
another National Court judge who has declined to process that 
case and offered to transfer the proceedings to the U.S. 
under the Mutual Legal Assistance Treaty. The Chief 
Prosecutor for the National Court tells us he will also fight 
Garzon's latest investigation.  Nevertheless, Garzon may 
attempt to wring all the publicity he can from the case 
unless and until he is forced to give it up. 
 
¶5. (SBU) President Zapatero made it a matter of national 
pride to participate in the November 2008 and April 2009 G-20 
financial summits even though Spain is not a G-20 member.  He 
and other Spaniards argue that the size of its economy, the 
lessons of its regulations, and the importance of its banking 
sector in Latin America and elsewhere justify Spanish 
participation.  He succeeded in participating as a result of 
support from French President Sarkozy and UK Prime Minister 
Brown, and he is actively seeking support to attend the New 
York summit planned for September.  After Spain was not 
included in the April 24 G-20 finance ministers meeting in 
Washington, Economy/Finance Minister and Second Vice 
President Elena Salgado met briefly with Treasury Secretary 
Geithner in Washington and explained the importance of 
 
MADRID 00000467  002 OF 004 
 
 
Spanish participation in the New York summit.  She said 
Secretary Geithner had not promised her anything but 
understood her arguments and would take them into 
consideration.  The Administration has not wanted to expand 
the G-20 (which already has five European members), and the 
issue has become a point of contention between our two 
governments. 
 
POLITICAL CONTEXT 
 
¶6. (SBU) Zapatero won reelection to a second term in March 
2008, but his center-left Spanish Socialist Workers Party 
(PSOE) is seven seats shy of a majority in the 350-seat 
Congress.  Over a year of worse-than-expected economic news 
has led to widespread criticism of Zapatero and his economic 
policymakers for having downplayed the economic difficulties. 
 Perhaps as a manifestation of this, Zapatero suffered his 
first serious political reverse since winning reelection when 
his party lost power in March 2009 regional elections in 
Galicia.  Zapatero shuffled the cabinet April 7 as a response 
to criticism of the GOS' inability to resolve the economic 
crisis and with an eye to the June European Parliament 
elections.  The most prominent change was the replacement of 
the Second Vice President and Minister of Economy/Finance. 
The Development (Public Works) Minister was also replaced, 
bringing Jose Blanco into the position. Although popularity 
ratings for Zapatero and the Socialists are low, the 
conservative opposition Popular Party (PP) has not managed to 
capitalize on this.  The PP has suffered internal divisions 
and more recently has been dogged by corruption accusations. 
Your visit will take place during campaigning for the June 7 
European Parliament elections. 
 
PRESIDENT ZAPATERO 
 
¶7. (SBU) Jose Luis Rodriguez Zapatero of the Spanish 
Socialist Workers Party (PSOE) was thrilled with President 
Obama,s victory last November, which gave him an opportunity 
to turn around high-level relations with the U.S. 
Zapatero,s abrupt withdrawal of Spanish forces from Iraq 
immediately after being elected in 2004 led to four years of 
cool senior-level relations.  The two Presidents never held a 
formal meeting, and Zapatero was criticized by the 
conservative opposition for poor relations with the U.S. 
(even though we had excellent day-to-day cooperation on many 
issues).  Zapatero,s and the PSOE,s eagerness to forge 
close ties with President Obama is evident in the Socialists' 
first television ad for next month,s European Parliament 
elections, which featured video of the Chicago election night 
rally and the words, &Social democracy or neoconservatism. 
That day you couldn't vote.  But now you can.8  Zapatero 
flew to Chile to meet with the Vice President in March, and 
he met with the President on the margins of the U.S.-EU 
Prague meeting in April.  Both meetings received prominent 
media coverage here, as did Zapatero,s informal encounters 
with the President at April events in London and Istanbul. 
You are the first Cabinet member to visit since the election, 
and we believe Zapatero offered to meet with you in part to 
show the Spanish public his administration's closeness to our 
very popular President and in part to suggest that this 
relationship will pay off in greater infrastructure contracts 
for Spanish companies.  Zapatero speaks little English. 
 
DEVELOPMENT MINISTER BLANCO 
 
¶8. (SBU) Jose "Pepe" Blanco is the day-to-day head of the 
PSOE (Zapatero is the official party leader) and a trusted 
political ally of Zapatero.  He retained his party position 
upon being named minister last month.  His selection was seen 
as a way for Zapatero to replace an unpopular predecessor 
with a political loyalist and an attempt to get more 
political benefit out of infrastructure spending.  As party 
head, Blanco was often critical of the U.S. and the war in 
Iraq, and he frequently plays to the Socialists' anti-U.S. 
base.  In October 2008, he blamed Bush administration 
policies for the global financial crisis.  However, he is a 
strong admirer of President Obama and often seeks to 
demonstrate the government's closeness to the Administration. 
 He attended the Democratic National Convention in August 
2008 and went to the Democratic headquarters in Chicago on 
the night of the elections. He is very interested in 
obtaining favorable media coverage.  Soon after the President 
praised Spain,s high-speed rail system in calling for 
high-speed rail in the U.S., Blanco announced that he would 
invite Administration officials to see Spain,s system.  (He 
 
MADRID 00000467  003 OF 004 
 
 
has not noted that several Congressional, DOT, GAO, and state 
delegations have visited Spain in the last two years to learn 
about the system.)  Blanco does not speak English. 
 
ECONOMIC CONTEXT 
 
¶9. (SBU) Since Zapatero was re-elected a year ago, the GOS 
has faced a deepening economic slump.  After 15 years of 
rapid economic growth, the end in 2007 of a long construction 
boom and the global financial crisis have boosted 
unemployment over 17% -- the highest rate in the EU.  The EC 
predicts that Spain will remain in recession throughout 2009 
and 2010 after other EU members have emerged, and most 
observers expect the unemployment rate to surpass 20%.  The 
government has responded with a large municipal 
infrastructure investment program and other spending efforts, 
and the budget has gone from a surplus in 2007 to a deficit 
that may approach 10% of GDP this year. 
 
¶10. (SBU) Over a year of worse-than-expected economic news 
has led to widespread criticism of Zapatero and his economic 
policymakers for their upbeat predictions during the 2008 
campaign and for having downplayed the economic difficulties 
long after many others were saying Spain was in a crisis.  In 
addition to responding to political imperatives, the April 
Cabinet shuffle was seen as an attempt to increase the pace 
of public spending, as new economy/finance minister Salgado 
is less concerned about the deficit than was her predecessor. 
 Spanish banks had little exposure to U.S. mortgages and were 
not caught up in the initial wave of European bank turmoil 
last year.  Some of the credit for this goes to the central 
bank's conservative regulation, including requiring higher 
loss provisions in good times and discouraging off-balance 
sheet vehicles.  However, many savings banks are overly 
exposed to troubled domestic construction and real estate 
companies.  The Bank of Spain took over a small savings bank 
in March, and others may have trouble as the economy slows 
and loan delinquency rates rise. 
 
¶11. (SBU) The U.S. has long been the most important single 
foreign investor in Spain, although U.S. investment is 
relatively less important now than it was 30 or 40 years ago. 
 Spain has become one of the most important investors in the 
U.S. in recent years, with significant investment in banking, 
wind and solar power, ethanol, road construction, foods, and 
insurance.  Spanish officials see U.S. stimulus legislation 
as a tremendous opportunity for world-class Spanish road, 
rail, and renewable energy companies. 
 
SPANISH RAIL NETWORK 
 
¶12. (U) With several main population centers on the coast, 
averaging about 350 miles from Madrid, Spain is well-suited 
for high-speed rail.  The AVE, its high-speed train service, 
boasts punctuality and prices competitive with airline 
travel, and officials say it is on track to pass France and 
Japan in the next few years to become the world's largest 
network.  As President Obama recently remarked, more people 
travel between Madrid and Seville by rail than by car and 
plane combined.  Since service between Madrid and Barcelona 
was inaugurated last year, rail has taken much of the market 
for this route from airlines.  A hallmark of the Spanish 
approach is the development of variable gauge trains, which 
run on existing tracks as well as newer high-speed rails that 
are compliant with European standards.  High-speed rail is 
also popular with the climate-change-conscious government 
because it generates fewer CO2 emissions per passenger-mile 
than air travel. 
 
¶13. (U) The development of the AVE has benefited from EU 
subsidies as well as strong GOS support.  The Development 
Ministry has purview over all federal transportation issues. 
Its two sub-organizations, ADIF and RENFE, are responsible 
for rail.  ADIF administers existing railway lines, 
constructs new lines, and owns most stations.  RENFE manages 
the trains, cargo and passenger services, and some stations. 
Transportation infrastructure investment is guided by the 
Ministry's 15-year strategic plan, which envisions spending 
250 billion euros of both public and private funds between 
2005 and 2020 to develop transportation in Spain. 
Approximately half of that figure will go to railway 
development.  At present, the following lines exist: 
Madrid-Seville-Malaga, Madrid-Zaragoza-Barcelona, and 
Madrid-Segovia-Valladolid.  Talgo and CAF, both Spanish 
companies with interests in the U.S., have supplied railway 
 
MADRID 00000467  004 OF 004 
 
 
vehicles for the AVE. 
 
¶14. (U) In addition to developing its passenger rail 
services, the strategic plan aims to increase freight transit 
by rail.  At present, only 3% of Spanish cargo is transported 
by train.  Recognizing American expertise in rail-based 
freight transport, GOS officials have expressed great 
interest in using your visit to learn from the U.S. 
experience.  They would like to initiate a dialogue on this 
subject with the USG and see it as an area that could provide 
opportunities for U.S. companies. 
 
MILITARY & COUNTERTERRORISM COOPERATION 
 
¶15. (SBU) Spanish military cooperation is important to the 
U.S. The southern Spanish bases of Rota and Moron are 
strategic hubs, midway between the U.S. and theaters of 
operation in Afghanistan and Iraq. Spain has troops in 
Lebanon (roughly 1,100), Afghanistan (780), Bosnia (260), and 
a smattering of others in various UN & EU observer missions. 
Spain recently announced a temporary increase in troops to 
Afghanistan to assist with forthcoming elections. 
 
¶16. (SBU) Spain is one of only five EU countries that have 
not recognized Kosovo's independence.  President Zapatero 
continues to deny recognition of an independent Kosovo state 
"out of political conviction" and in accordance with his 
interpretation of international law.  Most recently, on March 
19 the government announced the withdrawal of the 600 Spanish 
troops in NATO,s KFOR mission by the end of this summer. 
The government suffered severe public and private criticism 
for the failure to coordinate, even from Spanish commentators 
who favored the withdrawal.  When the Vice President met with 
Zapatero in Chile in March, he told reporters afterwards 
that, &the relationship we have with Spain exceeds whatever 
disagreement we may have over Kosovo.8 
 
¶17. (SBU) Spain is an al-Qaeda target and a critical player 
in U.S.-EU counterterrorism efforts due to its proximity to 
the Maghreb and a population that includes more than a 
million Muslims, mostly immigrants. The March 11, 2004, train 
bombings killed 191 persons and injured nearly 2,000 more, 
making it the second deadliest terror attack in European 
history. The Spanish government considers the threat from 
Islamic terrorism to be one of its top national security 
priorities and has identified numerous Islamic extremist 
groups operating within its borders. The Spanish are actively 
pursuing Islamic extremism terrorism-related investigations 
and have scores of suspects in jail. 
 
PERSONAL SECURITY 
 
¶18. (U) In general, Spain is safe. However, Madrid and other 
large cities attract a large number of criminals and 
pickpockets, and frequent crimes of opportunity against the 
unwary do occur. It is best to carry only essential items, 
including a photocopy of your passport's photo page. Visitors 
can protect themselves against crime by being street-smart, 
alert and aware of their surroundings. Travelers are 
encouraged to review the most recent Worldwide Caution issued 
by the Department of State. As the Department of State 
continues to develop information on any potential security 
threats to Americans overseas, it shares credible threat 
information through its Consular Information Program 
documents, available on the Internet at 
http://travel/state.gov. Additional information regarding 
safety and security in Spain is available on the U.S. 
Department of State's website (www.embusa.es) 
CHACON