VZCZCXRO4361
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHMD #0591 1701625
ZNR UUUUU ZZH
R 191625Z JUN 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 0803
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4030
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS MADRID 000591 
 
SIPDIS 
 
STATE FOR EUR/WE, EEB/IFD/OMA, EEB/TPP/IPE 
COMMERCE FOR 4212/D.CALVERT 
ENERGY FOR PIA/K.BALLOU 
TREASURY FOR OIA/OEE/T.O'KEEFFE,D.WRIGHT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EIND ELAB ENRG SP
SUBJECT: MADRID ECONOMIC WEEKLY, JUNE 15-19 
 
REF: MADRID 576 
 
Contents: 
 
ECON: Zapatero, Rajoy Spar over Tax Hikes 
ELAB: Central Bank Governor, Labor Minister Disagree on Labor 
Market Reform 
EIND: Number of Tourists Expected to Decline 
ENRG: Gamesa Secures Six Wind Farm Projects in China 
ENRG/EFIN: Iberdrola Issues Stock to Reduce Debt 
 
Zapatero, Rajoy Spar over Tax Hikes 
 
1.(U) President Zapatero was on the defensive this week over 
excise tax hikes on cigarettes and fuel announced last week. 
Zapatero said the increases were needed to address the 
growing budget deficit (approaching 10% of GDP this year) but 
that there would be none further this year.  He also said the 
worst of the economic crisis had passed.  Opposition Popular 
Party leader Mariano Rajoy blamed Zapatero's "dreadful 
economic policies" for the drop in tax receipts and the 
overall slowdown in economic activity.  He also called the 
timing of the increases "deceptive," given that the GOS 
approved them at the end of last week, only days after the 
European Parliament elections.  Comment: The tax increases 
are relatively minor -- adding around 7% to cigarette prices 
and less than 3% to fuel prices -- and Spanish cigarette and 
fuel prices remain below those in neighboring countries.  (El 
Pais, 6/16, 6/18) 
 
Central Bank Governor, Labor Minister Disagree on Labor 
Market Reform 
 
2.(U) Bank of Spain Governor Fernandez Ordonez and GOS 
Minister of Labor Corbacho again voiced conflicting opinions 
about labor market reforms.  Speaking separately, Fernandez 
Ordonez reiterated previous calls to make layoffs and wage 
adjustments easier for Spanish companies, while Corbacho 
continued to emphasize the importance of maintaining benefits 
and protections for workers.  The Minister's solution to 
growing unemployment (now over 17% and the highest rate in 
the EU) involves modifying Spain's economic model, which, he 
said, is heavily reliant on construction and especially 
vulnerable during economic crises.  Comment: In recent weeks, 
Fernandez Ordonez, appointed by Zapatero in 2006, has taken 
an increasingly public role in disagreeing with Corbacho.  It 
may be that he is filling a perceived vacuum since the 
departure of former Second Vice President Pedro Solbes, who 
often would make public statements supporting orthodox 
economic policies when ministers would move in other 
directions.  (El Pais, 6/17) 
 
Number of Tourists Expected to Decline 
 
3.(U) Spain will receive around 50 million tourists this 
year, 7.5 million fewer than in 2008, according to a 
projection from the Ministry of Industry, Tourism, and 
Commerce.  The hotel association CEHAT also expects a decline 
from 2008's total, though it did not want to project a 
figure.  (ABC, 6/18) 
 
Gamesa Secures Six Wind Farm Projects in China 
 
4.(U) Executives from wind turbine manufacturer Gamesa and 
Chinese energy provider Guangdong Nuclear Wind Power agreed 
on June 16 to a collaboration in which the Spanish company 
will construct six wind farms in China.  The farms will 
eventually produce 253 megawatts by the project's completion 
in 2011.  Gamesa will produce all of the turbines in Tianjin, 
China.  (Expansion, 6/17) 
 
Iberdrola Issues Stock to Reduce Debt 
 
5.(U) Electricity generator and distributor Iberdrola raised 
1.3 billion euros in capital from institutional investors on 
June 17, increasing its outstanding stock by 5%.  The company 
is seeking to reduce its debt from 33 billion euros to 25 
billion by the end of the year and maintain its A credit 
rating. 
CHACON