VZCZCXRO9487
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHMD #0901/01 2481056
ZNR UUUUU ZZH
R 051056Z SEP 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1193
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4115
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000901 
 
SIPDIS 
 
STATE FOR EUR/WE, EEB/IFD/OMA 
COMMERCE FOR 4212/D.CALVERT 
TREASURY FOR OIA/OEE:R.JOHNSTON 
ENERGY FOR PIA:K.BALLOU 
 
E.O. 12958: N/A 
TAGS: ECON EINV ELAB ENRG SP
SUBJECT: MADRID ECONOMIC WEEKLY, AUG 31-SEPT 4 
 
REF: A. MADRID 852 
     ¶B. MADRID 820 
 
MADRID 00000901  001.2 OF 002 
 
 
Contents: 
 
ECON: Zapatero Says Income Taxes Will Not Be Increased 
ECON: GOS Spending Nearly Double Its Revenues, Plans to Cut 
Ministerial Spending 
ELAB: Unemployment Rate Hits 18.5% in July, More Jobless 
Registered in August 
ELAB: GOS Agrees to Extend Supplemental Unemployment Benefits 
EINV/ELAB: Ford Seeks to Lay Off 600 Employees 
ECON: Prices Rise Slightly in August, Still Below Last Year's 
Level 
EINV/ENRG: Iberdrola Expects $500M in U.S. Stimulus Funds for 
Wind Power Projects 
 
 
Zapatero Says Income Taxes Will Not Be Increased 
 
1.(U) In an August 31 press conference after meeting with 
Sweden's Prime Minister in Stockholm, President Zapatero said 
the GOS had no plans to raise personal income or corporate 
taxes.  He acknowledged, however, that the GOS would seek to 
gradually increase capital gains taxes from the current rate 
of 18 percent.  Zapatero also announced that the GOS might 
cancel a 400-euro per person income tax deduction introduced 
two years ago.  Reiterating that any tax increases would be 
"moderate and temporary," Zapatero insisted that the GOS will 
restore budgetary stability and meet the EU's requirement of 
a deficit no larger than 3% of GDP by 2012.  (Comment: Others 
have expressed doubt that the GOS will be able to get the 
deficit down in time.)  Zapatero's assurance followed a 
controversy sparked by Development Minister Jose Blanco's 
statement during an interview the previous week that the GOS 
wanted to increase income taxes for those earning more than 
50,000 euros a year.  Blanco's office later retracted his 
statement. (El Pais, 8/31; All Media, 9/1) 
 
GOS Spending Nearly Double Its Revenues, Plans to Cut 
Ministerial Spending 
 
2.(U) From January through July, the GOS took in 58 million 
euros and spent 108 million, for a deficit around 8% of GDP 
during the period.  Spending was up 22% from the same period 
last year, and revenues were down 26%.  One press report said 
that Central Bank analysts now expect the combined deficit of 
all levels of the public sector to be between 11% and 12% 
this year, well above the Economy Ministry forecast of below 
10%.  Zapatero is expected to announce on September 13 a plan 
that will cut 15 billion euros in spending from the Interior, 
Housing, Justice, and Public Administration ministries.  (El 
Confidencial, 9/1 and 9/2; El Pais, 9/4; Embassy calculation) 
 
Unemployment Rate Hits 18.5% in July, More Jobless Registered 
in August 
 
3.(U) Spain,s unemployment rate reached 18.5% in July, up 
from 18.2% in June, according to Eurostat.  Spain continues 
to have the EU's highest rate, nearly double the EU average 
of 9.5%.  Separately, the Labor Ministry reported that the 
number of registered unemployed rose by 85,000 in August. 
Comment: While this figure almost always rises in August and 
the increase may reflect an increase in the size of the labor 
force, the unemployment rate is expected to continue rising 
in the fall.  (El Pais, 9/2; ABC, 9/2; El Confidencial, 9/2) 
 
GOS Agrees to Extend Supplemental Unemployment Benefits 
 
4.(U) Under strong pressure from labor and leftist political 
parties, the GOS agreed to expand eligibility for the 
six-month 420-euro supplemental unemployment benefit 
announced August 13 (reftels).  Once the congress approves, 
those whose regular unemployment benefits expired on or after 
January 1 will be eligible, not just those whose benefits 
expired on or after August 1, as originally announced. The 
GOS also agreed to remove the condition that unemployment be 
above 17% in order to consider extending the supplemental 
benefits beyond the six-month period. The eligibility change 
could add another 300,000 beneficiaries at an estimated 
additional cost of 700 million euros. (Cinco Dias, 9/3) 
 
Ford Seeks to Lay Off 600 Employees 
 
 
MADRID 00000901  002.2 OF 002 
 
 
5.(U) Ford announced that it plans to obtain authorization to 
lay off 600 of its 7,100 employees at its Valencia plant.  It 
will start the formal consultation process September 3, in 
accordance with Spanish law.  Ford has requested temporary 
furloughs four times within the last twelve months.  Unions 
have spoken out against the request, calling it unjustifiable 
for economic or production reasons. (Expansion 9/3, Europa 
Press, 9/3) 
 
Prices Rise Slightly in August, Still Below Last Year's Level 
 
6.(U) The National Statistics Institute's preliminary August 
inflation estimate suggests that prices rose by some 0.4% 
during the month.  The headline year-on-year rate was -0.8%, 
up from July's -1.4%.  Year-on-year rates are expected to 
remain negative for a few more months while they still 
include the impact of the late-2008 oil price decline.  The 
final August rate will be released next week.  (El Pais, 
8/29, Embassy calculation) 
 
Iberdrola Expects $500M in U.S. Stimulus Funds for Wind Power 
Projects 
 
7.(U) Out of $502 million in stimulus funds for renewable 
energy projects announced by the Treasury Department 
September 1, $294 million went to already-completed Iberdrola 
Renewables wind farm projects.  The company has applied for 
another $200 million in the next phase of disbursements for 
projects currently under construction.  It has over 3,000 MW 
of installed wind capacity in the U.S. -- over 10% of the 
U.S. total -- and employs 800 people.  Acciona, the world's 
second largest wind power producer after Iberdrola, also has 
applied for stimulus funds. (Treasury press release, El 
Confidencial, Iberdrola Renewables statement) 
CHACON