VZCZCXRO4118
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHMD #0913/01 2550930
ZNR UUUUU ZZH
R 120930Z SEP 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1207
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4122
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000913 
 
SIPDIS 
 
STATE FOR EUR/WE, EEB/IFD/OMA 
COMMERCE FOR 4212/D.CALVERT AND ITA/A.PARRIS 
TREASURY FOR OIA/OEE:R.JOHNSTON 
ENERGY FOR PIA:K.BALLOU 
 
E.O. 12958: N/A 
TAGS: ECON EIND EINV ELAB ENRG KGHG SP
SUBJECT: MADRID ECONOMIC WEEKLY, SEPT. 7-11 
 
REF: A. MADRID 901 
     ¶B. MADRID 172 
 
MADRID 00000913  001.2 OF 002 
 
 
Contents: 
 
ECON: Zapatero Previews 15 Billion Euro Tax Increase 
EIND/EINV/ELAB: GM Decision to Sell Opel Likely to Cost 1,700 
Spanish Jobs 
ECON: GDP Revision Shows Recession Started Earlier 
ECON: Prices Rose 0.3% in August 
ENRG/KGHG: GOS, Cities to Plug In Electric Vehicles 
 
Zapatero Previews 15 Billion Euro Tax Increase 
 
1.(U) Appearing before Parliament on September 9, President 
Zapatero said the GOS' proposed 2010 budget would impose tax 
increases equal to 1.5 percent of Spain,s GDP.  He said that 
the "moderate rise" in taxes was needed to "guarantee 
sufficient capacity to meet the needs of providing social 
protection (unemployment benefits) and investing in 
infrastructure."  He did not specify which taxes would be 
increased but again assured that taxes on earned income would 
not be among them.  The GOS expects the 2009 budget deficit 
will be 9.5 percent of GDP (Note: financial analysts predict 
that it will surpass 10%).  Zapatero argued that the increase 
would bring tax revenues as a share of GDP only to the level 
he inherited upon taking office in 2004 and would remain 
below the European average.  Opposition leader and PP 
President Rajoy criticized the proposal, calling the tax 
hikes "counterproductive" and suggesting that increases will 
only create more unemployment.  Other parties, legislators 
were also critical.  (All Media, 9/10) 
 
GM Decision to Sell Opel Likely to Cost 1,700 Spanish Jobs 
 
2.(U) Spanish press reports suggest that GM's decision to 
sell a controlling stake in Opel to the Canadian/Russian 
consortium led by Magna likely will cost 1,700 of the 7,500 
jobs at Opel's Figueruelas plant in Zaragoza.  Union leaders 
reacted negatively to the September 10 announcement of the 
decision, as they favored a competing bid by RHJ that was 
expected to cost the plant only around 1,000 jobs.  A number 
of steps remain before the deal can be completed.  (All 
Media, 9/11) 
 
GDP Revision Shows Recession Started Earlier 
 
3.(U) Revised GDP figures from the National Statistics 
Institute show that Spain,s recession began in the second 
quarter of 2008, not the third quarter as previously 
reported.  Instead of growing by 0.1% in the quarter, GDP 
fell by 0.02%.  The revised figures showed that full-year 
2008 growth was 0.9%, down from the previously reported 1.2%. 
 Comment:  While the practical impact of the difference in 
growth between 0.1% and negative 0.02% was very small, the 
revision may give the opposition more ammunition and further 
damage the government's credibility, as it shows that the 
recession had already begun at a tQ'PQ_H% 
0.8% below that of August 2008.  Comment:  Annual inflation 
rates are expected to remain negative for a few more months 
while they still include the impact of the late-2008 oil 
price decline.  Underlying inflation (not including energy or 
food prices, which are more volatile) remains low but 
positive.  (EXPANSION) 
 
GOS, Cities to Plug In Electric Vehicles 
 
5.(U) Industry and Trade Minister Sebastian, along with the 
mayors of Madrid, Barcelona, and Seville, rolled out on 
September 8 the "Movele" electric car project, which will 
make the three cities Spain's first to have significant 
numbers of electric vehicles.  The project has budgeted 8 
million euros for purchase grants for 2,000 vehicles by the 
end of 2010.  Grants will range from 750 to 20,000 euros for 
each vehicle from a catalog the GOS has prepared.  The grants 
are intended to cover 15-20% of the vehicles' cost.  While 
the project originally was aimed at government and corporate 
fleets (see ref B), we understand that individual purchasers 
 
MADRID 00000913  002.2 OF 002 
 
 
will be eligible for the grants as well.  The project also 
will fund infrastructure development -- a total of 546 
charging points will be established in the three cities -- 
and technical assistance.  The vehicles are expected to save 
2,700 tons of oil per year and reduce CO2 emissions by 4,400 
tons.  Minister Sebastian said that electric vehicles would 
be addressed in the sustainable economy legislation the GOS 
will soon propose.  He added that the GOS will use its EU 
presidency in the first half of 2010 to promote the 
implementation of electric and hybrid cars in the EU market. 
Spain currently has no domestic suppliers of electric 
vehicles or their components but is competing with Norway and 
the UK to attract an electric car plant planned by the Indian 
company Tata Motors.  (El Pais, 9/9; www.IDAE.es) 
CHACON