VZCZCXRO1718
RR RUEHIK
DE RUEHMD #0042/01 0191230
ZNR UUUUU ZZH
R 191230Z JAN 10
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1678
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4298
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 MADRID 000042 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/WE, EEB/IFD/OMA, EEB/TRA 
STATE PASS USTR FOR D.WEINER 
COMMERCE FOR 4212/DON CALVERT 
TREASURY FOR OIA/OEE R.JOHNSTON AND OTP:M.CORWIN 
ENERGY FOR PIA: K.BALLOU 
 
E.O. 12958: N/A 
TAGS: EAIR ECON ECPS EFIN ELAB KIPR SP
SUBJECT: MADRID ECONOMIC WEEKLY, JANUARY 11-15, 2010 
 
REF: A. MADRID 014 
     ¶B. 09 MADRID 1161 
 
MADRID 00000042  001.3 OF 002 
 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY 
 
Contents: 
 
ECON, ELAB: Spain Undertakes "Charm Campaign" on Economy 
EFIN: Spanish Banks Facing Capital Shortages 
ECON: Revised 2009 Inflation Rate at 0.8% 
ECON, EAIR: Blanco Proposes Automated Flight Systems and 
Private Investment 
ECPS, EFIN: Telefonica Attempts to Reassure Stockholders 
KIPR: Users' Groups Attack GOS's Anti-Piracy Initiative 
EFIN: GOS and Andorra Sign Tax Information Exchange Agreement 
 
Spain Undertakes "Charm Campaign" in Response to European 
Criticism 
 
¶1. (U) Local media reported on German government criticism of 
President Zapatero's EU statement calling for economic 
sanctions for EU member countries that fail to meet specified 
objectives in the successor to the Lisbon Strategy for EU 
Growth.  Rainer Breuderle, German Minister of Economics and 
Technology, expressed concern that the plan would create a 
sanctioning authority inconsistent with the Lisbon Strategy. 
This latest criticism comes on the heels of widespread 
European skepticism over President Zapatero's EU economic 
leadership credentials at a time when his own country is 
suffering from the highest unemployment rate in the OECD 
(more than 19%).  This weak economy also continues to draw 
criticism from the opposition party.  A Popular Party 
spokesperson dismissed the recent GOS announcement on jobs 
created through stimulus packages, saying many were 
short-term in nature and that the disbursement of funds was 
politicized, with over half going to Socialist Workers' Party 
(PSOE) regions.  The GOS has hired a Belgian production 
company for 83 million euros to showcase President Zapatero's 
program to improve the domestic economy and dispel rumors 
that he does not have the capacity to direct the EU. 
Additionally, senior GOS officials are being encouraged to 
reach out to major European media outlets to discuss their 
perspectives and recommendations on the economic situation. 
(Expansion, 1/12; El Confidencial, 1/13) 
 
Large Number of Spain's Savings Banks Facing Capital Shortages 
 
¶2. (U) A considerable number of Spain's savings banks 
("cajas") are facing capital shortages.  Analysts say that 16 
of 38 cajas for which data is available have capital ratios 
below what they consider an acceptable rate of 7%.  The Bank 
of Spain has been pushing for a rapid restructuring of the 
sector in order to avoid further government interventions. 
Thus far only a few of the cajas have used the GOS "FROB" 
restructuring fund.  (Expansion, 1/13) 
 
Revised 2009 Inflation Rate at 0.8% 
 
¶3. (U) The National Statistics Institute (INE) revised its 
estimate of 2009 consumer price inflation from 0.9% (as 
reported ref A) to 0.8%.  The final rate, although the lowest 
in 50 nearly years, indicates that deflation is not a serious 
threat at present.  (INE press release, 1/14; Expansion, 
1/14) 
 
Blanco Proposes Use of Automated Flight Systems and Private 
Investment in Airport Management 
 
¶4. (U) Infrastructure Minister Blanco released a 
Congressionally-mandated report analyzing airport 
profitability and announced plans to improve efficiency and 
productivity in a speech to Congress on January 12.  With 
only nine of the 48 airports managed by the GOS earning a 
profit, the Minister blamed high salaries for air traffic 
controllers, which average around 334,000 euros annually and 
reach above 900,000 for some including overtime.  He proposed 
replacing air traffic controllers in low volume airports with 
an automated system known as Aerodrome Flight Information 
Service (AFIS).  GOS aviation officials have been in touch 
with FAA counterparts to learn more about the role of 
automated systems in the U.S. 
 
 
MADRID 00000042  002.3 OF 002 
 
 
¶5. (U) The Minister also elaborated plans to improve airport 
efficiency and profitability by restructuring airport 
oversight and management in compliance with EU regulations. 
The GOS would create a new entity, "Aena Aeropuertos, SA," to 
assume the responsibility of airport management, currently 
overseen jointly with aviation by the quasi-governmental 
agency AENA.  The new model would shift the authority for 
setting airport fees from the Congress to Aena Aeropuertos, 
SA.  It would also allow for private investment of up to 30% 
in the new entity and provide a role for autonomous 
communities.  Blanco envisions creating subsidiaries to 
manage airports with high traffic, economic viability, and 
special complexity (at present only Madrid's Barajas and 
Barcelona's El Prat would meet these criteria).  Private 
companies could invest up to 10% in the subsidiaries, while 
the autonomous communities could invest up to 39%, both would 
have management input.  Additionally, the GOS plans to create 
regional airport committees to increase local government 
involvement.  The EU deadline for separating out the airport 
management function is 2011 and the GOS anticipates 
introducing a proposed legislation before June this year. 
(All Media, Fomento and Moncloa websites, Embassy) 
 
Telefonica Attempts to Reassure Stockholders after 
Devaluation of the Venezuelan Bolivar 
 
¶6. (U) Telefonica issued a strong statement attempting to 
calm and reassure its stockholders in light of the 
devaluation of the Venezuelan Bolivar (devalued 50%, from 
2.15 to 4.3 Bolivars to the dollar) on January 11. 
Telefonica's share prices fell 3% after news of the 
devaluation, the largest drop in over a year.  Both ING and 
Morgan Stanley are predicting that the devaluation will have 
a significant impact on Telefonica's profits over the next 
three years, with estimates of the cost ranging from 2 to 7 
billion euros. The Venezuelan branch had been the company's 
largest and most profitable in Latin America, responsible for 
9.2% of the company's total cash flow.  (Cinco Dias, 1/12) 
 
Internet Users' Groups Attack Government's Anti-Piracy 
Initiative 
 
¶7. (U) Internet users' advocacy groups launched a new 
campaign against the government's legislative proposal to 
expand its authority to take down or block websites that host 
IPR-infringing material.  Activists presented 
"RedSOStenible.net" (Sustainable Net) with the intention of 
organizing actions both on and off the Internet during 
Spain's EU Presidency to convince the public that the 
government's proposed anti-piracy measures are unworkable. 
According to one of the promoters of the new campaign, the 
government's initiative "is not a law against IPR violations 
but a law against civil liberties."  The GOS amended its 
original proposal (ref B) to include a judicial review and 
authorization before shutting down any website, but Internet 
users consider the safeguards insufficient.  Comment: This is 
the third campaign/manifesto launched by the "internautas" 
since the government introduced legislation in early 
December.  These populist advocacy groups are very vocal but 
it remains unclear how numerous they are or whether they have 
any influence.  The Internautas' Facebook page has 7,000 
members, but the page where the manifesto was published has 
over 200,000 and hosts a lively dialogue.  End comment.  (El 
Pais, 1/13) 
 
Spain and Andorra Sign Tax Information Exchange Agreement 
 
¶8. (U) On January 14, Spain and Andorra signed a Tax 
Information Exchange Agreement (TIEA).  This latest agreement 
represents another step in Andorra's efforts to be removed 
from the list of international tax havens.  As part of the 
agreement, Andorra commits to bring its regime into 
compliance with OECD standards.  Andorra is seeking TIEAs 
with a number of European countries as well as the United 
States.  (El Confidencial, 1/14) 
 
SOLOMONT