MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE - JANUARY

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SIPDIS

SIPDIS

DEPARTMENT FOR EUR/WE AND EEB/IFD/OMA

E.O. 12958: N/A
TAGS: ECON EFIN EINV ENRG EPET SCUL SOCI FR SP
SUBJECT: MADRID WEEKLY ECON/COMMERCIAL/AG UPDATE - JANUARY
7 - JANUARY 11

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Table of Contents:

ECON/EFIN: More Predictions of Financial Downturn
ECON/EPET: Repsol to Increase Diesel, Biodiesel Production
ECON/SCUL: Spanish Culture Minister Very Satisfied with
Florida Court Ruling on Odyssey
ECON/EINV: Showdown Between European Commission and GOS over
Endesa Takeover Restrictions
ECON/ENRG: More Electricity Connectivity Anticipated Between
France and Spain
SOCI/ECON: GOS Amends Housing Incentives to Encourage Renting

More Predictions of Financial Downturn


1. (U) The FT,s Leslie Crawford says: International
financial gridlock has destroyed the country,s recent bout
of economic euphoria. The article describes December,s bad
inflation and unemployment numbers, the international credit
squeeze, lower growth estimates and signs of falling house
prices. The article says that provincial towns are being
especially hard hit. Crawford notes that both political
parties are now emphasizing economics much more in the
election campaigns. (Comment: This FT page 3 story will
surely irritate the GOS. Government officials and even
PP-leaning businessmen complain about FT coverage of Spain.
The government,s line is best expressed by Labor Minister
Jesus Caldera: One bad quarter does not cancel out 15 good
ones. The opposition argues that the PSOE squandered a
PP-generated bonanza. The trend, if not the overall record,
benefits the opposition.) (Financial Times, 1/9/08)

Repsol to Increase Diesel, Biodiesel Production


2. (U) Spanish oil company Repsol announced on January 8 that
it had approved plans to invest 3.2 billion euros to increase
diesel production at its Cartagena (Spain) refinery. The
project would double the refinery's production to 11 million
tons per year and would partially focus on biodiesel
production. Repsol representatives anticipate that this
project will be completed in 2011 and will employ more than
6,000 workers along the way. Spain is the largest producer
of bioethanol in Europe and is rapidly expanding its
biodiesel production. Repsol is one the 10 largest oil and
gas companies in the world. (Repsol press release, 1/8/08).

Spanish Culture Minister Very Satisfied with Florida Court
Ruling on Odyssey


3. (U) Spanish media reported heavily on the January 10 US
Magistrate Court judgment requiring Odyssey Marine
Exploration to hand over to the GOS all details pertaining to
the Black Swan shipwreck site and treasure find, including
its location. Odyssey has thus far been reluctant to share
this information unless the GOS agreed to certain
confidentiality restrictions; the ruling does include some

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confidentiality restrictions. The Florida judge also set a

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date of March 5 for parties to return to the court to
determine whether Odyssey has fulfilled its obligations. The
GOS has consistently asserted that the Black Sawn shipwreck
is of Spanish provenance and that the U.S. company was not
authorized to conduct salvage operations on it. The Spanish
Culture Ministry has pronounced itself "very satisfied" with
the ruling and says that it validates past GOS claims about
the find. We have a previously-scheduled meeting with an
Odyssey representative on January 17 and will report on the
company's reaction. (All Media/Embassy, 1/11/08)

Showdown between European Commission and GOS over Endesa
Takeover Restrictions


4. (U) In defiance of a European Commission (EC) ruling, the
GOS has indicated it will not back off on conditions it
imposed on the 2007 takeover of formerly state-owned
electricity giant Endesa. Italian firm Enel and Spain's
Acciona won their takeover bid for Endesa Spain (one of the
largest utilities in the world) after a controversial and
drawn out battle in which the GOS was heavily involved. In
an effort to maintain a "Spanish fingerprint" on the company,
the GOS mandated that Endesa be maintained as an independent
company and brand and required that the company maintain its
decision making center in Spain. The EC overruled these and
other restrictions on December 5, giving the GOS until
January 10 to repeal them. On January 10, the Spanish
government sent a letter to the EC insisting that the
conditions it imposed were legal. This matter will likely
proceed to the European Court of Justice. (El Pais, 1/11/08)

More Electricity Connectivity Anticipated Between France and
Spain

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5. (U) During the January 10 Spain-France summit, President
Zapatero and President Sarkozy agreed to construct a new
high-tension electricity line between the two countries. The
agreement includes plans to establish a consortium between
Spain's electricity grid operator REE and its French
counterpart RTE to oversee the construction. Spain, which
already imports electricity from France, is a net exporter of
electricity overall, transmitting large amounts of
electricity to Portugal and some to Morocco. (Cinco Dias,
1/11/08)

GOS Amends Housing Incentives to Encourage Renting


6. (U) The GOS approved on January 11 amendments to its
2005-08 Housing Plan aimed at increasing the number of
renters, especially among lower- and middle-income families.
One change reduces the requirements on property owners
seeking to qualify for a 6,000-euro subsidy for renting out
their properties; they now can charge higher rents and rent
out larger apartments and still qualify. Another allows
autonomous community governments to add to the federal
government subsidy for low-income renters. Another gives
subsidized renters the ability to enter into contracts with
their landlords that include the the option of buying the
homes they rent. This option already exists in many regions
of the country, but the national government action will
strengthen the protection of such clauses. The amendments
also contain incentives for real estate developers to convert
their unsold property into rental or other properties
designated as "Officially-Protected Homes" (Viviendas de
Proteccion Oficial.) Under Spanish law, builders can receive
subsidies for building homes in exchange for agreeing to
price caps and other conditions. Typically these
"Officially-Protected Homes" are newly constructed
residences, but the new amendments would provide the option
of adding used homes to the pool. The amendments also raise
slightly the amount sellers are allowed to charge for
properties in this pool. (GOS press release, 1/11/08)







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