MADRID WEEKLY ECON/COMMERCIAL UPDATE JUNE 9 - JUNE

UNCLAS SECTION 01 OF 02 MADRID 000671 SIPDIS STATE FOR EUR/WE AND EEB/IFD/OMA E.O. 12958: N/A TAGS: ECON EINV ELAB ENRG SOCI SP SUBJECT: MADRID WEEKLY ECON/COMMERCIAL UPDATE JUNE 9 - JUNE 13 REF: A. MADRID 641 ¶B. MADRID 616 MADRID 00000671 001.2 OF 002 Table of Contents: ECON/ELAB: Strikes lead to empty grocery shelves ECON: Financial Times special report on Spain SOCI/ECON: Spain strongly opposes EU proposal to allow longer work week ENRG/EINV: Iberdrola rules out bid for British Energy ENRG/EINV: Repsol files suit against Ecuador ECON: May inflation 4.6 percent STRIKES LEAD TO EMPTY GROCERY SHELVES ¶1. (U) The combination of various strikes in Spain, primarily led by independent truckers and fishermen, have led to notable shortages in fresh produce and a potential shortage in medical supplies nationwide. Store owners reported June 12 that supplies of fresh fish and vegetables were extremely low and close to being depleted. A prominent pharmaceutical distributor added that pharmaceutical stocks could hold until Monday, June 16 at which point there could be problems in supply should the strike continue. The strikes come in large part as a result of the impact of high fuel prices, but are also based on complaints by workers who say they are being undercut by larger businesses and cheaper imports (as in the case of the fishermen's strike). The fishermen's strike began on May 30 and came to an end on June 11, but the truckers' strike continues, although the GOS has now broken blockades so that the 80% of truckers who are not striking will be able to deliver shipments. The strikers are seeking GOS responses to rising fuel prices that they say are causing them to operate at a loss. Madrid taxi drivers also announced a strike beginning June 13, saying that the fare increase offered by the GOS would not fully compensate for the increased fuel price, but as of midday June 13 taxis appeared to be operating normally. Post will report in more detail on the trucking strike septel. (All Media) FINANCIAL TIMES SPECIAL REPORT ON SPAIN ¶2. (U) The lead article is called "After the bust, a time for adjustment." The piece explains how the slowdown has come faster than people expected and how sharp it is. Two years ago, Spain was creating about a third of new jobs in Europe. This year, unemployment is rising faster than anywhere else in the EU. However, belying the FT's reputation in Spanish government and business circles as the purveyor of doom and gloom about Spain, the FT also quotes Spanish Banking Association adviser Federico Prades' "glass half full" perspective. He says that public and corporate finances are strong, much external borrowing has gone to modernize Spain's manufacturing sector, and the banking system is healthy. But critics insist that additional labor market reform is essential and that public spending must be more efficient. A more efficient judicial system would also be very beneficial. The FT Special Report also contains articles on banks, real estate, the Prince of Asturias awards, Expo 2008 in Zaragoza, small firms in the Basque Country, and energy. (Comment: While not underplaying the problems affecting the Spanish economy, the report also highlights some of the Spanish economy's strengths, including the economy's internationalization. For instance, the Ibex-35 blue-chip companies earned almost half of their income outside of Spain in 2007.) (FT 6/11) SPAIN STRONGLY OPPOSES EU PROPOSAL TO ALLOW LONGER WORK WEEKS ¶3. (U) Spain remained strongly opposed to the European Council's approval of a measure to allow member states to increase the maximum work week from 48 to 65 hours. Foreign Minister Moratinos and Minister of Labor Celestino Corbacho have vowed that Spain will act to change the directive - which must be approved in the European Parliament -- before it takes effect. Minister Corbacho criticized the measure, saying that it would represent a strong setback to the social agenda in Europe. Others, including Spanish unions such as the UGT, have warned that the proposal sets a dangerous precedent and hinted at the possibility of "confrontations" should the measure near approval by the parliament. Meanwhile opposition Partido Popular spokesperson Jose Ignacio Echaniz accused the government of confusing public opinion on this matter noting that increasing work hours would be optional and not obligatory for member states. (EL Pais, 6/10) MADRID 00000671 002.2 OF 002 IBERDROLA RULES OUT BID FOR BRITISH ENERGY ¶4. (U) Iberdrola Chairman Ignacio Sanchez Galan told reporters that the company would not bid on Britain's largest nuclear energy producer, British Energy, because the asking price was too high. Earlier this week, British Energy said it had rejected the proposals it had received so far because they were not high enough. Galan said Iberdrola remained interested in the British nuclear power sector. (El Pais, 6/13) REPSOL FILES SUIT AGAINST ECUADOR ¶5. (U) Spanish petroleum company Repsol YPF was the fifth petroleum company to file suit against the government of Ecuador for the controversial Law 42, which increases taxes on Repsol,s "extraordinary earnings" from 50 percent to 99 percent. The suit has been filed with the International Center for Settlement of Investment Disputes (ICSID),which is based in Washington. In Ecuador, Repsol operates block 16 and produces over 50,000 barrels per day. (El Pais, 6/13) MAY INFLATION 4.6 PERCENT ¶6. (U) Official Spanish year-to-year consumer price inflation for May (May 2008 compared to May 2007) was 0.1 percent below the 4.7 percent estimate announced two weeks ago (ref b) for the EU-harmonized index. This is still a significant increase from April's figure. (All Media) AGUIRRE