SPAIN: MFA POC DOWNBEAT ON ODDS OF SUPPORTING IAEA

C O N F I D E N T I A L MADRID 000615 SIPDIS FOR EUR/WE FOR IO/T'S JIM DETEMPLE, JIM HUSKEY FOR IO/FO'S MATTHEW GOLDSTEIN FOR IO/MPR'S LISA SPRATT FOR USUNVIE/IAEA E.O. 12958: DECL: 06/24/2019 TAGS: AORC ENRG IAEA KNNP PREL UN SP SUBJECT: SPAIN: MFA POC DOWNBEAT ON ODDS OF SUPPORTING IAEA BUDGET INCREASE REF: SECSTATE 57105 Classified By: ADCM William Duncan for reasons 1.4 (b) and (d) ¶1. (C) Post's primary MFA contact on non-proliferation issues has sounded a pessimistic note on the likelihood that Spain will support a significant real increase in the IAEA regular budget for 2010-2011, as proposed in Reftel. All of Post's MFA non-proliferation contacts undertook extensive foreign travel in the run-up to the IAEA Board of Governors (BoG) meeting during June 15-19, leaving Post unable to fully engage the MFA on this demarche in advance of those discussions. Carlos Torres, Counselor for Nuclear Non-Proliferation and Disarmament within the MFA's DG for Strategic Affairs and Terrorism, on June 12 briefly told POLOFF said the IAEA budget increase was a "complicated" issue for the GOS. On June 19, he elaborated that the GOS, a BoG member during 2008-2010, supports the work of the IAEA and agrees that the IAEA needs to increase its budget. He said that the lack of incremental increases over roughly 20 years has created a situation that is "not ideal." He questioned whether Spain would be able to support the USG position of a 9.5 percent increase to make up for past inaction. Off hand, he noted that Spain currently contributes roughly 80 million euros per year to the IAEA budget. ¶2. (U) Spain's ability to increase its contribution will be affected by the slumping economy and the need for fiscal restraint in the coming years. President Jose Luis Rodriguez Zapatero's Socialist Administration is planning to rein in public expenditure for next year after the GOS - in an attempt to boost the floundering Spanish economy - has launched the largest fiscal stimulus package in the EU (as a percentage of GDP). As a result of the increase in government spending, combined with the decline in tax receipts, the public sector is forecast to have a fiscal deficit of 8 percent of GDP in 2009, rising to 10 percent in ¶2010. In order to get on a path to meet the EU's requirement of a 3 percent deficit by 2012, the GOS expects to have to cut nonfinancial spending by 4.5 percent in 2010. According to OECD estimates published in late June, the Spanish economy is expected to contract by 4.2 percent this year and contract by 0.9 percent in 2010. Unemployment reached a high in April at around 18 percent and is expected to peak at around 20 percent by the end of the year. CHACON