JOB CUTS AT MORON COULD HAVE SERIOUS NEGATIVE

C O N F I D E N T I A L MADRID 000861 SIPDIS E.O. 12958: DECL: 08/27/2019 TAGS: MARR PREL SP SUBJECT: JOB CUTS AT MORON COULD HAVE SERIOUS NEGATIVE CONSEQUENCES FOR RELATIONS WITH SPAIN Classified By: Charge d'Affaires, a.i. William H. Duncan, Reasons 1.4(b ) and (d). ¶1. (C) Summary and action request: U.S. Air Forces in Europe (USAFE) has set in motion a procurement process that is likely to result in the discharge of 50-100 Spanish workers at Moron air base in April 2010, followed by an additional 20-100 job cuts in October 2011. At the same time, we understand the U.S. Navy is facing budget cuts at the base at Rota in FY-2011 that may result in local national job losses there. This cable assesses the potential negative consequences of these job losses. Post strongly recommends consultations between the Departments of State and Defense over the implications of these job cuts and the possibility that they can be mitigated or avoided altogether. End summary and action request. ¶2. (C) Moron is a Spanish air base located near Seville in southern Spain. Along with the air and naval base at Rota (near Cadiz),Moron has played a key role in a logistical train that stretches from the U.S. to theaters of operation in Afghanistan and Iraq. Governed by a bilateral agreement on defense cooperation that dates to the Eisenhower Administration (three decades before Spain joined NATO),our defense arrangements with Spain are a cornerstone of the bilateral relationship. Some 6,000 U.S. military flights transit Spain each year and recent years have seen an annual average of 150 port calls by U.S. warships. ¶3. (C) Post has for some time been engaged in consultations with USAFE regarding cutbacks at Moron air base that will result in the dismissal of a number of Spanish employees. We appreciate USAFE's willingness to engage on this issue. The job cuts are, as we understand it, driven by a combination of operational, budgetary and contracting policy factors and (after separation and potential litigation costs are paid) will save around $14 million annually. We are not in a position to second-guess USAFE on those matters. However, we want to ensure that senior decision-makers at the Departments of State and Defense understand the Spanish political context and the potential negative consequences of the job cuts, which we believe could be very serious and spill over into other areas of the military-to-military and indeed overall bilateral relationship. We also understand the U.S. Navy is looking at serious budget cuts at Rota next year, raising the possibility of multiple rounds of job losses at the bases. ¶4. (C) We saw last year a concrete example of how seriously the GOS takes labor issues at the two bases. During annual labor negotiations, the Spanish union made numerous demands regarding wages and working conditions. DOD was able to agree to all but two. No jobs were at stake, and the outstanding requests bordered on the absurd (e.g., being paid 40 hours wages for a shorter work week). Nevertheless, the Ambassador was called by Minister of Interior Rubalcaba and asked to explain why DOD could not satisfy all the demands. The Minister's inquiry started with President Zapatero. We were able to offer a convincing explanation of our position and quiet the President's concerns, but the incident was revealing. On paper, Rubalcaba has no role whatsoever with the respect to the bases or the workers. We surmise Zapatero asked him to engage us on the issue (rather than his Ministers of Defense or Labor) because of Rubalcaba's formidable reputation as a political fireman (Zapatero describes him as the "sharpest knife in the drawer"). If the GOS was that concerned over relatively minor and excessive union demands over working hours, what will the reaction be to a large-scale job cuts? ¶5. (C) Also, last year when this issue rose to the cabinet, Zapatero was the most popular politician in Spain and his political fortunes were at their zenith. Since then, the world financial crisis has hit Spain full force, and Zapatero's popularity has crumbled. Unemployment has risen from less than nine percent last year to over 18 percent today. Analysts uniformly predict it will pass 20 percent next year. Analysts also insist Spain will be one of the last countries in Western Europe to struggle out of recession. Zapatero and his party lost control of Galicia in local elections in March 2009 and recently dropped behind the main opposition party in the polls for the first time since he won the presidency in 2004. Everyone here, including government insiders, predicts a bitter political season this fall as Zapatero struggles to get his annual budget passed (he does not have a majority in congress) and the opposition parties sense weakness. All of this comes down to one issue: unemployment. Ordinary Spaniards are understandably terrified by spiraling jobless rates, and Zapatero has to stop the bleeding or risk seeing his second term go to ruin. When U.S. Secretary of Transportation LaHood met with Zapatero in May, the President sought the Secretary's personal assistance in convincing General Motors to preserve jobs at Spain's Opel plant. ¶6. (C) The two bases are located in Andalusia, Spain's most populous autonomous community (i.e., state),and a stronghold for Zapatero's party. Earlier this year when he tried to shore up his image with a cabinet shuffle, Zapatero brought the powerful President of Andalusia and Socialist Party baron, Manuel Chavez, into his cabinet as Third Vice President. No politician slipping in the polls can ignore his base, and the core of Zapatero's base is Andalusia. ¶7. (C) The principal opposition party, the Partido Popular (PP),is likely to make things worse for us by using the job cuts to beat up Zapatero. President Obama is wildly popular in Spain, and Zapatero has very publicly made a new and closer relationship with the U.S. a centerpiece of his foreign policy. The PP will be quick to use job cuts at the bases to prove that Zapatero has failed in his attempts to improve ties with the U.S. Conversely, parties farther to the left will use the job cuts to argue that Spain's returns on its defense arrangement with the U.S. (never popular with the Spanish left) are ever-diminishing. Since any additional Spanish effort in Afghanistan is always regarded here as something Spain does for the U.S., we would expect many to ask why additional Spanish troops should be put at risk when the U.S. is putting Spanish workers in the unemployment line. Some politicians and journalists will no doubt appeal to the defining Spanish characteristic - pride - and insist Zapatero somehow retaliate for the U.S. "insult." ¶8. (C) For all of these reasons, the job cuts at Moron (and maybe Rota after that) could put Zapatero in an extremely difficult position. Assuming he cannot reverse the decision (and we expect the GOS would reach out to senior-levels of the USG in an effort to do so),he may feel compelled to do a number of things that will be unhelpful to the USG. First, our agreement on defense cooperation frees us from paying a number of local taxes and fees. Revenue-hungry bureaucrats and politicians periodically take a run at these exemptions (at the moment, they are targeting a one million dollar a year tax break on utilities),but we have so far enjoyed the support of the GOS in beating off these efforts. If we cut the jobs, we may find the cost of operating in Spain will suddenly increase, potentially eating up any payroll savings. We should also never forget that our use of the bases functions on the basis of good will and trust. If we give the GOS a black eye over jobs, we anticipate the good will which lubricates the day to day working of our military presence will dissipate. This could affect routine operations (e.g., blanket flight clearances) and the "special requests" we make from time to time driven by unforeseeable operational necessities. It also poisons the well for future attempts to engage the Spanish military more closely on U.S. priorities (e.g., Africom). ¶9. (C) One of the most dangerous aspects of this situation is public relations. The two bases get very little media attention (and almost all of that comes from allegations U.S. military flights via Spain carried terrorism detainees to Guantanamo). No news is good news in this case. The Spanish public is pacifistic and suspicious of military activity, especially U.S. military activity. Nevertheless, these two bases are far from the media centers of Madrid and Barcelona. Anything that spotlights the bases in the media is probably going to hurt our interests. We can certainly anticipate the unions will go to the press to claim they are being mistreated by the U.S. military, casting our use of the bases in a very negative light. ¶10. (C) Avoiding these job cuts altogether would be the safest course. As we understand the situation that would mean identifying requirements for Moron that would necessitate keeping operational capabilities at the current level. Obviously Embassy Madrid cannot do that, but we strongly recommend DOD look seriously at this possibility. It may be that there are activities conducted elsewhere that could be moved to Moron or Rota, offsetting the job losses anticipated under the current scenario. We also urge that before jobs cuts are made at Moron, DOD review the situation carefully and consider as well possible future cuts at Rota. If this is done one base at a time and is driven exclusively by contracting officers, we are likely to be forced to go back to the Spanish repeatedly in a "death of a thousand cuts" scenario. That will probably only increase the pain for all concerned. We recently learned that a contract award may occur as early as October 2009, and the available time for interagency consultations on this issue appears to be short. We therefore urge the Departments of State and Defense to discuss these issues at the earliest opportunity. DUNCAN