MADRID ECONOMIC WEEKLY, JANUARY 18-22

UNCLAS MADRID 000070 SIPDIS STATE FOR EUR/WE, EEB/IFD/OMA, EEB/TPP/IPE STATE PASS USTR FOR D.WEINER COMMERCE FOR 4212/DON CALVERT TREASURY FOR OIA/OEE/R.JOHNSTON E.O. 12958: N/A TAGS: ECON EFIN KIPR SP SUBJECT: MADRID ECONOMIC WEEKLY, JANUARY 18-22 REF: MADRID 42 Contents: EFIN: EC To Limit FROB Funding of Distressed Banks KIPR: Competition Commission Accuses Copyright Management Entities of Monopolistic Practices KIPR: Online Piracy Blamed for Drop in Music Sales EC to Limit FROB Funding of Distressed Banks ¶1. (U) The European Commission will limit Spain's banking sector restructuring fund (FROB) to loans of no more than 2% of 'risk-weighted assets' to distressed banks and savings banks, or 2% of their "determined minimum amount of capital to operate effectively." The EC made this announcement after the Spanish government said the FROB would be allowed to loan up to 2.5%. The EC will make a final decision on approval before February 9. The expected approval will allow the GOS the ability to use the FROB without case-by-case authorization from Brussels, ultimately speeding up the banking sector restructuring process. The FROB has 9 billion euros and the ability to borrow up to 10 times that amount, for a total of 99 billion euros available. (El Pais, 1/19 and 1/22) Competition Commission Accuses Copyright Management Entities of Monopolistic Practices ¶2. (U) The National Competition Commission (CNC) issued a 100-page report accusing Spain's copyright management entities (collecting societies) of monopolistic practices in representing the interests of artists and entertainers and collecting royalties. In response, the largest and best-known of the management entities, the General Society of Authors and Publishers (SGAE),joined forces with three smaller groups to form a new group, 'Ibercrea' (Iberian Creators),to defend their interests collectively. The CNC report represents a new conflict between the GOS and the members of Ibercrea, who support the government's controversial legislative proposal to combat internet piracy of copyrighted works. Separately, two outspoken Spanish attorneys known for their support of free downloading, Javier de la Cueva and David Bravo, presented the report to the European Court of Justice, claiming that Spain is in violation of the EU's anti-trust laws by allowing the copyright entities to operate. Comment: The management entities, especially SGAE, are unpopular in Spain due to their support for the "digital canon" private copy levy. SGAE in particular suffers from a bad public image resulting from its aggressive practices in collecting royalties. The current anti-trust accusations, combined with demonstrations by employees over working conditions and pay, only add to SGAE's woes. (El Pais, 1/21 and 1/22) Online Piracy Blamed for Drop in Music Sales ¶3. (U) The International Federation of the Phonographic Industry (IFPI) recorded a worldwide drop of 30% in sales over the past five years, while Spanish artists have seen sales fall by 65%. Overall sales in Spain fell 17% in the past year alone. Industry representatives cited frustration over what they described as the GOS' passivity in fighting piracy. However, the head of the IFPI's local branch, Promusicae, expressed hope that the GOS would "continue the process it has just started," referring to the controversial "anti-downloading" provisions in the government's draft Economic Sustainability Law. (El Pais, 1/21) SOLOMONT