US embassy cable - 04MADRID2248

UNCLAS SECTION 01 OF 02 MADRID 002248 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, EAID, ETTC, PTER, PINR, SP 
SUBJECT: SPANISH SECRETARY OF STATE FOR ECONOMY:  TERRORISM 
FINANCE, IRAQ, ECONOMIC REFORM 
 
REF: A) MADRID 2230 B) MADRID 2204 C) MADRID 2012 
 
1. (SBU) Summary.  In a June 14 meeting with Charge, Spanish 
Secretary of State for Economy David Vegara said the fight 
 
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against terrorism finance, including close cooperation with 
the United States, would continue to be a priority for the 
Ministry of Economy and Finance.  On Iraq reconstruction, the 
senior Spanish Economy Ministry official reiterated that 
Spain will honor the commitments made at the October 2003 
Madrid Donors' Conference, forecasting the $5 million 
contribution to the International Finance Corporation Small 
Business Facility and $20 million to the IRFFI would be 
deposited this week or next.  Vegara described stimulating 
productivity, respect for market mechanisms and fiscal 
stability as the pillars of the Spanish Socialist Party 
(PSOE) economic program.  He downplayed media speculation on 
the seriousness of the PSOE's commitment to economic reforms, 
recognizing the government needed to earn the trust of 
Spain's major economic players.  Vegara said he hoped to meet 
with Treasury officials when next in Washington, at a minimum 
on the margins of the annual IMF/WB meetings.  End Summary. 
 
Terrorism Finance:  Toward the Top of the Agenda 
--------------------------------------------- --- 
 
2. (SBU) In a June 14 courtesy call with Charge, Vegara 
emphatically underscored the importance of the fight against 
terrorism finance to the Ministry of Economy's agenda. 
Vegara demurred that he was still reading in on the subject, 
but appreciated the GOS' work in FATF and that Spain would 
continue to play an active role on these issues, including 
close cooperation with the U.S.   Vegara took note of the 
Charge's urging that the Ministry of Economy press for rapid 
approval of implementing regulations for last year's 
terrorism finance law.  He noted he would be attending his 
first meeting of the newly created Terrorism Finance 
Oversight Committee next week and would raise the regulations 
if not already on the agenda.  Vegara said he would welcome 
U.S. views on any other terrorism finance-related issues 
where we felt additional action was needed. 
 
Iraq:  Honor Our Commitments 
---------------------------- 
 
3.  (U) Charge recounted to Vegara Vice President Solbes' 
commitment to Ambassador that Spain would honor the 
assistance pledges made at the October 2003 Madrid Donors' 
Conference.  He noted our initial concern regarding recent 
remarks by FM Moratinos as reported in El Pais (ref B), which 
Secretary of State for Foreign Affairs Bernadino Leon later 
 
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clarified that Mortinos intended to review how money was 
being spent not whether it would be contributed (ref A). 
Vegara reitered that Spain would honor its commitments.  He 
noted his intention to complete the processing for the 
deposit of $5 million for the IFC Small Business Facility and 
$20 million to the IRFFI this week or next.  He needed to 
consult with the MFA before final approval but anticipated he 
would not encounter any problems. 
 
Improving Productivity and Keeping the Budget Balanced 
--------------------------------------------- --------- 
 
4.  (U) Vegara provided a brief overview of the Zapatero 
government's economic vision, stating that the GOS was 
commited to change the growth model to a greater focus on 
improving productivity.  For instance, labor reform needed to 
ensure wage increases reflected increases in productivity. 
Fiscal disipline also formed a critical pillar of the PSOE's 
economic policy.  Vegara credited the Aznar government with 
creating a wide base of public support for sound fiscal 
policies.  PSOE intended to maintain that support, as shown 
by VP Solbes' presentation of next year's broad budget 
framework establishing expediture limits in line with fiscal 
balance.  Vegara also underscored the Zapatero's government's 
respect for markets, promising the Socialist government had 
no intention of interfering in private sector business 
decisions.   Vegara said he understood the Zapatero 
government would need to earn the private sector -- and 
American investors' --  trust, but also noted the government 
should be allowed time to establish its reputation.  He 
offered his doors were open if the Embassy needed 
clarification or coordination on specific issues raised by 
U.S.investors or other policy concerns. 
 
Comment 
------- 
 
5.  (SBU) Clearly still getting a handle on his job, Vegara 
came across as committed to sound economic policies and 
willing to work with us on terrorism finance as well as other 
issues.  In our conversation, Vegara mentioned his interest 
in meeting with his counterparts when next in DC.  We 
anticipate Vegara will attend the IMF/WB meetings this fall 
and recommend Washington agree to appropriate bilaterals if 
schedules permit. 
 
Bio Note 
-------- 
 
6. (U) A 40-year old economist from Catalunya, Vegara spent 
junior high school in Palo Alto and studied at the London 
School of Economics.  He worked at the Sabadell Bank after 
getting his degree, joining Prime Minister Gonzalez' economic 
staff at Moncloa (the Spanish White House) in the latter 
years of the Gonzalez government.  After PP gained power in 
1996, Vegara worked with Miguel Sebastian (now PM Zapatero's 
economic advisor) at Intermoney, a Spanish economic 
consultancy.  Following the Catalan Socialist Party victory 
earlier this year, he briefly joined the Catalan government, 
before being asked by PM Zapatero to serve as Secretary of 
State for Economic Affiars.  Vegara speaks fluent English. 
MANZANARES