B. 09 MADRID 1026
     C. 09 MADRID 499
     D. 09 MADRID 553
     E. 09 BARCELONA 160
     F. 09 MADRID 97

MADRID 00000006  001.3 OF 002

1. (SBU) SUMMARY AND COMMENT.  The center-right Popular Party
(PP), the largest opposition party in the Spanish Congress,
enters 2010 with a series of polls indicating that - by an
increasingly large margin - it would oust the incumbent
Socialists (PSOE) in a hypothetical vote, although the next
scheduled general election is more than two years away.  The
polls' findings are welcome news for the PP, which appears to
have overcome a series of corruption scandals - most notably
the "Gurtel scandal" investigating
kickbacks-for-public-contracts - that plagued the party for
virtually all of 2009, claimed numerous high-profile party
officials as victims, and tarnished the party at the
national, regional and municipal levels.  Despite the
scandals, the PP notched impressive electoral wins in 2009,
including retaking power in Galicia (Ref A), becoming the de
facto junior partner in the Basque Region (Refs B and C), and
besting the Socialists in European Parliamentary elections in
June (See Ref D).  Fighting as much for his own political
career as for the party's credibility, PP leader Mariano
Rajoy spent much of the fall of 2009 undertaking a series of
anti-corruption initiatives to shore up the party's viability
as an alternative to President Zapatero's increasingly
unpopular Socialists.  The PP appears for now to have
stanched the damage from the various scandals, but thousands
of pages of court documents have yet to come to light and
judicial proceedings remain ongoing.  END SUMMARY AND COMMENT.

//Fighting Back with Anti-Corruption Initiatives//

2. (SBU) In end-of-the-year reflections, Rajoy publicly
admitted in December that 2009 was "a very tough year" while
even friendly, conservative media less charitably described
2009 as "a nightmare" for the party.  In addition to the
alleged intra-party espionage scandal between rival factions
with the PP (see Ref F), the party faced ongoing
investigations stemming from an initial judicial inquiry -
known as Operation Gurtel - by Investigating Judge Baltasar
Garzon of the National Court.  Garzon in February publicly
unveiled his initial findings into an investigation of
alleged corruption in the PP national leadership during the
time of former Spanish President Aznar (1996-2004), as well
as among high level officials of Autonomous Communities
governed by the PP (Valencia and Madrid).  The corruption
network was allegedly led by Francisco Correa, a now-jailed
businessman who oversaw a network of businesses involved in a
kickbacks-for-public-contracts scheme to get public funds,
mostly from city halls and autonomous regions (equivalent to
U.S. states), in addition to illegally financing the

3. (SBU) Stung by the Gurtel scandal, the PP has undertaken a
series of efforts to prevent the recurrence of a similar
crisis.  On December 21 party officials publicly unveiled a
revised code of ethics that promotes greater transparency in
internal party contracts and audits, mandates competitive
bidding in party-awarded contracts, and prohibits party
officials from being able to accept expensive gifts or
favors.  Former Minister Jose Manuel Romay Beccaria will
oversee the implementation of these changes as the party's
new Internal Practices Auditor, a newly created position.
Finally, party officials will be forced to sign a legal
document in which they promise to conduct their work with
"integrity and transparency."  In addition, press reports in
November also indicated that the PP and the PSOE - which in
October was stung by its own corruption scandal in Catalonia,
where it leads a tripartite regional government - have found
common ground to propose legal reforms to change the penal
code and the Party Finance Law to curb kickbacks-for-favors

//Recent Polls Are Encouraging for the PP//

4. (SBU) Polling since mid-2009 has been encouraging for the
PP, although the next general election is not scheduled to
take place before early 2012 and it is not assured that the
PP's good fortunes will continue at expense of the PSOE,
which is under fire for its handling of the economic crisis,
among other setbacks.  The March 2008 general election gave
the PP 39.7 percent of the vote and 154 seats in the 350-seat
Congress of Deputies, while the 43.6 percent of the vote that
Zapatero's PSOE received enabled it to form a minority

MADRID 00000006  002.3 OF 002

government with 169 seats, seven shy of a majority.  A series
of polls conducted during November and December all suggest
that the PP has between 1.5 - 5.5 percent more support among
respondents than the PSOE.  Polling experts have extrapolated
that this data could translate into as many as 165-170 seats
for the PP in a hypothetical vote, enough to give the PP a
plurality in Congress.  Recent polls further suggest that -
through increased voter abstention and by losing support to
smaller leftist parties - the PSOE could be left with just
145-150 seats.  The next scheduled key election will be held
in late 2010 in Catalonia, where the PP has not traditionally
fared well. (See Ref E).

//Background on the Gurtel Scandal and Its Key Victims//

5. (U) More than 100 people have been indicted thus far in
the Gurtel scandal, which has left in its wake numerous
high-profile PP victims, who were either fired or forced to
resign.  Among those indicted, charges have included
illegally financing the PP, money laundering, tax fraud,
influence-peddling, forgery of public documents, and
prevarication or abuse of trust.  Foremost among these
victims were the national party's treasurer (who is also a
Senator), the party's number-two official in Valencia, a
member of the European Parliament, a regional minister, four
mayors and other senior party officials, most often in the
PP-led regional governments of Madrid and Valencia,
traditional strongholds for the party.  The scandals also may
have caused permanent damage to Francisco Camps, the
President of the Autonomous Community of Valencia and a
one-time rising star whom many predicted could have even been
an eventual future contender for party leader.  A brief
outline of some of the key Gurtel victims follows.

6. (U) Luis Barcenas, a PP Senator who oversaw the party's
finances for 20 years, professes his innocence but resigned
his post as party treasurer in July 2009, claiming that he
wanted to "save the reputation of the Party."  Publicly
available investigative documents allege that he received
millions of euros in kickbacks from companies linked to
Correa, the businessman at the heart of the scandal, in
exchange for assurances that Correa's companies would win
contracts from the Ministry of Public Works during the Aznar
administration.  Barcenas was forced to resign after he was
accused by Garzon of illicit association, money laundering,
and a crime against the Public Administration for allegedly
having facilitated the illicit activities of Correa.  Because
Barcenas remains a Senator, the Supreme Court will
investigate his case.

7. (U) Judge Garzon initially investigated Francisco Camps,
President of the Autonomous Community of Valencia, for having
awarded public work to some Correa's companies in exchange
for such gifts as expensive, tailor-made clothing.  Garzon
alleged that Correa paid for the suits that Camps bought in a
shop in Madrid and accused other leaders of the PP-Valencia
of being complicit in the activity.  Garzon had to transfer
the case to the High Court of Justice of Valencia because the
people he was charging were members of an Autonomous
Parliament.  In early August 2009, the High Court of Justice
of Valencia shelved the case after ruling that accepting
gifts was not "passive bribery" if the recipient was not
directly responsible for awarding contracts.  The Office of
the Prosecutor announced that it will appeal the sentence -
which Spain's flagship daily criticized as "a dangerous
precedent" - to the Supreme Court.  By late September, the
media published excerpts of a police report that outlined how
the corruption network allegedly worked within the Autonomous
Community of Valencia, explaining the double accounting of
the companies involved, and how everything was agreed on
between the then Secretary General of the PP-Valencia and
with the Vice President of the Autonomous Community.  The
report concluded that dirty money was deposited in PP's
vaults to illegally finance the Party.  Days later, the media
reported the police had intercepted phone conversations in
which a senior official in the PP's Valencia branch allegedly
stated that Camps was aware of the shady transactions.

     C. 2006 MADRID 3111

MADRID 00000017  001.2 OF 003

Classified By: Charge d'Affaires Hugo Llorens, reason 1.4 (D)

1. (C) Summary. Authorities confirmed late on January 3 that
they had located the body of Ecuadoran immigrant Carlos
Alonso Palate in the wreckage of the airport parking garage
bombed by ETA on December 30.  Alonso Palate becomes the
818th victim of ETA terrorism and the first ETA victim since
May 2003.  Sources close to President Zapatero said that he
would appear before Parliament to discuss his "new
anti-terrorism strategy," as Popular Party (PP) leader
Mariano Rajoy continued his criticism of Zapatero's handling
of the attack and other PP figures speculated that Zapatero
wants to maintain a dialogue with ETA.  An ETA expert told us
that ETA may have forshadowed the attack to Socialist Party
(PSOE) negotiators in a secret meeting in Ankara, but the
PSOE representatives may have misinterpreted the warning.
ETA's normally disciplined political front group Batasuna
appeared to be in disarray, with one of its leaders saying
only ETA could explain the rationale behind the attack, while
another insisted that there was no proof that ETA had
undertaken the bombing and that the Basque peace process
remained viable.  A Batasuna leader said the attack had been
"completely unexpected," but failed to condemn the bombing.
End Summary.


2. (U) Police located the body of Carlos Alonso Palate in his
vehicle, which had been on the lowest level of the five-floor
garage destroyed by an ETA bomb on December 30.  Crews
continue to search for the body of Diego Armando Estacio, a
second Ecuadoran immigrant who was in a separate section of
the garage.  There are now reports of a possible third
victim, an Uruguayan traveler whose family has reported
missing.  Alonso Palate is the 818th victim of ETA violence
and the first since May 2003, when ETA killed two police
officers in Navarra.  President Zapatero met with the
families of both victims, following criticism by one of the
families that he had not contacted them for days following
the attacks.  Zapatero also faced criticism for not having
visited the site of the bombing, which is expected to cost
over $40 million to rebuild, making it the most costly ETA
attack ever in economic terms.

3. (U) The Government took several steps to tighten security
in anticipation of possible additional attacks.  The Ministry
of Defense ordered increased security for all of its units
and the Basque Regional Government and the national
Government increased personal protection for politicians
considered to be under threat by ETA.  According to one press
report, there is concern that ETA has shifted its technology,
making current countermeasures against explosive devices less


4. (U) PP leader Mariano Rajoy harshly criticized the
Zapatero Government's response to the ETA attack, saying
Spain was "like a boat without a helmsman."  Rajoy, who had
joined Madrid PP leaders in making an early visit to the site
of the bombing, called upon Zapatero to address Parliament to
explain his counter-terrorism policies.  Socialist (PSOE)
leaders countered that the PP should demonstrate unity with
the Government rather than criticizing Zapatero, pointing out
that former President Aznar had not appeared before
Parliament when ETA broke its truce with his Government in
1999, nor had the PSOE asked him to.  Nevertheless, just
hours later, sources close to the Zapatero Government told
Spanish media that he would appear in Parliament "once all of
the facts were available" to discuss his strategy.  Socialist
politicians discussed the possibility of establishing a new
counter-terrorism pact to broaden its current pact with the
PP.  Rajoy argued that the PSOE had broken the PP-PSOE pact
by engaging in talks with ETA and called on the PSOE to
re-implement the existing pact rather than open it to
renegotiation simply to include other political parties.

MADRID 00000017  002.2 OF 003

Some PP leaders expressed concern that Zapatero intends to
maintain contacts with ETA in spite of the bombing.
Meanwhile, the moderate Basque Nationalist Party (PNV)
reconfirmed its support for the Government's decision to
suspend negotiations with ETA.


5. (C) Oscar Beltran (strictly protect), a journalist in the
Basque Region who has covered ETA for over 20 years, told
Poloff that ETA negotiator Josu Ternera may have warned PSOE
negotiators in mid-December that ETA would carry out
"actions," but that these actions were not intended to
disrupt the peace process.  News reports indicate that
Ternera, accompanied by his son and by ETA member Ainhoa
Ozaeta, held a secret meeting in Ankara on December 15 with
Basque PSOE leader Jesus Eguiguren and two unnamed PSOE
figures, during which the participants made no progress, but
also did not break off negotiations.  Beltran speculated that
the PSOE negotiators in this meeting may have misinterpreted
Ternera's warning to mean that ETA would escalate vandalism
and street violence, as it had done in October and November.
Beltran said that police sources in Paris indicated that the
French authorities had expected an ETA attack before the end
of the year, fears that evidently were not shared by the
Spanish leadership.


6. (U) Batasuna leaders emphasized their position that the
Basque peace process was "more important than ever" and
continued to accuse the Government of failing to move forward
on the negotiations and even insisted that there was no proof
that ETA had carried out the bombing.  But there were also
signs that internal Batasuna discipline was fraying.  Asked
to characterize the airport bombing, Batasuna spokesman
Pernando Barrena said that it was "up to ETA to interpret
(the attack)....  we have no doubt that what ETA has to say
to the Basque people about this incident will be very
important."  Another Batasuna leader, Joseba Alvarez,
acknowledged that the bombing had created serious problems
and said that "nobody had expected" the bombing.  There were
numerous reports that Batasuna leader Arnaldo Otegi had
wanted to be more critical of the attack in his December 30
press conference, but had been overruled by more hard line
members of the organization.

7. (C) Beltran, the Basque journalist, said that there was
tremendous confusion within ETA's support groups because ETA
had yet to issue an official declaration regarding the
bombing.  He said that ETA had been expected to issue a
declaration on January 2, but since that failed to take place
Batasuna and other ETA supporters were simply falling back on
standard extremist rhetoric.  Beltran said that the December
30 bombing had severely demoralized Basque society and
politicians across the political spectrum, who are bracing
for further ETA violence.

8. (U) In a signal that Spanish judicial authorities intend
to ramp up pressure on ETA's political front groups,
prosecutors denied a request by Otegi to attend a conference
in Germany and asked police to prepare a report on the
actions of Batasuna leaders on the day of the bombing.  Otegi
is free on bond, but faces large fines and 15 months in
prison for slandering King Juan Carlos and for leading a 2003
ceremony to honor dead ETA fighter Manuel Benaran Ordenana.
In addition to Batasuna, six other ETA front groups face
judicial action on terrorism-related charges.


9. (C) If it were confirmed that ETA negotiator Josu Ternera
had issued any kind of warning to Socialist negotiators prior
to the attack, it could prove a political bombshell for
Zapatero.  The PP would be able to point to this incident as
proof that the Zapatero Government was either incompetent in
handling the negotiations with ETA or weak in not immediately
pushing back on the ETA threat.  Even if this particular
incident does not gain traction in the media, Zapatero's
uncertain handling of the aftermath of the explosion has

MADRID 00000017  003.2 OF 003

already damaged his standing.  The PSOE is now focused on
organizing a response that both demonstrates toughness and
neutralizes PP criticism.  The need for Zapatero to make a
strong and credible presentation before Parliament appears to
be increasingly necessary if the PSOE is to stem the
bleeding.  A possible approach may be for the PSOE to seek to
create a new "anti-terrorism pact" that includes smaller
leftist and nationalist parties, particularly if the PP opts
out of a pact for reasons that appear petty or partisan.  The
PP feels vindicated in its frequent warnings to Zapatero not
to engage ETA and is in no hurry help Zapatero achieve a
graceful solution to his political predicament.


2007 January 4, 16:37 (Thursday)
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