By Don Quijones, Spain & Mexico, editor at WOLF STREET. His blog: Raging Bull-Shit.

Google raised the stakes today in its bitter battle with Spain’s most powerful newspaper publishers lobby, the AEDE. Following the Spanish government’s announcement of its intention to introduce a so-called “Google Tax” – a levy on websites’ sharing of links to other sites – the world’s most powerful tech company hit back with an audacious all-in.

The head of Google News, Richard Gingras, announced that on December 16th it would suspend the Spanish edition of its news service, a move that has sent jitters through the newsrooms of Spain’s largest newspaper publishers. The U.S. tech giant also said that it would remove all links to Spanish newspapers from all its Google News sites around the world.

Both moves have the potential to take a huge chunk out of Spanish newspapers’ national and international web traffic, sending members of the AEDE newspaper publishers lobby into a flurry of panic.

This morning they organized an emergency meeting, at which it was decided that a) Google was well within its rights to close its Spanish news service, and b) the Spanish government must nonetheless do something (anything, goddamnit!) to head off the threat – though the government’s intervention (at AEDE’s behest) caused the problem in the first place.

How is it possible that AEDE did not see this coming? Did it really think that it could shakedown the world’s most powerful quasi-monopoly without any repercussions? Did it not learn anything from the bitter painful experience of the more than 200 German newspapers who decided last month to abandon Google News en masse in protest against the US tech giant’s growing influence? In the space of just two weeks Germany’s largest newspaper publishing group, Axel Springer, lost 40% of its web traffic and is now pleading with Google to allow it to return to its pride of place near the top of its news aggregator.

The Height of Hubristic Madness

The greatest irony in all this is that of all Google’s services, Google News is arguably the most beneficial for media organizations. Since its inception 12 years ago, it has provided an enormous amount of web traffic free of charge – and free of advertising – to global news providers. From that traffic those same news providers are able to clock up some serious advertising dollars, or in this case, euros.

As such, expecting Google to pay for providing such a service is the height of hubristic madness. But then, as I wrote a few months back, Spain’s semi-bankrupt mainstream press is reaching the depths of desperation. In its quest to prolong the viability of its archaic business model it has no qualms in scraping the barrel of business depravity:

Unidad Editorial, the publisher of El Mundo, doubled its losses to €20.6 million in the first quarter of this year. As for Prisa, the owner of Spain’s biggest-selling newspaper El País, it lost €47.5 million in the first quarter – almost four times what it lost during the same period last year. In the last 10 years, Prisa has somehow managed to rack up total debts of over €3.2 billion.

The end result is that the majority of PRISA’s shares no longer belong to the founding Polanco family, but instead to banking institutions such as Santander, Caixabank and HSBC, not to mention the Spanish telecommunications behemoth Telefoníca and multibillionaire hedge fund owners such as Nicholas Berggruen.

Having sold out to the financial sector, one can’t help but wonder just how effectively El País will be able to discharge its reporting duties now that it is owned virtually lock, stock and barrel by the same banks and financiers on which it is supposed to report.

A Masterclass in Cartel Economics

The more El País serves as a channel for banker-friendly news, the more its largely left-wing readership declines, especially in its home market. Yet rather than adapting its business model to the new rules of the game – a game in which competition is on the rise from enterprising journalists while the digital-native generation feels little or no allegiance to any one newspaper publication – its owners joined forces with the owners of its supposed rivals (Vocento, Unidad Editorial, etc.) and did what every cartel has done throughout history: i.e., rig the rules of the game in their favour.

Naturally, the Rajoy government was more than happy to oblige, slipping in a last-minute amendment aimed at “protecting the press” in its recent Data Protection Law. Yet the new so-called “Google Law”, which is expected to raise roughly €80 million in revenues – all of which will go into the coffers of AEDE’s corporate members – is not only aimed at news aggregators such as Google News and Meneame.

Due to the highly ambiguous wording of the law, there are fears that just about every kind of news-sharing website, including small blogs such as my own, could end up getting caught in the law’s trawl net. In other words, the smallest news and entertainment providers will subsidise the largest. What’s more, the new law conveniently provides perfect cover for the government to begin watching and tracking every movement of every user and producer of Internet content.

In the face of public outrage, the government has refused to amend the law, even following Google’s latest announcement, which the deeply unpopular Minister of Education, Culture and Sport, José Ignacio Wert, rather glibly described as a mere “business decision.” Despite the suspension in service of Google News, access to information on the Internet is still guaranteed, he added. By Don Quijones.

Any lingering hopes that the Eurozone debt crisis was put to rest are brutally dashed. In anticipation, investors are bailing out: Greek stocks plunged 20% in three days. Read…  Eurozone Comes Back to Reality With a Crash

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