MADRID — Spain’s Council of Ministers finally approved a bitterly controversial film law Friday morning, although government critics say some of the draft law’s teeth have been pulled.

The government left out the major bone of contention between Spanish producers and TV operators: a tightening of broadcaster film investment quotas, which oblige Spanish broadcasters to invest 5% of revenues in Spanish or European films.

An earlier version of the draft law obliged broadcasters to earmark part of that quota, set at 0.9% of broadcasters’ annual revenue — E 23.1 million ($31 million) for 2005 — to pre-buy or co-produce films from indie producers.

That no longer applies, and, for the government’s critics, the law is a comedown. In the run-up to general elections, they argue, Spain’s ruling PSOE party hasn’t wanted to rock the boat with Spain’s highly influential broadcasters.

Despite vigorous exhibitor lobbying, the draft law also makes no mention of capping studio rentals in Spain.

“It only favors producers with multiple subsidies, and Hollywood’s major studios, who are allowed to go on abusing their dominant position over Spain’s exhibition sector,” said a press release from Spain’s Fece exhibitors’ association.

Spanish producers’ reaction was more favorable, if qualified.

“It’s a positive law. But, rather than just dealing with the established situation, it should also address the damage done by new media to traditional forms of distribution,” said producer Antonio Saura.

Spain’s Fapae producers lobby highlighted the draft law’s two main achievements. Presenting the draft law, Spanish culture minister Carmen Calvo committed to raise Spain’s main subsidy fund, the Fondo de Proteccion, from E65 million ($87.5 million) this year to $134.6 million in four years time.

The draft law also introduces new tax breaks in Spain. Its clearest fiscal novelty is to maintain breaks for producers at 18% through 2011.

Also, financial investors, teamed in so-called Economic Interest Groups, see write-offs raised from 5% to 18%.

It remains unclear, however, just how the tax breaks will work. Or if they will represent a real lure for investors.

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