Storytelling In The News: #86

The story of the terrorist bomb attacks in Spain

March 12, 2004

The top story around the world today -- business and non-business -- is the news of the terrorist acts in Madrid. Ten bombs tore through trains and stations along a commuter line at the height of Madrid's morning rush hour Thursday, killing 190 people and wounding 1,200 others before this weekend's general elections. The attacks inspired world-wide feelings of horror at the news of such a large number of premeditated murders.

Information vs knowledge: who was responsible?

The news of the attacks was clearly information -- a large number of people had been killed or wounded. But who was behind the attacks? In the absence of an explanation of who was behind the attacks, it was hard to say that we had any solid knowledge of what was going on, or what the implications of it were.

The Spanish government was quick to conclude that that the the bombings had been orchestrated by members of the armed Basque separatist group ETA. As the attacks came just three days before Spain's general elections, it seemed plausible on the spur of the moment to assume that the attack was part of ETA's 36-year campaign to win independence from Spain for the Basque region, even though the attack is unlikely to help the ETA and in fact will likely galvanize public support for the ruling center-right Popular Party in its fight against Basque terrorism.

By the evening in Madrid however, the story had begun to change. Arnaldo Otegi, the leader of Eta's outlawed political wing, Batasuna, said he did not think the group was responsible, suggesting that "sectors of Arab resistance" may have been behind the attacks. And the way in which today's rush-hour bombings were carried out bears few similarities with Eta's previous modus operandi.

Thus the view emerged that the attack could be the work of al Qaeda. This possibility received some corroboration when police found a van with detonators and an Arabic-language tape with Koranic verses in the town of Alcala de Henares, 15 miles east of Madrid. Neighbors tipped police, who found seven detonators and the tape on the front seat of the van, Mr. Acebes told a news conference. Three of the four trains bombed Thursday originated in Alcala de Henares and one passed through it, the state rail company Renfe said.

Moreover, the Arabic newspaper Al-Quds al-Arabi faxed the Associated Press's Cairo office a claim issued in the name of al Qaeda claiming responsibility for the attacks. The five-page e-mail claim, signed by the shadowy Brigade of Abu Hafs al-Masri, said the brigade's "death squad" had penetrated "one of the pillars of the crusade alliance, Spain."

On Thursday night, Interior Minister Angel Acebes said that all lines of investigation were still open. A U.S. intelligence official, speaking on condition of anonymity, said, "It's too early to tell. We're not ruling anything out." France raised its anti terrorism alert Thursday night, with Prime Minister Jean-Pierre Raffarin's office saying more soldiers would patrol public transport.

The question of responsibility is central to determining the story's implications. If the attacks were a matter of internal Spanish politics, they could be ignored by other countries -- none of our business. But if they were the work of al Qaeda, then they were a reminder that global terrorism is still alive and dangerous, and clearly demonstrating a capability to launch deadly attacks elsewhere.

The global financial impact

It is interesting to note that news of the bombings per se, horrible as they were, had no effect on world financial markets. The bombings occurred around 8am in Madrid or 2 am Eastern Standard time in the US, and for much of the day the US stock market remained flat. The story that the Spaniards were once again throwing bombs at each other, was regrettable, but of little wider significance.

Everything changed however when the story changed. When the new story emerged with al Qaeda as a possible perpetrator, Wall Street stocks plunged in the last hour of trade on Thursday, as reports emerged that bombings in may have been the work of al-Qaeda. Suddenly, this wasn't just Spaniards throwing bombs at each other: now we could be dealing with the international terrorist group who might strike anywhere.

By the close the Dow Jones Industrial Average fell 168.51 points, or 1.6 per cent, to 10,128.38 and the S&P 500 dropped 1.5 per cent to 1,106.79. The technology-heavy Nasdaq Composite slid 1 per cent to 1,943.89.

David Memmott, head of block trading at Morgan Stanley, said the report of an al-Qaeda link "definitely hit the market quite hard".

Ciaran O'Kelly, head of equity trading at Banc of America Securities, agreed that the report spooked investors, but said: "The story is bigger than that. The fear in this marketplace is reflected in rising volatility levels. The index volatility has been bid up all week as investors have focused on the weak dollar, rising Treasury prices, widening credit spreads and the strength of the economic recovery."

The meaning of the story

At the time of writing, the significance of the bomb attacks cannot be determined. We have information on the physical facts of what happened: More than 190 people are dead and 1,200 others are wounded.

But so long as the story doesn't include a reliable explanation as to who was responsible and whether those persons have the intent to launch further attacks outside Spain, we can't be said to have knowledge of what is going on.

But in the absence of knowledge, even the possibility of a negative story is by itself enough to rattle financial markets around the globe.

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