US embassy cable - 03ROME4133

S E C R E T  ROME 004133 
 
SIPDIS 
 
 
E.O. 12958: DECL: 09/10/2013 
TAGS: PGOV, ECON, PREL, IT, EUN 
SUBJECT: ITALY'S EU PRESIDENCY: A SLOW START ON AN 
AMBITIOUS AGENDA 
 
REF: A. ROME 3029 
     B. ROME 3047 
     C. ROME 3237 
     D. ROME 2949 
     E. ROME 3679 
     F. SECSTATE 253041 
     G. ROME 3629 
     H. ROME 3304 
     I. BRUSSELS 4289 
     J. ROME 3976 
     K. ROME 3200 
     L. ROME 3229 
     M. ROME 3213 
     N. BRUSSELS 3726 
 
Classified By: CDA EMIL SKODON FOR REASONS 1.5 (B) AND (D) 
 
1. (C) Summary.  The Italian Government unveiled an ambitious 
work program for its EU Presidency on July 1.  Nine weeks 
into its Presidency, however, progress in most areas has been 
slow.  Given the extended August break and the December 
holidays, Italy has, in effect, just over three months to 
conclude work on its far-ranging and ambitious agenda.  This 
cable evaluates the first two months of Italy's EU 
Presidency, gauging the progress made toward reaching both 
its stated objectives and other issues of interest to the 
U.S., and assesses what will likely be completed by December. 
 
2. (C) The Italian EU Presidency began in a barrage of 
negative press highlighting PM Berlusconi's legal problems 
and conflicts of interest, and questioning his commitment to 
EU policies (REF A).  PM Berlusconi's remarks during his 
speech to the European Parliament and the subsequent 
German-Italian spat exacerbated fears of some observers that 
the Presidency would remain mired in controversy and become 
distracted from its agenda (REF B).  The first month of the 
Presidency was indeed dominated by news of the quarrel and of 
unrest in the governing coalition parties because of concerns 
about Berlusconi's financial dealings.  Nevertheless, we are 
starting to see a more confident Italian government in its 
Presidency role with Berlusconi's successful rapprochement 
with Schroeder in Verona marking the start of the "down to 
business" portion of the Italian Presidency.  More 
significantly, the collapse of the Middle East cease fire, 
combined with direct appeals from the United States, 
encouraged Foreign Minister Frattini to take a strong stand 
against Hamas:  he successfully pressed other EU governments 
into imposing sanctions at the informal September 5-6 Foreign 
Ministers' meeting. Embassy Rome believes Berlusconi and his 
government can use the remainder of the Presidency to 
strengthen transatlantic relations and achieve concrete 
progress on issues such as the Middle East Peace Process 
(MEPP), Iraq reconstruction, and non-proliferation, including 
deterring Iran's nuclear program (REF C).  On the central 
issue of Galileo, however, we will have to engage the top 
levels of the GOI soon if we seek greater Italian activism 
before the crucial December 4 Transport Council.  End Summary. 
 
----------------------- 
THE SPAT AND THE STRIFE 
----------------------- 
 
3. (C) Italy's Presidency began one day after a Milanese 
court temporarily suspended Berlusconi's trial on charges of 
bribing judges, under a new law granting immunity to Italy's 
top five government officials during their periods of office 
(REFS A, D). The PM's gaffe at the European Parliament 
further diverted attention from an ambitious Italian program 
for the Presidency and called into question the government's 
ability to act impartially within and on behalf of the EU 
(REF B). The government has moved to put the rocky beginning 
behind it.  German Minister of Interior Schily traveled to 
Italy in early August for a rescheduled meeting to discuss 
security and immigration issues with Italian Interior 
Minister Pisanu, and at the invitation of EU Commission 
President Prodi, Chancellor Schroeder traveled to Verona, 
Italy on August 22-23, where he met with PM Berlusconi. 
Despite the spat with Germany, most Presidency work has not 
been, and we predict will not be, affected. 
 
4. (C) Likewise, while much will be made in the press and 
opposition of dissension within the governing coalition, we 
do not expect it to interfere with Italy's EU Presidency.  If 
anything, the Presidency will serve as glue to bind the 
coalition tighter.  Tensions exist in the coalition over both 
style and substance, ranging from the style of 
recommendations for judicial reform to real political 
differences among governing parties over pension, labor, and 
economic reforms.  In the end, however, we are betting that 
the coalition will hold through and beyond the Presidency. 
(See REF E for a fuller analysis of the coalition, its 
 
 
divisions, and its future.) 
 
--------------------------------------------- ------------- 
PROGRESS TOWARD ITALIAN PRESIDENCY WORK PROGRAM OBJECTIVES 
--------------------------------------------- ------------- 
 
5. (C) The Italian Presidency outlined five (5) priority 
objectives in its work program: 
 
I) to open, and if negotiating conditions permit, conclude, 
the Intergovernmental Conference (IGC) process leading to a 
constitution for the EU; 
 
II) to pursue the Lisbon economic competitiveness strategy, 
increasing public investment in Europe with the aid of 
European financial institutions, and developing a 
Trans-European (transportation) Network (TEN); 
 
III) to map out an itinerary for conclusion by 2004 of the 
accession negotiations for Romania and Bulgaria with a view 
to their accession in 2007, to develop closer relations with 
the Western Balkans, Russia and the Commonwealth of 
Independent States (CIS), and Israel, and to re-launch the 
Euro-Mediterranean partnership (the "Barcelona process") by 
moving toward establishment of a Mediterranean Bank for joint 
development projects; 
 
IV) to rebuild the transatlantic link; to contribute via the 
Quartet to the Mid East peace process, to ensure the EU has a 
"front-line role" in Iraq reconstruction, and to advance 
European Security and Defense Policy (ESDP), and; 
 
V) to improve the security of European citizens in the fight 
against terrorism through effective measures to combat 
transnational crime and illegal immigration, the 
reinforcement of EUROPOL, coordinated control of external 
borders, laying down common rules on asylum, stepping up 
cooperation arrangements with the countries of origin or 
transit of the migration flows, and improving cooperation 
between Member States on matters relating to visas. 
 
I. IGC 
------ 
 
6. (U) As part of its Presidency duties, Italy will open the 
6th IGC on October 4 with the goal of completing work on the 
constitution for the European Union.  Italy recognizes that 
the draft Treaty will be altered, but would like to avoid a 
general reopening of debate.  Foreign Minister Frattini 
characterized the European Constitution as an "absolute 
necessity" in an August 2 interview, and expressed confidence 
that political agreement could be achieved by the end of 
Italy's Presidency.  Italy has played a prominent role in 
previous IGCs, and the government would like to successfully 
conclude the IGC under its stewardship. 
 
7. (C) From our perspective in Rome, it appears doubtful that 
the IGC can be completed by December 2003, given the complex 
fundamental issues under review and the desire of a number of 
(smaller) member states to open discussions.  More likely, in 
our view, is that the work of the IGC will be completed 
before the elections for the European Parliament planned for 
June 2004. 
 
8. (C) The U.S. should continue to encourage Italy to take a 
firm position in EU security and defense strategy discussions 
to ensure that proposals to allow subsets of member states to 
act in the name of the EU on defense matters (even when there 
is no consensus with the EU) do not become enshrined in the 
new constitution.  We should also bolster Italian leadership 
for the principle that unanimity on EU defense decisions, 
rather than some form of qualified majority rule, remains the 
practice.  While delivering this message, we recommend 
reiterating long-standing USG support for greater European 
unity, including a European security and defense policy.  We 
suggest underscoring our shared objectives and values, and 
pointing out that only through a common approach and 
coordinated action (via such long-established channels as the 
NATO partnership) can we achieve our common goals on security 
issues such as counter-terrorism, non-proliferation, and 
management of regional conflicts. 
 
II. ECONOMIC ISSUES 
------------------- 
 
EU Internal Competitiveness 
 
9. (C) Italy's Presidency program calls for a variety of 
economic and financial reforms. The government is likely to 
make incremental progress on those items already in process, 
such as advancing the "Financial Services Action Plan" via 
 
 
various directives already in the review process.  The 
government's more ambitious proposals - such as its "European 
Action for Growth" Plan to increase public investment in 
infrastructure, financed through market instruments and the 
development of a European Financing Facility, are unlikely to 
gain traction.  Other EU members doubt the feasibility of 
such a funding mechanism, and it appears unlikely to get off 
the ground during the Presidency.  An Italian proposal for an 
EU-wide tax treaty has been strongly opposed by the UK and 
Ireland, which have lower tax rates than other EU members, 
and is also unlikely to progress during the Presidency. 
 
Passenger Name Record (PNR) 
 
10. (C) The real prospect of penalties against Alitalia as of 
September 12 has captured GOI attention on PNR.  In response 
to our latest demarche (REF F), we believe the Foreign 
Ministry will argue for pressing the EU Commission to be more 
flexible in reaching an adequacy finding with the USG. 
However, if the Italian Presidency is to play a more active 
role on PNR, the MFA will have to overcome the hardline 
skepticism of Italy's Data Privacy Authority.  It is by no 
means clear the MFA will gain the upper hand. 
 
Chemicals 
 
11. (C) A discussion of REACH at the European level will 
likely take place during the Italian EU Presidency, but the 
Italian Ministries of Environment and of Productive 
Activities are engaged in a battle for control of the 
proposal.  The Italian chemicals industry is hoping that the 
EU Commission will not be prepared to discuss REACH at the 
Environmental Council on October 27, so that the 
Competitiveness Council that meets in November will have the 
opportunity to shape the issue.  In either case, it is 
unlikely that final agreement will be reached before the end 
of the Italian Presidency, and the Irish Presidency will have 
to carry forward the work (REF G). 
 
Geographical Indications (GI) 
 
12. (C) The Italian Presidency will press the EU Commission 
for an aggressive promotion of GI protection at the World 
Trade Organization (WTO) Ministerial in Cancun.  The EU has 
released its short list of 41 items for which it will seek GI 
protection.  Italy is among the most ardent proponents of GI 
protection and its wish list constitutes 30 percent of the 
entire EU list. With this key exception, the GOI seems to 
have let other EU members set the EU negotiating position for 
Cancun. 
 
III. EXTERNAL RELATIONS 
----------------------- 
 
Accession Negotiations 
 
13. (C) Italy would like to conclude accession negotiations 
for Romania and Bulgaria by the end of its Presidency, with a 
view to their accession in 2007.  The Italian government is 
also a strong supporter of Turkish accession and will seek to 
include a forward-leaning statement on Turkish progress in 
the December Council conclusions.  It is unlikely that these 
objectives will be achieved. 
 
Western Balkans 
 
14. (C) The U.S. and EU share the same goals for the Western 
Balkans, including eventual EU membership.  Italy has worked 
closely with its Balkan neighbors to help them meet EU and 
NATO standards.  The Italian Ministry of Foreign Affairs 
(MFA) says it agrees with our view that careful assessment of 
the Macedonia mission, and careful planning for Bosnia, 
should precede, not follow, a political decision by NATO and 
the EU for eventual EU takeover of SFOR; the Presidency will 
play a key role therefore in moderating the more aggressive 
view of some member states for a quick EU takeover in Bosnia. 
Still, the GOI hopes that the USG will give a green or yellow 
light to an EU takeover of SFOR before the end of 2003. 
Italy agrees with our view that the EU should maintain an 
adequate emphasis on refugee returns and ICTY (International 
Criminal Tribunal for the former Yugoslavia) cooperation in 
its decision to provide assistance and grant new status to 
Stabilization and Association Process (SAP) countries. 
 
Relations with Russia and the CIS 
 
15. (C) Italy and Russia are working closely to prepare for 
the November 6 EU-Russia summit.  Berlusconi and Putin want 
to make the new EU-Russia Permanent Partnership Council 
operational as soon as possible, and it is Berlusconi's 
stated goal to bring Russia closer to the EU and 
 
 
transatlantic institutions in general.  Berlusconi's meeting 
with Russian President Putin in Sardinia August 29-31 was a 
warm up for the November EU-Russia summit and bilateral state 
visit.  The Italian Presidency program calls for enhancing 
economic relations with Russia and the CIS "in any sector and 
at any level."  To achieve these goals, the government's 
proposal calls for an increase of the overall ceiling of 
European Investment Bank (EIB) external mandates.  Other EU 
members, more reluctant to reach out to these nations, have 
decisively distanced themselves from the PM's call to extend 
EU membership to Israel and Russia.  (Comment: The PM was 
only half serious about this overture to Russia, but his 
interest in integrating Russia into Europe is clear. End 
Comment.) 
 
Middle East Peace Process (MEPP) 
 
16.  (C) The breakdown of the ceasefire in the Middle East 
seems to have jolted the GOI into action.  Although 
previously reluctant to "stick its neck out" on the issue of 
Hamas' asset freezing, the Italian government at the informal 
Foreign Ministers' meeting on September 5-6 pressed - 
successfully - other EU governments to impose financial 
sanctions against Hamas.  FM Frattini played a key role in 
obtaining consensus.  As EU President, Italy represents the 
EU at Quartet meetings. By taking such a strong stand on 
Hamas, the Italian government is trying to lay a marker down 
that it wants to lead on Middle East issues and not just wait 
for a EU consensus to develop. 
 
17. (C) In part to enhance its effectiveness within the 
Quartet, the GOI is pushing its EU partners to minimize 
contact with Arafat.  The Italian government would like the 
EU to play a more significant role in the MEPP, in aspects 
such as monitoring the Road Map and in the social and 
economic reconstruction of Palestine.  The GOI views the 
September 22 Quartet FM meeting in New York as crucial both 
to re-energizing the Roadmap and to a more constructive and 
visible EU role in the process.  We can expect increased 
Presidency interest in the Process in the run-up to the 
December Euro-Mediterranean (Euromed) Ministerial in Naples, 
as well as a revival of its proposals to hold a Middle East 
peace conference and to extend an EU "Marshall Plan" for 
Palestinian economic investment. 
 
Euromed Partnership/Barcelona Process 
 
18. (C) Italy's EU Presidency program calls for the re-launch 
of the Barcelona Process, in part through the establishment 
of a Mediterranean Bank for joint development projects.  The 
process has foundered over the years as the EU largely 
focused its attention on the Central and Eastern European 
nations during the 1990s.  The July adoption at Palermo of a 
protocol on rules of origin for the EU, Mediterranean, 
accession countries, and EFTA nations was a noteworthy 
achievement, but it is unlikely to signify real progress 
toward the creation of a Euromed free trade area, despite the 
EU's professed interest in such a development (REF H). 
 
Iraqi Reconstruction 
 
19. (C) Both bilaterally and in its Presidency role, Italy 
has shown a strong commitment to Iraq stabilization and 
reconstruction.  The Iraqi reconstruction issue is one 
wherein positive public statements from Italy as EU President 
could be useful in guiding public discussion.  FM Frattini 
has taken an active role on behalf of the Presidency in 
support of the October 24 Donor Conference in Madrid.  In his 
address to the European Parliament on September 3, Frattini 
stressed that Europe was "duty-bound" to find a common 
position on the issue of Iraq, and that the EU should make 
"every effort to reach a resolution that would give the UN a 
mandate to guide postwar Iraq."  As reported in REF I, the 
Gymnich FMs meeting September 5-6 was encouraging, but did 
not explicitly endorse a new UNSCR on Iraq. 
 
European Security and Defense Policy (ESDP) 
 
20. (C) The August 29 Experts Level meeting that Italy called 
to discuss European security issues removed from 
consideration an EU-endorsed separate planning cell at 
Terverun, but the "Gang of Four" has vowed to keep the office 
alive outside the EU framework.  A British proposal to 
establish an EU planning cell within SHAPE is still on the 
table.  The Italian Presidency's view is in line with USG 
thinking on duplication of planning operations and structured 
cooperation.  The question is whether the Italian Presidency 
has the negotiating skills to deal with "gang of four" 
interests without jeopardizing Berlin-plus.  Thus far the 
Presidency has been saying all the right things as it 
approaches the start of the IGC.  Berlusconi may compromise 
 
 
on many issues in order to achieve Italy's goal of completing 
the process by December, but signals to date from the MFA 
indicate that does not include giving in on an issue so 
important to the U.S.  There may, however, be some wiggle 
room in Italy's view towards retaining consensus decision 
making for CFSP, as long as any changes to that policy do not 
compromise Berlin-plus (REF J). 
 
IV. IMPROVING TRANSATLANTIC TIES 
-------------------------------- 
 
21. (C) One of PM Berlusconi's top priorities is 
strengthening the transatlantic relationship through concrete 
bilateral action in areas where U.S. and EU interests 
coincide.  Specific areas for cooperation outlined by the PM, 
Deputy Prime Minister Gianfranco Fini, and other top 
officials include: preventing the spread of weapons of mass 
destruction (WMD), fighting terrorism, and contributing via 
the Quartet to the MEPP.  Fini also told visiting U.S. 
officials that the Government of Italy wants to overcome 
differences on biotech issues during its Presidency (REFS K, 
L).  On September 4, Frattini suggested to Secretary Powell a 
joint declaration of shared EU-US values and common 
objectives. 
 
22. (C) On issues where the U.S. and EU disagree, Italy will 
try to smooth over differences.  For example, the strong 
negative reaction among EU members to the U.S. decision to 
suspend military aid to countries that have not signed 
Article 98 agreements led FM Frattini to criticize the 
decision in the EU Parliament, but in mild terms. 
 
Galileo 
 
23. (C) Reaching a solution on the Galileo system's signal 
overlay of the M-Code is one of the few issues with a real 
deadline during Italy's Presidency.  Italy so far has 
expressed an appreciation of U.S. national security concerns, 
but has not worked actively to ensure that EU technical 
experts are given clear political instructions that overlay 
of the M-Code is unacceptable (REF L). 
 
24. (C) Embassy Rome and Washington efforts to get the 
Italian MFA to push Galileo discussions up from the technical 
to the political level have not been successful.  There 
remains a strong GOI inclination to leave this issue in the 
hands of the EU Commission.  It is only slowly dawning on the 
GOI that Galileo may turn out to be the biggest 
trans-Atlantic train wreck of their presidency.  After the 
latest round of technical talks, if we wish to promote 
greater Italian Presidency activism on Galileo, we will have 
to directly engage the top levels of the GOI (including the 
PM) on the political importance of this central issue. 
 
V. IMPROVING SECURITY 
--------------------- 
 
Counterterrorism Cooperation 
 
25. (C) Italy has been a strong partner in the war on 
terrorism and supports strengthening EU counterterrorism (CT) 
efforts and U.S.-EU cooperation on terrorist financing 
designations, transport security, border controls, and 
intelligence sharing.  The GOI understands that cracking down 
on the financial support for terrorism is critical to 
enhanced security. In its capacity as EU President, Italy is 
sponsoring a seminar on terrorist financing in early November 
in Brussels and considers U.S. participation essential. 
Italian MFA CT officials have also suggested strengthening 
the Counter Terrorism (COTER) Troika mechanism (REF M).  The 
Italian government pressed other European governments to 
impose financial sanctions on Hamas, and is actively 
investigating individuals and entities suspected of providing 
financial support to terrorist groups.  We will continue 
working closely with Italy on these issues, and hope to find, 
with Washington, ways of making the cooperation more concrete 
to achieve tangible ends. 
 
Stemming Illegal Immigration 
 
26. (C) Reaching agreement within the EU on common control of 
external borders to stem illegal immigration is a priority 
for Italy during its Presidency.  Italy's lengthy coastline 
makes the country particularly exposed to both human 
trafficking and illegal immigration.  Italy can be expected 
to push hard to achieve its immigration goals, which it sees 
as part and parcel of the war against terrorism and a clear 
responsibility to be shared among EU members.  Earlier this 
summer, Italian interest in giving Libya more tools for 
controlling its coastline in order to stem illegal migrants 
led FM Frattini to suggest that the embargo on arms exports 
 
 
be eased to allow the sale of non-lethal items, such as 
night-vision goggles.  In response to opposition to lifting 
the arms embargo from the UK, Germany, and others, Frattini 
stopped pushing the argument so vigorously.  However, if the 
UN Security Council sanctions stemming from Pan Am 103 are 
lifted, Frattini may revisit the issue within the EU. 
 
Justice and Home Affairs (JHA) 
 
27. (SBU) Italy has moved forward enthusiastically on the 
commitments the government made at the June JHA Troika.  In 
particular, the Italians are being very helpful in dealing 
with EU member states regarding upcoming bilateral 
negotiations on the protocols needed to complement the Mutual 
Legal Assistance and Extradition Treaties.  Italy has agreed 
to be one of the first three countries to enter into 
negotiations with the U.S., joining Ireland (the next EU 
Presidency country) and Denmark (instrumental in moving the 
negotiations forward during the its EU Presidency last year). 
 The Italians have also supported our efforts to work on 
"confidence-building" measures, specifically cross-training 
of U.S. and EU personnel, and to explore opportunities for 
cooperation on witness protection in the Balkans.  We expect 
that Italy will be a strong supporter of our efforts to 
develop a common terrorism prevention strategy in the G8 
context, which may influence the course of the EU in this 
area. 
SEMBLER 
 
 
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	2003ROME04133 - Classification: SECRET