ITALY'S EU PRESIDENCY: A SLOW START ON AN

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 NNNN 2003ROME04133 - Classification: SECRET