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.

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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.)

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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
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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.
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2003ROME04133 - Classification: SECRET