PRESIDENT CIAMPI SENDS CONTROVERSIAL MEDIA REFORM

UNCLAS ROME 005639

SIPDIS


STATE FOR EUR/WE

E.O. 12958: N/A
TAGS: PGOV IT ITALIAN POLITICS
SUBJECT: PRESIDENT CIAMPI SENDS CONTROVERSIAL MEDIA REFORM
BILL BACK TO PARLIAMENT

REF: ROME 5557


1. Summary: Italian President Ciampi declined to sign draft
legislation reforming Italy's media sector December 15 and
sent the bill back to Parliament. Ciampi cited technical
legal conflicts and broader concerns about the legislation's
potential constraints on media pluralism in a further-
liberalized media sector. The President's action is an
uncommon but by no means unprecedented detour in the
legislative process. Berlusconi and his coalition partners
must now decide either to send the legislation back to
Ciampi as-is or, more likely, make some technical
adjustments in Parliament to address Ciampi's legal points.
We expect the broad reform measures included in the
legislation eventually will be implemented, but Berlusconi
will pay a steeper price than expected to again shepherd the
reform bill through Parliament. For coalition partners
looking ahead to a possible cabinet shuffle in January,
Christmas may come a little early this year. End Summary.

Ciampi's Surprise
--------------


2. President Ciampi confounded most observers' predictions
(including ours - reftel) by declining to sign the "Gasparri
Law" (named for the communications minister) liberalizing
further Italy's media sector, instead sending it back to
Parliament on December 15. The legislation, approved by
Parliament December 2 (reftel),eliminated distinctions
among media properties (creating an "integrated
communications system"),set a timetable for initial
privatization of public broadcaster RAI and lifted limits on
broadcast media holdings, restrictions on cross-ownership of
media properties and caps on advertising spending. These
provisions effectively legitimized Prime Minister
Berlusconi's current media holdings and would have nullified
a constitutional court decision directing one of
Berlusconi's three broadcast networks to convert to digital
transmission (in order to respect the cap on broadcast media
holdings). Critics charged that the legislation would
reinforce Berlusconi's dominance of Italian media, as did
such organizations as Journalists Without Borders, and
implored the President not to sign it.


3. In sending the "Gasparri Law" back to Parliament, Ciampi
cited three principal concerns for his decision:

-- the conflict between the legislation's one year phase-in
period, and a constitutional court decision requiring an
assessment of pluralism in the media by the end of 2003;

-- the absence of a clear mechanism to correct any
"deficiencies in pluralism" under the new media system that
were identified by a watchdog commission; and

-- the potential for individual companies to create a
"dominant position" absent caps on the percentage of revenue
that broadcast media properties could earn from advertising.
In this case, Ciampi is echoing concerns from print media
that, absent advertising revenue caps, advertising will
flood out of print media to broadcast outlets. This revenue
shift would jeopardize many newspapers' bottom line and,
therefore, reduce pluralism and undermine freedom of the
press.

Government Regrouping For Interim Fix...
--------------


4. The Berlusconi Government reacted calmly, characterizing
the President's decision as a normal feature of the
legislative process, albeit one used only uncommonly. A
small group drawn from the leadership of all four coalition
members immediately began discussing options and plotting
strategy for responding to Ciampi's decision. Essentially,
the Berlusconi Government, via its parliamentary majority,
has two choices:

-- send the legislation back to Ciampi, as-is and
unmodified;

-- return the bill to the lower-house Chamber for
adjustments to address at least some of the concerns that
Ciampi noted; after votes by both houses, the modified bill
would then go back to Ciampi for signature.

Whichever route the Government elects to take, Ciampi must
sign the law when it next lands on his desk.


5. Most observers think the Government will select the
second option, and early press backgrounding after the
initial coalition consultations would seem to support that
assessment. Resubmitting the legislation as-is to Ciampi
would risk having it referred almost immediately to the


constitutional court (where a likely adverse ruling would
prompt modifications to the law anyway) and renew domestic
and international criticism of the Government's approach to
press freedom and media pluralism. However, parliamentary
fine-tuning is not without risk. Elements of the coalition,
especially in the National Alliance, held their noses to
approve the legislation, and others, especially Chamber
President Casini, are wary of appearing to rubber-stamp
legislation that inter alia benefits the Prime Minister.
Moreover, with a "review" -- and possible reshuffle -- of
the cabinet due in January (post-Italian EU presidency),
ambitious coalition partners angling for more prominent
roles, notably Deputy PM Fini, may set a steep price for
their continuing collaboration on the media reform
legislation.


6. First, though, the Government must figure out how to
"save" two networks -- Mediaset's private Rete 4 network and
the public RAI 3 -- from prior law and court rulings that
effectively put both out of business on December 31. Rete 4
remains under judicial order to convert to satellite or
digital transmissions beginning January 1, something it has
not prepared to do. Under separate 1997 legislation passed
by the center-left Dini Government, RAI's third channel
legally will no longer be able to accept advertising on the
same date, and there's no money in the national budget to
offset the loss of revenue. The Government reportedly is
contemplating a decree that would maintain the status quo
for one or two months, providing a window during which
Parliament could adjust the Gasparri legislation.


7. Comment: A popular and widely-respected President,
Ciampi is well-attuned to the moods and undercurrents
coursing through Italian society. In this case, he
evidently decided public and private grumblings about the
Gasparri law, spiced perhaps with some choice foreign
commentary, merited suggesting that Parliament take another
look at the legislation. This society still revolves
principally around old, interlocking networks of family,
friendship and business. Print media companies have been
crying foul over the potential loss of advertising revenue
that would flow to television absent the current advertising
revenue caps. In this case, Ciampi appears to have heeded
their calls, and those of the opposition, for another look
at this legislation. In doing so, he also outmaneuvered the
coalition by issuing his decision before the majority could
pass pending conflict-of-interest legislation designed to
defuse the opposition's charges. Ciampi's maneuver
ultimately should not forestall, or alter substantially, the
media liberalization package. But it is likely to raise its
price for Berlusconi. End Comment.


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2003ROME05639 - Classification: UNCLASSIFIED