ITALY'S EU PRESIDENCY HAS UNEVEN SUCCESS BUT

C O N F I D E N T I A L ROME 005665

SIPDIS


NOFORN

DEPT FOR EUR/WE, EUR/ERA

E.O. 12958: DECL: 12/09/2013
TAGS: PREL IT EUN
SUBJECT: ITALY'S EU PRESIDENCY HAS UNEVEN SUCCESS BUT
DELIVERS ON U.S. SECURITY INTERESTS

REF: A. ROME 4133

B. ROME 4564

C. BRUSSELS 4892

D. ROME 3237

E. ROME 5150

F. BRUSSELS 5622

Classified By: DCM EMIL SKODON FOR REASONS 1.5 (B) AND (D)


1. (C) SUMMARY. Against the backdrop of EU members'
continuing divisions over Iraq, Italy's EU Presidency managed
to further U.S. interests in fighting terrorism and in
keeping the EU's defense and security policy in accord with
NATO and the Berlin-Plus agreement - in line with Italy's
Presidency goal of strengthening transatlantic ties. Italy
also succeeded in meeting other key EU Presidency goals of
enlarging the EU and improving border control. It was less
effective, however, in resolving U.S.-EU differences on
economic and trade issues, notably regarding genetically
modified organisms. In addition, the Italian EU Presidency's
economic growth initiative to increase investment,
transportation, and telecommunications did not fulfill its
lofty ambitions, particularly on infrastructure projects, but
resulted in the Council's endorsement of public/private
investments to improve competitiveness and reduce
unemployment.


2. (C) Italy's failure to bring about approval of the EU
draft Constitution is likely to be its EU Presidency legacy.
Much of the European press and a number of EU
parliamentarians have blamed Prime Minister Silvio Berlusconi
for not being able to mediate member states' implacable
differences on voting rights. Berlusconi decided it was
better to end the InterGovernmental Conference (IGC) rather
than preside over a weekend of futile haggling. He deserves
some credit for meeting with EU government leaders to attempt
to forge consensus and for proposing last-minute compromises,
but ultimately could not overcome Spain and Poland's
determination to hold on to the voting advantages they fought
for at the Nice Treaty, and France's refusal to compromise on
the Convention's QMV formula. END SUMMARY.

Two Presidencies
--------------


3. (C) Berlusconi's senior diplomatic advisor (NSA
equivalent),Giovanni Castellaneta, told DCM that Italy's
tenure should be viewed from two perspectives - the normal
residency responsibilities and the IGC. He emphasized that
the Prime Minister was pleased with the overall Presidency
results and the concluding documents approved in Brussels.
Italy was particularly proud of the statement on
Transatlantic relations authored by Italy and approved by the
final Council. He was pleased with the public statement of
gratitude by A/S Jones. Italy will continue to push for
stronger US-EU ties during upcoming Presidencies, he
promised.


4. (C) Both Castellaneta and MFA office director for EU
Institutional Affairs Giuseppe Buccino-Grimaldi laid the
blame for the IGC's failure to agree on a draft in two
corners. Most important was the Spanish/Polish unwillingness
to bend on Nice voting arrangements. The other was France's
reluctance to compromise in good faith on the QMV formula
laid out in the original Convention draft. All other issues
had been agreed to or would have been adopted with some
modification, emphasized Buccino. The big question now is
whether the areas already agreed will be frozen while QMV
negotiations continue. DCM put this question to a number of
EU member COMs and DCMs at President Ciampi's holiday
reception for the Diplomatic Corps on December 19, and
received the full range of answers -- yes, no, and maybe.
Ireland will have its hands full managing this process while
at the same time presiding over an EU preoccupied with formal
enlargement in May, elections in Spain and Poland and for the
European Parliament. For all these reasons, Buccino opined
that the treaty would not be ready for another attempt at
consensus until the Dutch Presidency in the second half of

2004.

ESDP in Accord with Berlin-Plus
--------------



5. (C) Italy's failure to unite EU members in resolving
voting rights differences has also put on the shelf for now
its provisions for structured cooperation, a single foreign
minister, and a watered-down mutual defense clause that may
have satisfied neutral EU states but appeared to no longer
obligate all members to come to one another's defense. The
EU defense planning capabilities decided on prior to the
Summit, however, are intact. The proposal -- welcomed by
NATO SYG Robertson and in accordance with the Berlin-Plus
agreement reinforcing NATO/EU cooperation -- creates an
independent EU military planning cell that will link EU
military officers in national military headquarters to
coordinate operations in which NATO does not participate.
According to this plan, a NATO liaison officer will sit at
the EU military office, and the EU will have a staff at
SHAPE. Castellaneta -- who was involved in drafting this
proposal with his British, French, and German colleagues --
was particularly pleased that it set out a clear hierarchy of
preferences for EU planning: NATO as the "natural choice,"
then Berlin-plus, then an EU national headquarters lead, and
only when none of these apply a recourse to an EUMS-led
approach. European defense policy also evolved during the
Italian EU Presidency to enhance capabilities for gendarmerie
and humanitarian forces deployment before or after military
conflict and a European Defense Agency that will coordinate
research, development, and arms purchases.


6. (C) The European Council's final declaration under the
Italian EU Presidency states that the EU is committed to
multilateralism and "a strong UN," and it begins and ends
with statements that the transatlantic relationship is
"irreplaceable and essential." In order to underscore the
importance of these ties, Foreign Minister Franco Frattini
invited Secretary Powell to the EU foreign ministers' Nov. 18
working lunch in Brussels, an initiative that fostered
goodwill; the final Summit declaration refers to the
"positive results" of that meeting.

Fighting Terrorism and WMD
--------------


7. (C) Frattini played a key role in persuading the EU to
declare Hamas a terrorist organization and freeze its assets;
EU consensus on blocking assets for charities that support
Hamas and suspected terrorists in Italy and abroad remains a
problem, however, but Castellaneta insisted that Italy would
continue to push the issue within the EU. MFA POLDIR Aragona
has told DCM the same, but cautioned that it will be
difficult to get some other EU members to move more quickly.
Italy led the EU in adopting a position on strengthening
international treaties against weapons of mass destruction
(including the nuclear non-proliferation treaty, IAEA rules,
the treaty banning nuclear tests and experiments, conventions
on biological and chemical weapons, and the Hague code of
conduct against proliferation of ballistic missiles). The EU
also passed a measure requiring all future EU treaties to
include a clause against WMD proliferation.

Boosting Enlargement: Italy's Investment in the Future
-------------- --------------


8. (C) Italy made considerable progress in achieving one of
its key presidency goals of advancing the EU candidacies of
Turkey, Balkan countries, and former Soviet states -- an
accomplishment that promises to promote stability in fragile
democracies. At the Dec. 12 Council, Italy succeeded in
pushing for early accession -- January 1, 2007 -- of Bulgaria
and Romania. It greatly encouraged Turkey's path to reform,
stressing the importance of using Ankara's influence to
facilitate a Cyprus settlement. Castellaneta pointed to the
encouraging gains made by the anti-Denktash Parliamentarians
in the elections, and promised to work closely with his Irish
counterpart to keep the pressure on all sides to continue
reform.

Iraq
--------------


9. (C) Italy demonstrated leadership as President by pledging
200 million Euro for Iraq reconstruction at the Madrid
conference, the second largest amount by an EU member state.
Italian efforts to get the EU to show stronger political
support for coalition efforts in Iraq were generally


unsuccessful; even the final European Council declaration was
only a minor improvement over previous
lowest-common-denominator language.

EU Outreach
--------------


10. (C) Italy did not meet all of its ambitious MEPP goals
but held several conferences to further the peace process,
including the AHLC Palestinian donors conference, where Rome
pledged 77 million euro, and a Euromed Partnership Conference
that facilitated meetings among Arab and Israeli foreign
ministers. In its EU Presidency declarations and during
meetings with Israeli leaders in November, Italy took a
balanced approach of moderate support for Israel (including
new bilateral agreements on technical cooperation) while
condemning Israel's security wall incursion into Palestinian
territory; it worked to further Palestinian development while
pressing Palestinian leaders to crack down on terrorism.
Italy reaffirmed that the roadmap is still the only viable
peace plan on the table.


11. (SBU) Italy was successful in turning the EU's attention
back towards the Balkans in the wake of the war in Iraq. The
Presidency successfully used the EU's Balkan Stabilization
and Association process to push continued reform throughout
the region, especially in Albania and Croatia. Under Italy's
watch, the EU police follow-on to NATO in Macedonia continued
to provide a stable security environment around Tetovo and
other areas of ethnic tension, and has been praised by some
EU member states as the first Berlin-plus operation and as
proof that the EU can deploy into (somewhat) hostile areas.
Italy was also instrumental in clarifying the transition
phase of an EU Berlin-plus SFOR follow-on, which will occur
only in close consultation with NATO (and the US) and would
continue to include a small NATO contingent even after the EU
is fully deployed.


12. (C) The EU-Russia Summit in November resulted in a number
of cooperation agreements, but Berlusconi sent the wrong
message to Moscow when he defended President Vladimir Putin
on the issues of Russia's human rights record in Chechnya and
its arrest of energy czar Khodorkhovsky -- remarks that
prompted a rare censure from the European Parliament.
Frattini later led the EU in joining Secretary Powell to warn
Russia about adhering to its promises to withdraw troops from
Georgia and Moldova and respect human rights.


13. (C) During Italy's Presidency, the EU urged Tehran to
suspend uranium enrichment activities and agree to the IAEA
Additional Protocols on Safeguards. The EU also has
denounced torture and human rights violations in Iran but
agreed to continue dialogue with Tehran. Castellaneta said
that the EU debate on how to deal with Iran will continue,
and emphasized Italy's view that the International Community
(IC),while continuing to be tough with Iran, should also
keep open communications lines. Iran has received a warning
from the IC on its nuclear program and will therefore be more
cautious in the future, he averred. Under the right
conditions, Iran could be used as a tool to promote regional
stability. Luigi Maccotta, head of the MFA's Iran and Iraq
office, told Poloff that, in terms of Iran policy, the EU
Presidency had been a disappointment. The EU, he explained,
prefers to pursue a policy of engagement with Tehran,
favoring carrots over sticks. The IAEA Board of Governors
criticism in November of Iran's nuclear policies, followed
shortly by a UN resolution condemning Iranian human rights
policies, both fall in the latter category. (Comment.
Tehran postponed FM Frattini,s trip to Iran earlier this
month, immediately following Italian support for the UN
resolution, in order to express its pique at the Italians.
Maccotta said the trip has not been rescheduled but will be,
since dialogue is paramount to the Italians. End comment).
Maccotta added, however, that these events did lay down
markers so that Iran knows exactly where it stands with the
EU, which could alleviate any ambiguities in future dialogue.



14. (SBU) Near the end of the EU Presidency, a high-level
Italian diplomat led an EU delegation to both Pyongyang and
South Korea to express EU concerns about North Korea's
nuclear program and to push for six-party nuclear talks.



15. (C) Bilateral and EU meetings with Ukraine President
Leonid Kuchma were important in keeping Ukraine within the EU
sphere on the heels of Kiev's increasing economic alliances
with Russia. MFA Counselor for NIS Affairs told poloffs that
Berlusconi recommended to Kuchma that Ukraine could bolster
its EU aspirations by increasing its efforts to help broker a
solution to the Moldova/Transnistrian conflict.

Breakthroughs on Justice and Home Affairs
--------------


16. (C) Concerns about combating a dramatic rise in illegal
immigration from North Africa over the last decade moved
Italy to push European border security to the top of the JHA
agenda, paving the way for the establishment an EU Border
Management Agency and enhancing the EU's capacity to combat
illegal immigration across maritime borders. On the law
enforcement front, there was moderate progress in beefing up
Europol while a new Framework Decision established an EU-wide
basis for the definition of criminal acts and penalties in
the field of drug trafficking. In addition, the Presidency
was able to secure JHA Council political support for the EC
to finalize its proposal on biometrics in visas and residency
permits -- a decision endorsed by leaders at the EU summit.

Trade and Economic Issues
--------------


17. (C) The Italian EU Presidency had some economic
successes but none helpful to US policy. Italy abstained on
the EU vote to lift a ban on genetically modified corn,
reflecting a major rift among the GOI ministries on the
issue. Italy also lent little weight to resolve the impasse
with the EU on the proposed Galileo satellite system signals
that interfere with U.S. military navigational warfare
capability and instead has preferred to leave the issue with
European Commission experts. Similarly, with the Passenger
Name Recognition issue, Italy overcame the objections of its
national data privacy authority on the transfer of passenger
data to the U.S., then left negotiations at the EU level to
the Commission.


18. (SBU) The Italian Presidency made progress in the
financial arena: achieving consensus on a European takeover
code -- capping the end of 15 years of infighting; making
progress on the Investment Services and Transparency
Directives; and advancing agreement on the Financial Services
Action Plan, which is designed to create a single harmonized
EU securities market. Italy, in response to U.S. approaches,
included language in the preamble to the Takeover Directive
to ensure that U.S. firms will not be disadvantaged by the
Directive. On the down side, under Italy's EU watch Italian
Finance Minister Tremonti led the European Council in
supporting the suspension of the Stability Pact in order to
accommodate French and German deficits, leading to still
resounding recriminations from smaller countries alleging
double standards and hypocrisy (but not "unilateralism").


19. (SBU) Italy claimed success in realizing one of its key
goals, a European economic growth initiative that continues
the Lisbon agenda of increasing economic competitiveness. At
the final Summit, the European Council endorsed Italy's plan
to invest in infrastructure, research, and education using
public (national governments and the European Investment
Bank) and private sector funds.

The Berlusconi Factor
--------------


20. (C) Berlusconi's leadership of the EU Presidency was
marred by controversy from his suspended bribery trial, his
verbal gaffes offending other EU leaders, coalition tensions,
and his government's declining popularity ratings.
Berlusconi and EU Commission President Romano Prodi indulged
in spats motivated in part by their domestic political
rivalry: Berlusconi scheduled Prodi as the last speaker at
the IGC opening in October; Prodi, poll respondents' most
popular choice to lead the Left in the next Italian national
elections, published a manifesto for the European left widely
viewed as a challenge to Berlusconi's center-right
government. During the Presidency, Berlusconi's government
faced several challenges, including internal squabbling over
legislation and from widespread but largely ineffective


transportation strikes and demonstrations against proposed
pension reform legislation.


21. (C) Berlusconi -- a leader for whom personal
relationships are paramount -- became one of the few EU
Presidents to be censured by the European Parliament after he
spoke out in defense of Russian President Putin's human
rights record in Chechnya and the arrest of Yukos chairman
Khodorkhovsky. While there's no love lost between Berlusconi
and the Brussels bureaucracy, Berlusconi has been, on the
other hand, an ardent friend of Washington and -- in spite of
Italian public disapproval of the Iraq war and the loss of 19
Italians to a terrorist attack in Iraq -- an eloquent
defender of U.S. efforts to fight terrorism.

Comment
--------------


22. (C) Italy's slow start lowered expectations for a
successful conclusion to its EU Presidency. Despite the IGC
collapse over QMV, Italy nevertheless ironed out with other
EU transatlanticists a European security policy in accord
with NATO and led the EU to contribute to the fight against
terrorism. For these reasons, we give the Italian EU
Presidency a "B" grade reflecting its uneven success overall
but its support for U.S. foreign policy interests. The
transatlantic successes of this EU Presidency set the stage
for continued EU-US cooperation in future Presidencies.
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2003ROME05665 - Classification: CONFIDENTIAL