ITALY UNABLE TO INCREASE AFRICA EMERGENCY AID

C O N F I D E N T I A L ROME 002679 SIPDIS PASS USAID FOR PPC/DCO USEU FOR PATRICIA LERNER E.O. 12958: DECL: 08/12/2015 TAGS: EAID EAGR XA IT FAO SUBJECT: ITALY UNABLE TO INCREASE AFRICA EMERGENCY AID REF: A. SECSTATE 109314 ¶B. JUNE 30 NATSIOS-DEODATO LETTER ¶C. ROME 1671 Classified By: Acting Economic Minister-Counselor Kathleen Reddy for re asons 1.4 (b,d) ¶1. (SBU) Summary: Italy is unable to increase its emergency humanitarian assistance for Africa due to severe budget difficulties. Italy's overall aid spending levels will likely remain at 0.17 percent of GDP (the same level as 2004) only because of debt relief, particularly for Ethiopia. "Real" aid funds available for programmed assistance and emergency relief are actually going down as Italy tries to keep its government deficit under control. Regarding the U.K. proposal for an International Finance Facility, many Italian aid officials share USG concerns about "front-loading" aid, but the Italian Finance Ministry supports the concept. End summary. ¶2. (U) Drawing from Ref A points, Ambassador Sembler wrote Italian Foreign Minister Fini to urge Italy to provide additional emergency humanitarian relief for Africa. USAID Administrator Natsios reiterated this message in a June 30 letter to Giuseppe Deodato, Director General for Development Cooperation at the Ministry of Foreign Affairs. Econoff then met August 9 with Gabriele Di Muzio, the MFA's Development Cooperation Office Director for Africa, to discuss this appeal for more Africa assistance. Italy Has No Money to Give. -------------- ¶3. (SBU) Di Muzio said Italy will not be able to follow the U.S. and U.K. lead by increasing emergency humanitarian assistance to Africa. Di Muzio said that given Italy's fiscal difficulties, the GOI cannot make any additional commitments beyond what has already been budgeted for 2005. Italy has, however, made a euro 2.5 million (euro=$1.23) contribution to the World Food Program for Niger. No additional money, he said, is available to meet food needs in Ethiopia and Eritrea. ¶4. (C) Di Muzio said that while Africa still receives about 40 percent of Italian official foreign aid, overall aid amounts are shrinking. Di Muzio cited the example of his own office, which handles all bilateral development projects in Africa. Di Muzio requested euro 120 million for 2005 but received only euro 70 million (which, he said, has already been spent),a big drop from the euro 96 million his office received in 2004 and euro 111 million in 2003. GOI Aid Levels Steady Only Because of Debt Relief. -------------- -------------- ¶5. (C) On paper, Di Muzio predicted, Italy will maintain an aid spending level of 0.17 percent of GDP for 2005 (approximately euro 2.4 billion, the same level as 2004) but only because of debt relief. For example, Italy this year forgave $360 million in bilateral debt to Ethiopia. In other words, Italy's "real" aid budget--money available for emergency relief and programmed development projects--is actually going down. The ongoing crisis in Darfur, meanwhile, is soaking up ever larger portions of Italy's resources for Africa. Di Muzio said Italy pledged at the Oslo conference to disburse euro 60 million in aid to Sudan in 2005-2007, and this promise will mean further belt tightening for other areas. Aid Officials Ambivalent About IFF. -------------- ¶6. (C) Di Muzio shed some light on the GOI's position regarding the U.K. International Finance Facility (IFF) proposal. He explained that the Italian Finance Ministry, without consulting the MFA, has already voiced support for the IFF, a mechanism for front-loading aid through the sale of bonds (Ref C). Di Muzio said aid professionals in the MFA are not really enthusiastic about the IFF. Echoing USG concerns, Di Muzio commented that many development problems cannot be solved simply by spending more money. He also said he and many of his colleagues in the aid wing of the MFA believe it is better to strengthen existing channels for delivering aid funds rather than creating a new body, with the accompanying support staff and overhead. However, Di Muzio predicted, now that the Ministry of Finance is on record as favoring the IFF, the GOI will remain passively supportive of the idea. ¶7. (SBU) Italy's official aid community, according to Di Muzio, is more enthusiastic about new funding ideas such as a surcharge on international airline tickets, an international lottery, or a tax on global financial transactions (Tobin tax). Italy, Di Muzio said, is "open" in principle to any new funding methods to support development assistance. BORG NNNN 2005ROME02679 - Classification: CONFIDENTIAL