SCENESETTER FOR PM BERLUSCONI'S OCTOBER 31 MEETING

C O N F I D E N T I A L SECTION 01 OF 03 ROME 003585

SIPDIS

E.O. 12958: DECL: 10/26/2015
TAGS: PREL PGOV CVIS IT ITALY NATIONAL ELECTIONS ITALIAN POLITICS IRAQI FREEDOM
SUBJECT: SCENESETTER FOR PM BERLUSCONI'S OCTOBER 31 MEETING
WITH THE PRESIDENT


Classified By: Ambassador Spogli, for reasons 1.4 (b)(d).


1. (C) Summary. PM Berlusconi specifically requested this
meeting, and a spring address to a joint session of Congress,
to bolster his prospects in Italy's April elections. Behind
in the polls and facing his toughest campaign, Berlusconi
will juxtapose his proactive and pro-U.S.foreign policy with
that of his likely center-left opponent, Romano Prodi, who
prefers to follow an EU foreign policy lead and has called
for a timetable to withdraw Italian troops from Iraq. GOI
officials are concerned about a potential terrorist attack,
either during the Turin Winter Olympics or the spring
elections.


2. (C) Berlusconi will seek: (a) presidential statements of
support on shared values; (b) support for extending in 2005
the UN mandate on Iraq; (c) tangible progress on a plan to
enhance Iraqi security capabilities and allow a coordinated
drawdown of Italian forces; and (d) the President's possible
intervention to waive or delay new passport requirements for
continued Italian participation in the Visa Waiver Program.
We should: (a) offer appropriate praise for Italy's foreign
policy support without jeopardizing our relationship with
Prodi; and (b) engage Berlusconi on Russia and Iran. End
Summary

Italian Elections
--------------


3. (C) PM Silvio Berlusconi prides himself on his warm
relationship with the President and has carefully planned
this meeting and a spring address to a joint session of
Congress (he meets Speaker Hastert before going to the White
House) to bolster his prospects in Italy's national
elections, tentatively scheduled for April 9. Berlusconi's
center-right coalition is down eight points in the polls,
undermined by internal leadership spats and continued
economic stagnation. The center-left also is plagued by
internal disputes but former European Commission President
Romano Prodi just won a triumphant electoral victory in the
primaries. Pending electoral law changes may slightly
increase the odds for the center-right, and it is too early
to deal Berlusconi out. However, most political observers
predict Prodi's center-left coalition will win in April.

Iraq: Seeking a Way Forward
--------------


4. (C) We expect Berlusconi will juxtapose his proactive,
pro-U.S. foreign policy with that of Prodi, who prefers to
follow an EU foreign policy lead and has publicly called for
a timetable to withdraw Italian troops from Iraq. Berlusconi
has remained adamant that Italian troops will stay in Iraq
until the security situation warrants, and the Iraqi
government requests, a drawdown of Italian troops. The
center-right has already accused Prodi of encouraging
terrorist attacks on Italy through reckless calls for
withdrawal. However, Italian public opinion remains
overwhelmingly opposed to the war in Iraq and Berlusconi will
be under increasing pressure to make public statements about
plans to withdraw troops. He will be reassured by
commitments of continued high-level consultations but would
better appreciate progress in enhancing Iraqi security
capabilities in a way that allows measured Italian drawdowns
by April. Italy is also seeking an extension of the UN Iraq
mandate by the end of the year; the Italian presence is
premised on the UN mandate, and Parliament will vote in
January on the next six-months of funding for thier troops.
Italy also feels that the mandate extension should
specifically reference political progress in Iraq.


5. (C) We can and will work with a Prodi-led government
should the center-left win next year. Despite Prodi's calls
for a withdrawal timetable, other elements of his center-left
coalition have assured us that Italy will not make any
dramatic Zapatero-style actions and will coordinate changes
in troop levels with both us and the Iraqi government. Prodi
himself has hinted at a compromise formula involving
continued Italian involvement in Iraq for reconstruction
initiatives.

Strongest Ally in Continental Europe
--------------


6. (C) Berlusconi will be seeking Presidential statements
of support on shared values for our freedom agenda and praise
for Italy's substantial commitment of resources overseas. In
addition to being the third largest contributor of troops to
MFN-I, Italy also funds reconstruction and justice projects
in Iraq, leads ISAF, a PRT and a justice initiative in
Afghanistan, just took over KFOR command, pledged $3 million
to the UN Fund for Democracy, indicated it will fund the new
Foundation for the Future, co-hosts Democracy Assistance
Dialogue initiatives with Turkey and Yemen, and provided
earthquake and hurricane relief for Pakistan and New Orleans.
We want to provide appropriate praise without jeopardizing a
potential future relationship with a center-left government.

Budget Woes
--------------

7. (C) High public debt, rising social welfare costs and a
stagnant economy are limiting Berlusconi's ability to
maneuver in the face of growing domestic economic discontent.
Pocketbook issues will drive the campaign and be
Berlusconi's biggest challenge, although Prodi has yet to
offer any credible alternative economic policy. The draft
budget now being debated by the Italian Parliament must be
approved by the end of the year, and it appears it will
include painful cuts in many sectors. This includes
potentially dramatic (to about .85% of GDP) cuts in the
defense budget and a 20% reduction in the overseas deployment
budget that could undermined Italy's ability to sustain its
overseas commitments.

Terrorist Threat Looms Large
--------------


8. (C) Following the London bombings, the GOI approved a
strong anti-terrorism law and began a crackdown of arrests
and deportations of illegal immigrants and suspected
terrorists. However, Italy continues to be targeted in
fundamentalist websites, and many Italian officials expect
Italy will be attacked in the near future. They are worried
specifically about a potential attack during either the
February Turin Olympics or the spring elections. We continue
to work closely with the GOI on security preparations and
intelligence sharing for the Olympics as well as on
increasing readiness for possible attacks on USG facilities
or London/Madrid scenarios.

UN Reform/Iran/Russia/Balkans
--------------


9. (C) Berlusconi is likely to thank you for U.S. support
in opposing the G-4 plan for UNSC reform; while Italy's
specific concern is blocking Germany from obtaining a seat,
they support our view that any changes to the Security
Council should be based on a wide consensus of support within
the UN. As Iran's largest European trading partner, Italy
remains concerned that it has been excluded from the EU-3
negotiations and complains that the EU-3 has not sufficiently
consulted other EU member states. Italy shares our concern
about proliferation and supports moving the issue to the
UNSC. Overall, however, Italy favors engagement over
confrontation and will be concerned about the economic losses
associated with potential sanctions. Berlusconi and Putin
remain good friends, and Berlusconi continues to insist he
has delivered our messages of concern about Putin's
increasingly anti-democratic actions. Another nudge from the
President would strengthen our message. Italy remains fully
engaged on the Balkans and supports a continued international
presence in Bosnia and Kosovo until there is international
consensus that both entities have made sufficient progress on
democratic reforms. The candidacy of Amb. Laura Mirachian
for the post of the High Representative in Bosnia is of key
interest to the Italians. They have lobbied strongly for USG
support, arguing that Italy's high military profile deserves
an equally strong policy voice. Department and Embassy
officers who have met with Mirachian believe she shares our
outlook for the future of the region. While she has not
received official USG support at this point, the USG does not
want to be seen as opposing her candidacy, since she could
emerge as the front-runner.

Visa Waiver Program
--------------


10. (SBU) DHS has confirmed that there will be no blanket
waiver, no official policy favoring parole, and no exceptions
to the October 26, 2005 requirement for digitized photos in
passports for any beneficiary of the Visa Waiver Program
(VWP). The GOI plans to issue machine readable passports
with digitized photographs in five Italian Prefectures: Rome,
Milan, Naples, Palermo and Cagliari, with the possibility of
successive extension to other Prefectures. Italians who
obtain passports after October 26 from Prefectures other than
these five offices, or who obtain passports from an Italian
Consulate abroad, will require a U.S. visa. U.S. consular
sections in Italy are working with airlines and travel
agencies to ensure that Italian passengers caught unaware of
the change in visa requirements are directed to the closest
Embassy or Consulate for expeditious visa processing.


11. (C) President Ciampi, FM Fini and senior aides to PM
Berlusconi have all raised the VWP issue with the Ambassador,
insisting that the new requirements will be a major
embarrassment to Berlusconi just when he is trying to use his
U.S. connections to improve his election prospects.
Berlusconi may ask the President to intervene to fix the
problem, arguing that Italy is a staunch partner in the war
on terror and is in the process of implementing previously
announced U.S. requirements for biometric passports.
SPOGLI