ITALIAN DEFENSE BUDGET: PM'S OFFICE SEES PROPOSED

C O N F I D E N T I A L ROME 003697 SIPDIS DEPT. FOR EUR/RPM AND EUR/WE; OSD FOR DASD FATA E.O. 12958: DECL: 11/02/2015 TAGS: PREL MOPS MARR ECON IT NATO IRAQI FREEDOM SUBJECT: ITALIAN DEFENSE BUDGET: PM'S OFFICE SEES PROPOSED BUDGET AS PROBLEMATIC, WORKING TO IMPROVE IT Classified By: Ambassador Ronald Spogli. Reasons 1.4 b and d. ¶1. (C) After hearing in the past few weeks from the Chief of the Italian Defense General Staff and the Minister of Defense that cuts envisioned by the proposed Italian defense budget for 2006 would put Italian defense spending in the range of 0.85-to-0.9 percent of GDP, jeopardizing Italian participation in overseas peacekeeping and defense procurement programs, Ambassador raised the issue with Undersecretary to the Prime Minister, Gianni Letta, on November 2. Ambassador pointed out that: 1) defense spending by a NATO Ally and G-8 member well below 1 percent of GDP would send a bad signal to NATO aspirants who were being told by the Alliance to spend at least 2 percent; 2) the U.S. was concerned that the proposed budget could put at risk the important contributions Italy was making in overseas deployments in Iraq, Afghanistan, the Balkans and elsewhere; and 3) that the proposed budget would hamper Italy's ability to participate in critical defense procurement programs in which the U.S. was Italy's main partner. ¶2. (C) Letta said the Prime Minister's office agreed that the proposed defense budget was a problem, recognized the very important Italian activities that would be put at risk by the cuts, and noted that there had been some miscalculations concerning defense requirements when the overall budget proposal was put together. He assured the Ambassador that the GOI was working to improve the defense budget before a final national budget package was completed and approved by parliament in the coming weeks. ¶3. (C) Comment: Both the CHOD and the DefMin urged us to raise our concerns (which they of course share) over the defense budget with the PM or Letta, with the hope that hearing it from us, the senior GOI leaders might revisit the issue. From Letta's reaction, it seemed the PM's office already knew it had a problem that needed to be addressed. Hopefully, our having weighed in will steer the matter decisively in the right direction. We will continue to closely monitor the work on the defense budget in the weeks ahead. SPOGLI