ITALIAN RESPONSE TO DEMARCHE ON U.S. INITIATIVE TO

UNCLAS ROME 000469 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: KNNP PARM TRGY AORC IT IAEA SUBJECT: ITALIAN RESPONSE TO DEMARCHE ON U.S. INITIATIVE TO STRENGTHEN THE IAEA REF: STATE 21700 (U) SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION. ¶1. (SBU) On February 7, 2005 SCICOUNS delivered reftel demarche to Counselor Giovanni Battista Iannuzzi, Director of Office VII (National Authority for Conventions on Nuclear, Bacteriological and Chemical Disarmament) of the Ministry of Foreign Affairs' Directorate General for Multilateral Political Affairs and Human Rights. On February 11, Iannuzzi responded with preliminary comments. Iannuzzi thanked SCICOUNS for providing the U.S.-proposed text for the draft terms of reference on the IAEA Special Committee on Safeguards and Verification, as well as the text of the U.S.-proposed Draft Board Decision to create the Special Committee. He assured SCICOUNS that he had provided copies of these texts to Ambassador Catalano, who will head the Italian delegation at the Senior Group meeting in London on February 14th. Iannuzzi emphasized that his comments were preliminary, and said that the Italian delegation looked forward to further discussion of the U.S. proposals in London. ¶2. (SBU) Iannuzzi said that after comparing the U.S. texts of September and November 2004, Italy's views remained fairly the same. He confirmed that promoting additional signatories to the IAEA Additional Protocol was a priority objective for Italy, just as for the United States. He also said that Italy shared the idea that creating a Special Committee on Safeguards and Verification in the IAEA could be useful in combating the increased menace of nuclear terrorism and nuclear proliferation. ¶3. (SBU) Iannuzzi told SCICOUNS that Italy was interested in taking part in the proposed Special Committee. However, referring to the last point in the U.S.-proposed Draft terms of reference for the Special Committee (paragraph 8 of reftel),Iannuzzi responded that the GOI preferred resources for the Special Committee to come from existing budget resources within IAEA, not from extra-budgetary resources made available by interested states. COMMENT: Context for Iannuzzi's comment: for the last several years, Italy has relied on extraordinary one-off revenue measures and spending deferrals to avoid bumping up against the EU deficit/GDP ceiling of three percent. The current Finance Minister has pursued the most challenging fiscal reforms in the last decade, while also implementing tax cuts promised during Prime Minister Berlusconi's campaigns. Domestic and international budget experts agree that the 2005 mix of spending and tax cuts will not keep Italy's deficit under the EU ceiling. Facing this situation, the GOI will need to turn to extraordinary austerity measures. END COMMENT. SEMBLER NNNN 2005ROME00469 - Classification: UNCLASSIFIED