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06NAPLES102 2006-03-29 15:47:00 UNCLASSIFIED Consulate Naples
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					  UNCLAS SECTION 01 OF 02 NAPLES 000102 


E.O. 12958: N/A

1. Summary: The primary economic issue in Italy's Mezzogiorno
is far and away that of "jobs". Unemployment has always run at
higher levels in the South than in central and northern Italy,
and southern voters are sure the current economic downturn has
hit them the hardest. Parents, educators, political figures and
young people themselves complain that the South is mortgaging
its future, as trained university graduates continue to leave
their families and hometowns to head north and even abroad in
search of adequate employment. Next, after the jobs issue,
comes the challenge of improving Southern Italy's inadequate
infrastructure, which aggravates the South's geographic
disadvantage (northern Italy is considerably closer to markets
in the rest of Europe). The center-left (CL) charges that the
current center-right (CR) government has "neglected" or even
forgotten the South; the presence in the government of the
Northern League certainly reinforces that message for many
southerners, especially when its version of devolution is taken
to mean "let's keep our tax revenues here in the North."

2. (Summary, cont.) However, while many swing voters may choose
to cast their vote for the CL, many others will abstain or spoil
their ballot, convinced that neither coalition will be able to
make headway with the South's problems. Based on these
pocketbook issues, the CL is likely to maintain its inroads in
traditionally conservative Calabria, and will maintain its
ascendancy in traditionally CL Campania (including Naples,
Italy's third largest city) and tiny Basilicata. The CR has
come from behind enough to make the election a toss-up in
traditionally conservative Puglia (despite the CL's victory in
the recent regional elections), while the CR should win in
Sicily. Southern CL leaders are cautiously optimistic that
Prodi will continue to maintain a lead nationwide due to
economic worries; CR boosters insist the race is too close to
call, and Berlusconi continues to come from behind. End summary.

3. This cable addresses how economic issues are affecting the
political campaign in the South. A follow-up cable will examine
the larger political situation in the run-up to the April

Southern Italy still lags behind


4. The depressed economy in Campania, Sicily, and Calabria - not
coincidentally the three areas with strong organized crime
presence - remains an intractable national issue. Faced with
the EU stability pact requirements, international competition,
and increased energy costs, these southern regions continue to
lag behind more advanced areas. With the current economic
down-turn, the gap with northern regions has only widened, thus
making economic and social growth in the short- to medium-term
even more difficult. Consequently, "jobs" consistently ranks as
the number one campaign issue throughout the South.

5. Our contacts believe the economic situation in the
Mezzogiorno is only likely to get worse if the national
government does not take effective measures to boost employment
and economic growth (including foreign investment) in the South.
Our interlocutors in political, institutional,
economic/business, and academic circles are united in calling
for three measures in this regard: (1) an aggressive, long-term
fight against organized crime; (2) an improved infrastructure;
and (3) bureaucratic reform.

Organized Crime


6. Pervasive organized crime has blighted Campania, Sicily and
Calabria, preventing the development of a truly market-oriented
business culture. The lack of rule-of-law and widespread,
chronic environmental pollution (aggravated by organized crime,
known in this manifestation as the "eco-mafia") have made the
area unattractive to many private investors. Corruption among
elected government officials, in many cases connected to
organized crime, undermines efforts to cultivate a "rule-of-law"

Unwieldy Bureaucracy, Lack of infrastructure


7. A deficient infrastructure and an inefficient government
bureaucracy with little sense of public accountability further
retard development. Business leaders, including American
contacts with U.S. companies operating in the South, complain of
infrastructure problems. For example, Nokia reportedly decided
to close down its small plant in Sicily because of the
inadequate water system.

8. As a result, much of the public is cynical on both issues -
infrastructure and government reform, doubting any government
will make a difference. For example, contacts in the small
southern region of Basilicata recently noted that the leading
vote-getter in elections there is usually the protest vote
indicated by unmarked or defaced ballots, amounting to over 30
percent of the vote.

9. The largest infrastructure project on the table, the
multi-billion-dollar "Messina Straits Bridge" to link Sicily
with the toe of the Italian boot, is mired in controversy and
uncertainty. A pet project of PM Berlusconi, many expect a CL
government would not go ahead with the bridge project. Many
political and business leaders in Sicily argue that the bridge
does not address the more pressing infrastructure needs of the
region, such as the water system.

Dissatisfaction with Berlusconi


10. Our CL contacts here cite growing frustration and
disillusionment with the Berlusconi government, and are sure
voters will "throw the bums out." However, CR proponents
maintain that while Berlusconi has not delivered as much as he
had promised, he has made important achievements, and certainly
accomplished more than the CL the last time it was in power.

11. Some CR contacts complain of a Southern "assistenzialista"
attitude, a debilitating dependency on government to provide,
above all, guaranteed jobs and public works projects to fuel the
economy. One Alleanza Nazionale leader noted the significance
in word choice: Southerners say they want a "position" (posto),
not "work" (lavoro). But other Southerners reject accusations
that the South has grown dependent on financial aid from Rome,
and that it wastes much of what it does receive through
inefficiency, poor planning, and corruption. Some contacts
insist the government can't tackle crime without implementing
programs to create jobs and boost local communities.

Yet not convinced by Prodi and the CL


12. Of course, not only Berlusconi's performance comes under
fire from a southern perspective. A recent editorial in the
Palermo-based daily "La Sicilia" criticizes Romano Prodi's
announced intention to cut labor costs, saying the measure will
benefit more economically dynamic northern areas - not southern
ones. The proposal will not cut southern unemployment rates,
nor will it impact on the weak economy, says the editorialist.
Theoretically, all want to resolve Italy's "two-speed economy,"
but in practice decisions are made with the center-northern
region in mind.

Business leaders upbeat~


13. Despite the gloomy economic picture, the political and
economic class is not completely disheartened about the future.
(One exception is a surprising number of political leaders in
Calabria, who are despondent about ever eradicating the
`Ndrangheta organized crime group). Most of our contacts insist
that southern Italy has great potential to become an advanced,
attractive environment for economic growth. In particular, it
has human resources, boosted by a number of excellent
universities, and it has great undeveloped potential in the
tourism sector. Many in the South pin their hopes on turning
the South's geographic position to its advantage by developing
trade with the Balkans and with North Africa.

~Voters increasingly turned-off


14. Southern voters are a different matter; we see widespread
voter dissatisfaction and skepticism regarding the electoral
choice before them. But will this attitude be directed against
both parties (resulting in high absentee rates), or mostly
against the current CR government? Or will Berlusconi succeed
in convincing voters that his government has made real progress,
and had certainly done a better job than a fractious CL
government with a potentially dangerous extremist leftist
component would have done? The gloomy economic picture in the
South remains uppermost in voters' minds, but a significant
portion of Southern voters are still undecided on which
coalition provides more hope of a brighter future.