BERLUSCONI-PRODI DEBATE SHOWS CONTRAST: NO

UNCLAS SECTION 01 OF 02 ROME 001019

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON IZ IT ITALY NATIONAL ELECTIONS
SUBJECT: BERLUSCONI-PRODI DEBATE SHOWS CONTRAST: NO
KNOCKOUTS

REF: A. ROME 0996

B. ROME 0584


1. (SBU) SUMMARY: Many commentators give PM Berlusconi a
slight edge over challenger Romano Prodi in last night's
second candidate debate. Berlusconi was more poised than in
the first debate and offered a surprise proposal to eliminate
local property taxes on every family's first home--a proposal
some observers believe might bring him crucial undecided
voters. Prodi hammered the Berlusconi record but failed to
inspire with his performance. In a debate in which PM
Berlusconi tried to paint Prodi as the powerless head of a
band of communists and ex-communists, Iraq was the only
foreign policy issue. On Iraq, Prodi repeated the Union's
standard line that he would call for a phased withdrawal of
Italian troops by the end of 2006 in consultation with the
Iraqi government. However, his fervor in denouncing the
attempt to bring democracy to Iraq through regime change was
noteworthy. END SUMMARY.

POCKETBOOK ISSUES DOMINATE THE DEBATE
--------------


2. (SBU) PM Silvio Berlusconi and center-left (CL) challenger
Romano Prodi squared off April 3 in the second of two
American-style debates. As was the case in the first debate,
pocketbook issues dominated (REF A). However, both
candidates avoided explaining how they would finance the
various tax cuts and spending proposals they had offered over
the course of the campaign.

TWO COMPETING IMAGES OF GOVERNMENT EMERGE
--------------


3. (SBU) More forward-looking than in the last debate and
less defensive, Berlusconi described a vision of smaller
government that enables individuals to thrive. In contrast,
the more professorial Prodi outlined a paternalistic role for
government that redistributes wealth from the rich to the
less fortunate. Berlusconi tried to paint Prodi as the
powerless head of a band of communists and ex-communists and
focused on Prodi's proposals to increase the inheritance and
other taxes. Prodi consistently asked for Italians to
consider whether they feel better off now than five years
before and proposed programs, such as a cash payment to
families with children.


4. (SBU) In his final statement and the last comment of the
night, Berlusconi dramatically proposed cancellation of local
taxes on a family's first home (ICI) a clear attempt to
appeal to his constituency's pocketbooks. Berlusconi's task
over the next week is to convince incredulous and apathetic
voters that his proposal is credible. It remains unclear
whether Berlusconi coordinated the proposal with his
coalition allies, and the measure could run afoul of the
Northern League. ICI is one of few Italian taxes raised by
municipal governments for their own benefit, and some CL
officials, ironically given their opposition to devolution,
have called ICI a form of "fiscal federalism," a concept dear
to the Northern League.


5. (SBU) Several CL Mayors have already denounced
Berlusconi's proposal. Rome Mayor Walter Veltroni said that
Rome collects Euro 300 million from ICI and said it is
irresponsible for Berlusconi to propose eliminating a source
of local income without offering an alternative. But the PM
did find one odd bedfellow: Communist Renewal Party leader
Fausto Bertinotti expressed support for Berlusconi's proposed
cut to ICI.

IRAQ: THE ONLY FOREIGN POLICY ISSUE
--------------


6. (SBU) Italian participation in peacekeeping operations in
Iraq was the only foreign policy issue raised by the
questioners. Prodi said the war did not bring peace and had
led to an increase in terrorism. His government never would
have entered, and this was not the way to export democracy,
which Europe has done more effectively by other means. He
repeated the standard Union line, that he would bring home
Italian troops by the end of 2006, in consultation with the
Iraqi government (REF B). He did not refer to prior
consultation with coalition allies and said Italian soldiers
would come home "as soon as possible."


7. (SBU) Berlusconi responded that Italian troops did not
participate in the war in Iraq but went there at the
invitation of the UN and had focused on reconstruction. He
confirmed the government's stated policy of a phased
withdrawal by the end of 2006. Berlusconi used this issue to
maintain that a Prodi government would be at the mercy of
communist party leaders, declaring "we cannot isolate
ourselves from the world."

COMMENT
--------------


8. (SBU) COMMENT: Prodi's statements on Iraq were not new,
but his fervor in denouncing the attempt to bring democracy
to Iraq through regime change was noteworthy. More than in
the first debate, Italians were able to see two different
views on the role of government expressed by Berlusconi and
Prodi. Down in all publicly available polls, Berlusconi is
targeting undecided and apathetic voters--both those who
still fear communists and those who just want to pay less
taxes. Many commentators call Berlusconi's proposed tax cut
an obvious ploy to win votes, while others say the obvious
ploy might be what he needs. If so, its effect will turn on
whether people believe he will keep this promise--and that
means he has a selling job to do in the few remaining days
before the elections. END COMMENT.
SPOGLI