ITALY SCENESETTER FOR DNSA ELLIOTT ABRAMS

C O N F I D E N T I A L SECTION 01 OF 03 ROME 003167

SIPDIS

SIPDIS

USEU/USNATO PLEASE PASS TO DNSA ELLIOTT ABRAMS.

E.O. 12958: DECL: 11/22/2016
TAGS: PGOV XF AF IR IZ LE IT
SUBJECT: ITALY SCENESETTER FOR DNSA ELLIOTT ABRAMS

REF: A. ROME 3160

B. WHITE HOUSE 212139ZNOV06

Classified By: A/Political M/C Jonathan R. Cohen for reasons 1.4 (b) an
d (d).


1. (U) Embassy Rome warmly welcomes the visit of Deputy
National Security Advisor for Global Democratization Strategy
and Deputy Assistant to the President Elliott Abrams. Please
find below background information to serve as a scenesetter
for the visit. Country Clearance sent REFTEL A.

Summary
--------------


2. (SBU) Early press predictions that Center-Left leader
Romano Prodi's government was unstable and would fall quickly
now appear alarmist, though Prodi faces a difficult challenge
this fall as he must pass a fiscally tight budget to meet EU
budget constraints.


3. (C) The Prodi Government committed almost 3,000 troops to
an enhanced UNIFIL force in Lebanon, will assume operation
command of UNIFIL in February 2007, and pledged 30 million
euros for Lebanon at the Stockholm donors conference. In
Iraq, PM Prodi has announced plans to withdraw all Italian
troops by the end of 2006. However, the Prodi government
pledged $30 million for civilian reconstruction efforts and
will provide NATO gendarme police training in Iraq. Italy
seeks to maintain its strong influence in the Balkans and is
an enthusiastic supporter of initiatives to integrate the
former Yugoslavia into EuroAtlantic structures. Italy remains
one of our top security partners, hosting over 14,000 U.S.
military personnel and their families at Italian bases,
including forces that have deployed from Italy to Afghanistan
and Iraq (and have since returned.) The GOI under Prodi has
sought to play a role in many international crises and hopes
its leadership in Lebanon will help give it a seat at the
table on other important global issues like Iran, Afghanistan
and the Middle East Peace Process. On Iran, Italian officials
have told us consistently that Italy will support a sanctions
regime passed by the UN even though sanctions would
significantly affect Italy's bottom line--Italy is Iran's
second largest trading partner in the EU. End Summary.

Prodi Stands Despite Early Predictions
--------------


4. (SBU) Prodi leads a diverse coalition of allies ranging
from centrist-oriented Catholic parties to radical
communists. During the election campaign, the center-left
coalition was often plagued by internal disputes, with the
radical-left assuming an increasingly high-profile role.
Radical left parties scored significant gains, winning
roughly 12 percent of the vote and capturing 38 of the
potential 158 center-left seats in the Senate, making them
essential to the Prodi government. Internal Coalition
disputes continue to be rampant. Nevertheless, Prodi has
been able to hold his coalition together, passing
controversial legislation supporting Italy's military to
Afghanistan despite far-left objections. Many, moderates
within the coalition agree the government as a whole is being
drawn too far to the left and that next year could bring a
re-assessment of coalition political strategy.

Significant Economic Handicaps and a Budget Battle
-------------- --------------


5. (SBU) High public debt and consistent budget deficits,
rising social welfare costs, persistent unemployment, and a
stagnant economy all limit Italy's financial ability to
increase or sustain Italy's overseas missions. The current
budget has reduced foreign assistance by 27 percent and
defense spending by ten percent (to about 0.90 percent of
GDP),well below the NATO two percent benchmark.
Peacekeeping funding, carried as a separate line item outside
the budget, was cut by 20 percent for 2006. These economic
handicaps, combined with a legacy of public debt, have forced
Prodi to introduce an austerity budget for 2007 that has
heightened tensions within his coalition. The political
battle to pass the budget will be the most important test of
the strength of Prodi's government.

Taking a High-Profile Role on Lebanon

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6. (U) Despite public differences with the U.S. on Iraq,
Italy has played a leading role in international efforts to
stabilize Lebanon. In July, at the request of the U.S.,
Italy hosted an international conference attended by Foreign
Ministers from 20 nations and international organizations to
discuss the international community's role in resolving the
current crisis in Lebanon. The discussion focused on support
for an international stabilization force, the need for an
urgent and sustainable cease-fire, humanitarian concerns, and
the reconstruction of Lebanon. Immediately after the
conference, Italy pledged to contribute 3,000 soldiers to an
enhanced UNIFIL. Italy will take over command of the UNIFIL
forces on the ground early next year and commands the UNIFIL
Planning cell in New York.

Shift to Civilian Cooperation in Iraq
--------------


7. (U) Italy, with approximately 1,600 troops located in Dhi
Qar Province in the British sector, was at one time the third
largest troop contributor in Iraq after the U.S. and UK but
will withdraw all remaining troops by end 2006. Before the
April elections, the Berlusconi government announced a
timetable for the drawdown of Italian troops with the aim of
repatriating all by year end (with the exception of trainers
in the NTM-I) and transforming the mission into a civilian
one. When Prodi's government first took office they
announced a full withdraw from Iraq, including their civilian
PRT. After intense senior level USG engagement, the Italians
agreed to leave a civilian presence, called URS (Unit for
Reconstruction Support) which is moving to Tallil Air Base
within the protective perimeter of US forces once Italian
troops deport.

Seeking a Broader Role in the Middle East
--------------


8. (U) Italy is a member of the EU, NATO, G8, and will soon
rotate onto the UN Security Council. The GOI under Prodi has
sought to play a role in many international crises and hopes
its leadership in Lebanon will help give it a seat at the
table on other important global issues like Iran,
Afghanistan, and the Middle East Peace Process. In a recent
visit to Lebanon, Prodi reiterated his government's belief
that the key to long-term stability in the region is finding
an equitable solution to the Israel-Palestinian conflict, a
solution that is guaranteed by the international community,
and the Italians would like to help make that happen.


9. (C) Italian MFA officials have taken pains to distance
Italy from the so-called Spanish-French-Italian Middle East
Peace Initiative. They said that while the MEPP is a
priority for Italy, it was crucial to coordinate any such
initiative carefully;first within the EU, then with the U.S.,
then with Israel and finally with moderate Arab countries. FM
Massimo D'Alema publicly distanced Italy from the
Spanish-French announcement, saying Italy "appreciated" the
Spanish-French effort, but "we want a European initiative,
not just the initiative of a few countries." Similarly, MFA
officials said it should first be discussed in the so-called
Quint (France, Spain, Italy, UK, Germany) format; Italy hosts
the next meeting of the Quint just before your arrival on
Friday, November 24 and plan to put the issue on the agenda.
PM Prodi has publicly noted the need for "concrete measures
to reduce tension and build confidence between the parties."

Iran
--------------


10. (C) Despite not being a member of the core group of
nations seeking to resolve the current impasse over Iranian
nuclear ambitions, Italy has told us repeatedly that Italy
will support a sanctions regime passed by the UN even though
sanctions would significantly affect Italy's large
trade/investment exposure there. Senior officials have
cautioned that although unavoidable, moving forward with
sanctions will set in motion a process of escalation whose
outcome is not predictable. Senior Italian officials believe
the key issue for Iran is not the nuclear one; it is U.S.
recognition and engagement. Italy wants to be consulted on
Iran policy given that they are Iran's second largest trading
partner in the EU, and will soon join the UNSC the Italians

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are grateful that we have begun to include them in
consultations.

Holding Steady in Afghanistan
--------------


11. (U) Italy is among the biggest contributors to NATO's
ISAF mission in Afghanistan maintaining an average of 2,000
troops in Kabul and Herat, where Italy commands the western
sector of the country. However, pressure from the far left
and a public perception that the military mission in
Afghanistan is failing will keep the government resistant to
engagement in offensive combat operations or deployment
beyond the Kabul and Herat areas. Refunding the Afghan
mission will be a political challenge for the Prodi
government again in December. The government has pledged to
increase development assistance in 2007. Recently Foreign
Minster Massimo D'Alema has been calling for a new
international strategy in Afghanistan that would increase
development assistance and involve the EU, UN and neighboring
countries, including Iran.

Maintaining Strong Influence in the Balkans
--------------


12. (C) Italy is a member of the six-nation Contact Group
that leads international engagement in the Balkans. Italy
has participated in every Balkan peacekeeping operation in
the region since the breakup of the former Yugoslavia.
Currently, Italy leads the EU police force in Bosnia, the
successor to the NATO-led SFOR peacekeeping force and last
year commanded the NATO-led KFOR force in Kosovo. In
addition to peacekeeping, Italy has contributed to the
political, economic and infrastructure development of the
war-torn region and has been among the most enthusiastic
supporters of integrating the countries of the former
Yugoslavia into the EuroAtlantic community.

SPOGLI