ITALY: DOMESTIC STALEMATE KEEPS PRODI IN THE GAME,

C O N F I D E N T I A L SECTION 01 OF 03 ROME 002093

SIPDIS

NOFORN
SIPDIS

E.O. 12958: DECL: 09/20/2017
TAGS: PGOV PREL IT
SUBJECT: ITALY: DOMESTIC STALEMATE KEEPS PRODI IN THE GAME,
BUT ON THE DEFENSIVE

REF: A. ROME DAILY REPORT (9/19/2007)

B. ROME DAILY REPORT (9/18/2007)

C. ROME DAILY REPORT (9/24/2007)

D. ROME 2046

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Classified By: Ambassador Ronald P. Spogli for reasons 1.4 (b) and (d).

SUMMARY
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1. (C/NF) A political stalemate keeps the fragile Prodi
government afloat and could do so for a prolonged period,
even as it prevents PM Prodi from tackling Italy's much
needed institutional/economic reforms. The tense domestic
politics and PM Prodi and FM D'Alema's different tactics on
some items mean Italy's foreign policy could become
increasingly inconsistent. Moreover, Prodi's razor thin
majority in the Senate means one stumble (for example, during
the budget debate running through December, or over
casualties or kidnapping of Italian forces deployed abroad)
could end his government. Recent defections from the
still-unformed Democratic Party (PD) indicate some
preparations for life after Prodi are already underway. Our
strategy of the most intensive engagement possible with
Prodi, D'Alema, and others remains critical in keeping Italy
a solid strategic partner. In this regard, frequent contact
from Washington is essential. END SUMMARY.

PRODI SUFFERED IN HOT SUMMER, NO RELIEF IN SIGHT
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2. (C/NF) After a politically difficult summer, late August
polls showed a record 68 percent of Italians were
dissatisfied with the Prodi government, and Prodi's coalition
partners were openly discussing cabinet shuffles. Minister
of Justice Clemente Mastella suggested that Senate President
Franco Marini should replace Prodi and lead an institutional
government, and a grass-roots movement against the political
class has emerged, with leftist comedian Beppe Grillo
rallying thousands to his "throw the bums out" movement (REF
A). September brought no relief, and several Prodi allies
have threatened a break with the coalition over various pet
issues. The governing majority even failed September 27 to
win a minor vote in the Chamber of Deputies where the
coalition majority is generally considered secure.

HELD UP BY A STALEMATE
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3. (C/NF) Marini, a relatively conservative center-left
former Christian Democrat, told the Ambassador September 19
that political stalemate is keeping Prodi afloat as no party
leader except Silvio Berlusconi is ready to see the Prodi
government fall. Marini said Berlusconi would easily win
parliamentary elections if held today. According to Marini
and others:

--The far left knows the Prodi government is the best
arrangement they can hope for since any new government would
give more weight to centrists and less to the left.

--The Democrats of the Left (DS) and Daisy parties are
planning the October 14 launch of the new Democratic Party
(PD). Presumptive leader Walter Veltroni has made it clear
he does not want to see his national coming out coincide with
the collapse of the current center-left majority.

--Minister of Infrastructure Antonio Di Pietro, leader of the
Italy of Values (IdV) Party, is well-placed as a minister and
has no incentive to abandon the government. DiPietro,
however, is unpredictable and recently threatened to vote for
an opposition motion to remove the embattled Vice Minister of
Economy.

--MoJ and UDEUR leader Mastella, with three seats in the
Senate, is working toward an alliance in the center of the
political spectrum with Pierferdinando Casini's UDC party--a
deal he has not yet locked in. Mastella is one of Prodi's
weakest links and could be among the first to try to dump
Prodi. Mastella said September 21 he would never again enter
a government with the far left and has repeatedly threatened
to bring Prodi down.

--Berlusconi allies Casini and the National Alliance's (AN)
Gianfranco Fini do not want to govern again under the shadow
of Berlusconi as PM. They would prefer to wait for a
post-Berlusconi scenario.


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--Forza Italia (FI) and the Northern League (LN),however,
would be happy to see Prodi fall now.

BUT WAITING FOR AN (ENGINEERED) ACCIDENT TO HAPPEN
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4. (C/NF) Marini said the upcoming debates over the budget,
which must be passed by December 31, and pension reform would
be rife with disagreements that could cause the government to
fall. According to Marini, the Prodi government's
unpopularity is hurting center-left political parties, making
it increasingly likely that one or more of the parties will
break from the coalition. He said he was beginning to
believe the government could fall before the end of the year,
but that Prodi would most likely be replaced by a technical
government in 2008. Marini predicted parliamentary elections
would be held in 2009.


5. (C/NF) In a September 18 press conference, former PM
Lamberto Dini announced he would not join the PD (REF B). He
will remain part of the center-left coalition but said he
would not give carte blanche to measures catering to the far
left. Marini termed Dini's decision not to join the PD
"malicious," and Berlusconi confidant Gianni Letta told the
Ambassador September 26 that Dini's defection changes the
political dynamic. Including Dini, there are now five openly
"dissident" senators from the conservative wing of the center
left. This group is a concern for Prodi, since, unlike
Mastella or DiPietro, none of the dissidents have a
ministerial position to lose, and Dini (like Marini) harbors
aspirations of becoming PM in a technical government.
According to Letta, Dini is upset that the government is
looking to reverse pension reforms implemented while he was
PM and to increase taxes on financial instruments. Many
commentators speculate that other politicians might use the
October 14 PD constituent congress to jump the Prodi ship, or
even sink it. (Note: FI Senator Giampiero Cantoni told
Poloff September 19 that he had been actively lobbying Dini
to leave the PD. Letta confirmed to the Ambassador September
26 that "they are working that angle very hard." End note.)

DOMESTIC POLITICS CONSTRAIN FOREIGN POLICY
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6. (C/NF) Most observers say the Prodi government's foreign
policy is dictated by the need to survive in a hostile
domestic political environment, and criticize the outsized
influence the radical left exercises on the rhetoric, if not
the action, of Italian foreign policy. Until the September
22 hostage-taking of two SISMI officers in Afghanistan (REF
C),the radical left had taken every opportunity to call for
the immediate withdrawal of Italian troops there and forced
Prodi to offer his resignation in February over foreign
policy. Ironically, a Communist Renewal Party (RC) official
told Poloff September 25 that their response to the recent
incident was muted because the government is so fragile that
they did not want to give coup plotters in the moderate wing
of the majority an excuse to bring down the government.


7. (C/NF) Marini gave a more nuanced assessment of the
influence domestic politics has on foreign policy after the
Ambassador expressed concern that NSA equivalent Sannino had
recently visited Tehran. Marini explained that some issues,
especially those involving Italian troop deployments abroad,
are conditioned by domestic politics, but that Prodi's rush
to dialogue with Iran is a personal preference. Marini
noted, however, that Italy would suffer disproportionately if
stronger economic sanctions were imposed on Iran.

COMMENT
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8. (C/NF) Already subject to personal disputes and public
inconsistencies on the foreign policy approach between PM
Prodi and FM D'Alema, particularly on engagement with Iran,
Syria and Hamas (REF D),Italy's ability to support USG goals
on the international stage can be hampered by the Prodi
government's inherent fragility and the disproportionate
influence of the radical left. This is especially true when
Italian soldiers are involved, though the radical left's
muted response to most recent Afghanistan incident suggests
the tense domestic politics can, at times, limit even the
radicals. The domestic political stalemate has virtually all
Italians stumped as to the next steps--how/when Prodi falls,
if followed by a technical government or immediate elections,
etc. It also prevents the government from tackling Italy's
much needed institutional/economic reforms. The conditions
exist for this political stalemate to continue indefinitely

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with Prodi floating in the political doldrums, but Dini and
others may be looking for the opportunity to sink Prodi's
leaky ship. In the meantime, Italian foreign policy could be
unpredictable, as Italian naval gazing enters a period of
unprecedented intensity. END COMMENT.
SPOGLI