ITALY CONFIRMS PLEDGE OF $100M FOR GAZA, BUT ONLY

C O N F I D E N T I A L SECTION 01 OF 02 ROME 000314

SIPDIS

NEA/IPA: LENTZ

E.O. 12958: DECL: 03/16/2019
TAGS: EFIN KPAL KWBG PGOV PHUM PTER EUN
SUBJECT: ITALY CONFIRMS PLEDGE OF $100M FOR GAZA, BUT ONLY
$30M IS NEW FUNDING

REF: SECSTATE 20388

Classified By: Economic Minister Counselor Tom Delare
for reasons 1.4 (b) and (d).


1. (C) Summary: Responding to reftel demarche, Antonello
De Riu of the Italian MFA confirmed Italy's pledge of $100m
(79m Euros) in aid for Gaza, to be spent over three or four
years, though he cited two problems that could result in the
pledge not being met: Italian "over engagement" and the
limited absorptive capacity of the Palestinian Authority to
responsibly spend funds. Of the total pledge approximately
24 million Euros ($30m) are newly committed funds, which will
consist of grants and credits, for which Italy has not
identified a funding source. Comment: Substantial Italian
commitments to Afghanistan, Gaza, Iraq, Libya, and Pakistan
(septel),combined with cuts in development assistance of
sixty percent in 2009 call into question Italy's ability to
meet all of its pledges. We need to press the Italians to
prevent this reduction and deliver on their aid commitments.
End Summary.


2. (C) On 9 March Econoff delivered reftel demarche to
MFA Counselor Antonello De Riu, head of the Middle East
office within the Development Cooperation Directorate. De
Riu confirmed that Italy intends to spend $100 million (79m
Euros),though he said there is still disagreement within the
Italian government over whether the aid would be disbursed
over three or four years (Prime Minister Berlusconi has
publicly announced conflicting timelines). Of the 79m Euros,
22 million Euros were previously obligated in December of

2008. The GOI would like to spend this tranche of funds by
the end of 2009, though De Riu claims it has encountered
difficulties due to lack of Palestinian governmental
capacity. The GOI has 33.5 million Euros yet to be disbursed
from a pledge made in Paris in 2007, which will be
reallocated to meet the new 79m Euro pledge. Subtracting the
money that Italy began spending in December and the Paris
money already pledged, the net new Italian contribution is
approximately 24 million Euros, of which De Riu estimated
60-70% would be in credits with the remainder in grants. De
Riu thought the money would come from funds already allocated
for bilateral, multilateral and emergency GOI accounts.


3. (C) The GOI began spending 22 million Euros in December
of 2008 mainly on aid to vulnerable families in Gaza,
channeled through the European Community, De Riu said. The EC
monitored those cash disbursements very closely to ensure
they were given exclusively to needy families, according to
De Riu. Medical teams, humanitarian flights, UNRWA, the FAO
and the WHO were also recipients of funds from this Italian
disbursement. In the past Italy has given money through the
UNDP and ICRC, De Riu said, but for domestic political
reasons and for improved accountability it now prefers to
give as much Palestinian aid as possible through the PA or
through the European Community. De Riu noted that the
Palestinian Authority requested that all projects be steered
through it, but asked rhetorically who would monitor it for
corruption.

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Limited Palestinian Absorptive Capacity
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4. (C) "A pledge doesn't mean much unless it's actually
spent," said De Riu. According to De Riu, lack of competence
within the Palestinian Authority (PA) often impairs Italy's
ability to successful disburse aid and execute projects. He
cited the example of an 11 million Euro West Bank electrical
project that Italy had pledged to build in Hebron. The
project was contingent upon the municipality of Hebron
creating a company to manage the electricity. Despite
repeated attempts to secure cooperation, the municipality
refused to do so, thus the GOI is attempting to re-direct the
project for Gaza. "The problem is that the PA doesn't
control Gaza," De Riu noted. As a result Italy finds it

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difficult to fund education and health there as the schools
and hospitals are run by Hamas. "I fear that absent a
political solution (to intra-Palestinian factionalism) it
will be very difficult for Italy to spend its pledge within
four years," De Riu said. He suggested if the GOI is able to
successfully disburse 22 million Euros in 2009 it would be a
harbinger of whether the PA has sufficient competence and
expertise to absorb the entire Italian 79 million Euro
pledge.

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A Personal Political Commitment from the PM
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5. (C) De Riu was puzzled how PM Berlusconi's widely
publicized remarks about a "Marshall Plan" for the
Palestinians might be implemented in practice. He speculated
that it might focus on private sector growth, but he said
given the restrictions on import and export of goods in Gaza,
he did not think private sector investments would be
particularly promising. De Riu thought the PM used the
rhetorical flourish to demonstrate a political commitment and
in short, De Riu said, "aid to Palestine is a priority now."


6. (C) Comment: Italy has announced a sixty percent cut
in its global development assistance budget, yet PM
Berlusconi continues to pledge increases in Italian
assistance to high profile areas like Gaza. Embassy will
continue to press the GOI to meet its assistance commitments,
including for this latest tranche of 24m Euros. This latest
offer appears to be a high priority with Berlusconi's
personal support. Nevertheless, we remain skeptical, given
Italy's past performance. End Comment.


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