This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 ROME 000583 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/WE, EUR/ERA, EB/IFD/ODF 
USEU FOR PATRICIA LERNER 
PARIS FOR USOECD 
 
E.O. 12958: N/A 
TAGS: EAID ECON EFIN IT IRAQI FREEDOM AFGHANISTAN
SUBJECT: ITALY'S DEVELOPMENT ASSISTANCE IN DECLINE 
 
REF: A. ROME 117 
     ¶B. ROME 28 
     ¶C. ROME 27 
 
SENSITIVE BUT UNCLASSIFIED, NOT FOR INTERNET DISTRIBUTION. 
 
¶1. (U) SUMMARY:  In view of Italy's extraordinary 27.6% cut 
in 2006 foreign assistance from 2005 levels, DCM called on 
Guiseppe Deodato, Ministry of Foreign Affairs (MFA) Director 
General for Development, recently to hear his views and 
ensure continued good cooperation on development assistance. 
 
¶2. (SBU) Deodato said new funding for Iraq reconstruction 
would be handled by the MFA's Middle East Office, expressed 
dismay over poor coordination between the EU's foreign 
assistance programs and its member states' foreign assistance 
programs, and identified Italy's priorities for assistance, 
including Sudan, Somalia, and North Africa.  Despite 
declining resources, Italy has so far delivered on Iraq:  all 
but but five million of its Madrid pledge for Iraq has been 
disbursed.  On Afghanistan, the GOI plans to fulfill its 
Berlin commitments of 145 million euros over three years (ref 
C).  However Italy's shrinking budget allocation for 
development is a worrisome trend that could affect it's 
ability to maintain its current role in international 
affairs.  END SUMMARY. 
 
Background: A Casualty of a Weak Economy 
---------------------------------------- 
 
¶3. (U) The slashed development budget is part of the 
continuing downward spiral of Italy's foreign assistance 
budget, which has declined in tandem with the stalled Italian 
economy (ref B).  The MFA's Development Cooperation Office, 
which Deodato heads, has also suffered from a loss of 
confidence by the Italian Parliament because of a corruption 
scandal in the nineties.  Since the MFA established tight 
budgetary and accountability controls to counter possible 
corruption, the Development Cooperation's disbursements have 
drastically slowed.   As a result, the Parliament has made 
the Protezione Civile, originally an agency established to 
handle domestic national disasters and emergencies, the 
conduit to disburse funds rapidly for international 
disasters. 
 
¶4. (U) Italy, which once posted a 0.42% of GDP assistance 
budget, is in the unenviable position of announcing this year 
that the combination of the foreign assistance budget and the 
Paris Club debt relief for 2006 totals only 0.12% of Italy's 
GDP, one-third of the EU average of 0.36%, or 400 million 
euros in 2006 versus 552.6 million in 2005.  No decisions 
have yet been made on where the cuts will be made.  Italy has 
promised to honor its commitments in Afghanistan. 
 
¶5. (U) On Iraq, at a press conference February 3, MFA 
spokesman Pasquale Terracciano said Italy's focus in Iraq 
during the first semester of 2006 will be to progressively 
reduce its military presence and increase economic 
reconstruction and democratic institutions assistance.  The 
Parliament passed a decree February 10, which included 
continued support for Iraq through June 30, 2006.  Italy's 
strategy will be to focus on three areas: Baghdad, Kurdistan, 
and Dhi Qar Province; Italy has earmarked half its allotment 
for Dhi Qar.  Institution-building initiatives will focus on 
the health sector and on infrastructure (water and 
transportation), and its training and institution-building 
projects will focus on federalism, the electoral process, and 
combating corruption.  In the health sector, the GOI and the 
Italian Red Cross have devised a plan to reorganize the 
health sector and rehabilitate hospitals and clinics in 
Baghdad and Dhi Qar.  In addition, under MFA Coordination, 
the Italy-based Mediterranean Institute for Hematology will 
provide infant cardiology and cardio-surgery units in 
Kurdistan. 
 
Iraq Assistance:  Whither the PRT? 
--------------------------------- 
 
¶6. (SBU) DCM raised the recent decree passed in Parliament to 
authorize funding for continued operations in Iraq through 
June 2006.  Deodato pointed out that MFA Development 
Cooperation has no authority over the portion of funds 
designated for reconstruction projects.  The funds will be 
disbursed by the MFA Director General for the Middle East, 
Riccardo Sessa, and will be tied to continuing military 
assistance. 
 
¶7. (SBU) Deodato expressed concern over the continuing 
military influence over Iraqi reconstruction priorities.  He 
said that the application of the Provincial Reconstruction 
Team model has had some difficulties in the past, and 
recommended a more flexible approach for the use of funds for 
the PRT reconstruction projects.  He believes a top priority 
should be rapid, "grass-roots" assistance to meet Iraqi 
needs.  Deodato hopes to provide credit to Iraq; but after 
the 2005 Paris Club debt cancellation, funds available for 
loans have been reduced because the rotating loan fund at the 
Ministry of Finance has not been replenished. 
 
Focus on Horn of Africa, Mediterranean Countries 
--------------------------------------------- --- 
 
¶8. (SBU) Deodato said other Development Cooperation 
priorities include Somalia and the Ethiopia-Eritrea Conflict. 
 He noted that four years ago, Eritrea expelled the Italian 
Ambassador at the time.  He compared Eritrea's President 
Afewerki to Libya's Muammar Al-Qaddafi and characterized 
relationships between Italy and Eritrea as strained.  Despite 
this, Eritrea had requested a 30 million euro assistance 
package from Italy; however, Italy will require the return of 
property in Eritrea belonging to Italian citizens as a 
condition for the assistance to be disbursed.  In addition, 
Deodato said a new law in Eritrea enacted last month, which 
restricts Non-Governmental Organization (NGO) activities, had 
essentially cut off the operations of seven Italian NGOs 
operating in Eritrea. 
 
¶9. (SBU) On Somalia, Deodato speculated that Belgium 
designated an Ambassador, based in Nairobi, to the 
Transitional Federal Government of Somalia (TFG) due to the 
strong interest on the part of Louis Michel, former Belgian 
Deputy Prime Minister and current European Union Development 
and Humanitarian Aid Commissioner.  Italy followed suit on 
January 5 by designating Ambassador Lanata as Italian 
Ambassador to the TFG (ref A).  Somalia has asked Italy for 
assistance in restructuring its central bank. 
 
¶10. (SBU) Deodato said Italy had a strong role in the 
political negotiations in Sudan, because of Barbara Contini, 
Italy's representative in Darfur.  Contini stayed in the 
region for over a year, and implemented thirty successful 
projects.  Deodato was particularly critical of the World 
Food Program (WFP) feeding program, which feeds over 150,000 
Sudanese.  He said these people were not war refugees, but 
rather were drawn by the WFP free food.  He said the 
situation in Sudan was "enormously complex" and remained a 
top priority for his office. 
 
European Union Development Cooperation and Italy 
--------------------------------------------- --- 
 
¶11. (SBU) Deodato expressed dismay over coordination 
difficulties between the EU and Italy.  He said the EU's 
development assistance relative to Italy's is "enormous," 
with the EU budgeting some seven billion euros. He also said 
that UK development contractors and grantees are able to take 
better advantage of EU tenders for foreign assistance 
projects, compared to Italian contractors/grantees, given UK 
speed and bureaucratic agility. 
 
Comment: Open Door, but Don't Forget Systemic Limitations 
--------------------------------------------- ------------ 
 
¶12. (SBU) Up until now, the Embassy has met either a closed 
door or long delay in getting information from the Office of 
Development Cooperation.  This has meant a lagged response to 
Washington requests for information regarding Italy's plans 
on foreign assistance to a particular client state.  We 
believed these delays were due not only to Italy's infernal 
red tape, but also to Italy's embarrassment at what was a 
shrinking pool of assistance funding, and the consequent 
difficulty in establishing Italy's priorities for the many 
requests for foreign assistance funding. 
¶13. (SBU) Deodato did confirm that he must triage many 
requests from us and others, but he also said Iraq and 
Afghanistan were priorities for Italy.  Beyond Italy's 
programs in both these countries, we believe he and others in 
the GOI will continue to steward their limited 2006 funding 
carefully and allocate it to foreign assistance projects in 
Italy's direct national interest and not necessarily as a 
result of request from others, (i.e., the United States) for 
support to a developing country in need.  END COMMENT 
SPOGLI