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

C O N F I D E N T I A L SECTION 01 OF 04 ROME 000864 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/FRIED, NEA/WELCH, IO/SILVERBERG; NSC FOR 
HADLEY; DOD FOR EDELMAN 
 
E.O. 12958: DECL: 03/20/2016 
TAGS: PGOV PREL IT ITALY NATIONAL ELECTIONS
SUBJECT: ITALIAN ELECTIONS: WHAT IF THE CENTER-LEFT WINS? 
(PART II OF II) 
 
REF: A. (A) ROME 839 
     ¶B. (B) ROME 768 
     ¶C. (C) ROME 724 
     ¶D. (D) ROME 584 
     ¶E. (E) ROME 501 
     ¶F. (F) ROME 371 
     ¶G. (G) ROME 342 
 
Classified By: Ambassador Spogli, for reasons 1.5 (b)(d). 
 
¶1.  (C)  Summary.  Septel outlines the possible outcomes of 
the April 9-10 Italian elections; as of now, the center-left 
has a slight edge in polling, suggesting neither the left nor 
the right will win with a large mandate.  We predict: (1) 
budget constraints will challenge the next government's 
ability to undertake new foreign policy or security 
commitments; (2) a narrow margin of victory for either 
coalition will lead to greater political instability; and (3) 
political paralysis over government formation may last 
through the summer and potentially longer. 
 
¶2.  (C)  If the center-left wins, we can and will work with a 
Prodi government that will provide relative continuity in 
Italy's foreign policy.  But the days of Italy automatically 
engaging on our behalf will be over as Prodi seeks to 
deliberately subordinate Italian foreign policy to the EU. 
To maintain current Italian initiatives, we will have to work 
much harder and expect more bumps along the road. 
 
¶3.  (C)  We will need to engage early and often to shore up 
center-right support and build a center-left consensus on key 
issues including Italy's relationship to NATO/trans-Atlantic 
relations, Iraq (troop withdrawal and PRT implementation), 
Italy's 2007 UN Security Council seat, Iran (UNSCR), 
MLAT/legal cooperation (Abu Omar); Hamas/Israel, Russia 
(energy/democracy issues) and economic/commercial interests 
(defense procurement, growth/competitiveness, GMOs).  Post 
has been engaging on these issues with key center-left 
leaders; as elections outcomes unfold, we recommend adding 
high-level visits to/from Washington to ensure Italy remains 
our strongest ally in continental Europe.  End Summary. 
 
Budget Woes 
----------- 
 
¶4.  (C)  Regardless of who wins, spiraling debt and a 
stagnant economy mean the next Italian government will have 
to struggle to maintain key foreign policy commitments in 
Iraq, Afghanistan and the Balkans.  The 2006 budget already 
cut foreign aid by 27 percent (Afghan aid protected so far) 
and reduced military spending to approximately 0.9 percent of 
GDP, with funding for overseas military deployments (a 
separate line item) cut by 20 percent.  With a budget 
deficit/GDP ratio of 4.1 percent, Italy has already exceeded 
its EMU ceiling of 3.5 percent.  Although the EC has been 
silent on this transgression, further deterioration would 
invite meddling by Brussels, and a CL government might be 
more inclined than Berlusconi has been to respond with 
further spending cuts.  We should focus our efforts on 
maintaining existing commitments and lower expectations of 
significant pledges of additional financial support or 
materiel for new initiatives. 
 
Political Paralysis/Instability 
------------------------------- 
 
¶5.  (C)  Unless the center-right (CR) wins a big mandate, 
which seems unlikely, we expect a prolonged period of 
political paralysis within/among coalitions as they form a 
government and elect a new president and prime minister. 
This could mean April-July government formation, followed by 
the summer holiday hiatus, and the fall dedicated to a budget 
fight that could crack a weak, new coalition with a narrow 
majority--for example, a center-left (CL) government 
dependent on its extremist elements (Greens, Communists). 
This scenario could prompt a relapse to Italy's past pattern 
of frequent government turnovers. 
 
Engagement Strategies 
--------------------- 
 
¶6.  (C)   We have begun to engage key CL leaders on areas of 
concern, first and foremost the belief voiced by DS leader 
D'Alema (Ref C) that "the road to Washington leads through 
Brussels."  The best news is that the CL's likely choice for 
Foreign Minister, DS Party Secretary Piero Fassino, supports 
U.S. policy goals on Iraq, Iran, NATO and Israel (Ref E). 
However, if Prodi's more extreme coalition partners do well 
at the polls, they will certainly demand key 
ministerial/undersecretarial positions and press for 
unwelcome shifts in foreign policy.  Ambassador has laid down 
clear markers with the CL on Iraq policy, NATO/the 
trans-Atlantic relations, Iran, Hamas, terrorism, 
Russia/energy, and Afghanistan. 
 
¶7.  (C)  This election is focused more on Italy's dismal 
economic conditions than on foreign policy issues.  A strong 
CL win would bring unions and traditional 'social partners' 
back into power with predictable demands for increased social 
spending that could erode foreign/defense commitments.  On 
the economic front, we anticipate the need to engage the CL 
on defense procurement and GMOs and to press for economic 
reforms that underpin Italy's ability to project power 
overseas. 
 
¶8.  (C)  The CR, behind Berlusconi's strong leadership, has 
courageously adopted unpopular polices, especially on Iraq. 
A weakened CR showing at the polls, however, will undermine 
that courage as politicians scramble for position in 
leadership fights and intra-coalition negotiations.  As the 
election outcomes unfold, we will need to also engage CR 
leaders to shore up their commitment to our shared 
objectives. 
 
Key Problem Issues 
------------------- 
 
¶9.  (C) EU Bias:  Should the CL win, former EC Commissioner 
Prodi will deliberately subordinate Italian foreign policy to 
the EU.  Implicit in this approach (a fundamental change from 
Berlusconi's efforts to leverage our bilateral relationship 
to make Italy a "first tier" European power) is the belief 
that no single state can interact with the U.S. as an equal 
(Ref G).  Therefore, the EU should be strengthened as a 
counterweight to U.S. power.  DS leader D'Alema and Daisy 
Party leader Rutelli (Refs A,C,F) insist, however, that 
stronger ties with the EU will not weaken ties with the U.S. 
The CL supports: an EU foreign minister; EU seats in the IMF, 
WB and UNSC; a European-wide 2009 referendum on the EU 
Constitution; accession of Romania, Bulgaria and Croatia; and 
Turkish accession conditioned on compliance with the 
Copenhagen criteria (Ref G). 
 
10 (C)  We recommend high-level Washington engagement early 
(May/June/July) to reinforce the benefits of strong bilateral 
cooperation and the management of trans-Atlantic relations 
through NATO, not the EU. 
¶11.  (C)  Iraq:  Berlusconi all but removed Iraq as an 
election issue by announcing that Italy's current military 
mission will become a largely civilian force by the end of 
¶2006.  The CL has multiple voices on Iraq; Prodi has said he 
will demand a troop withdrawal timetable but will consult 
with the U.S. and the Iraqi government on a transition to a 
democracy-building role (Refs F,G).  Our main concern is 
coordinating with Rome on the implementation of withdrawal 
and on the establishment of an Italian-led PRT in Dhi Qar, 
especially during a transition period when key Italian 
government posts may be vacant.  The proposed May/June 
US/UK/GOI trilats would be our first opportunity to seriously 
engage the new government on Iraq, and we should have the 
highest representation possible at that meeting. 
 
¶12. (C)  UN:  Italy will assume a seat on the UNSC in January 
2007, but Prodi and Rutelli (Refs F,G) claim they support 
making this an "EU seat," even if this means relinquishing 
Italian sovereignty.  At a minimum, this approach could slow 
and/or complicate our work in New York. 
 
¶13. (C)  Iran: The CL has been firm in opposing Iran's 
nuclear ambitions, but energy and trade needs will complicate 
their position on possible UN sanctions (Ref A,C).  Upset at 
not being adequately consulted on EU-3 negotiations, Italy 
likely will use its UNSC seat to ensure greater inclusion in 
EU policy formation.  This presents an opportunity for 
engagement that we should pursue in late summer/early fall. 
 
 
¶14.  (C)  NATO/Transatlantic Relationship:  The CL election 
manifesto includes no mention of NATO, although CL leaders 
reassured the Ambassador they considered it central to 
Italian foreign and security policy (Refs A,B,D).  While the 
MFA NATO desk believes that  Italian NATO policy will not 
change dramatically, the CL manifesto says they will deploy 
international missions and authorize the use of force only 
under an EU/UN umbrella, conspicuously not mentioning NATO as 
a source of legitimacy for such operations.  The CL support 
for CFSP and ESDP as part of an "autonomous" European defense 
could translate into a preference for buying European, rather 
than U.S. defense items.  We recommend a high-level Pentagon 
visit in early summer to bolster our position. 
 
¶15.  (C)  Legal/MLAT Cooperation:  The left-leaning Italian 
judiciary is likely to take advantage of a CL win to press 
for U.S. cooperation on pending extradition requests on Abu 
Omar; it would be difficult for a weak CL government to 
withstand demands from the Communists/Greens that Italy 
'stand up' to America on this alleged rendition issue.  The 
CL also supports expanded powers for the International 
Criminal Court and has been critical of our Guantanamo policy. 
 
¶16.  (C)  Hamas/Israel:  CL leaders agree that Hamas must 
renounce violence and at least implicitly recognize Israel by 
continuing the Oslo process (Ref C).  We should encourge the 
CL, if they win, to build on the improved Italy-Israel ties 
created by Berlusconi and continue a balanced policy toward 
the Palestnians, instead of aligning only with Palestinian 
views, as the EU and the Italian left have done in the past. 
 
¶17.  (C)  Russia:  A CL win would end the special 
Berlusconi-Putin relationship, for better or worse.  An 
EU-focused foreign policy could bolster CL inclinations to 
push Moscow on democratic reforms, its Istanbul commitments, 
cooperation in the OSCE, and non-interference in the affairs 
of its neighbors, so we should engage them at the first 
opportunity.  Either a CL or CR government's desire to engage 
Moscow, however, will be tempered by Italy's dependence on 
Russia for energy. 
 
¶18.  (C)  Afghanistan/Balkans:  We do not anticipate policy 
difficulties with a CL government here, but budget 
constraints could limit Italian abilities to commit resources 
to new initiatives in both Afghanistan and the Balkans.  We 
can help ensure continued support by agreeing to Italian 
requests that their presence in policy jobs be commensurate 
with their military commitments. 
 
¶19.  (C)  Comment:  If the CL wins, we can and will work with 
a Prodi government that will provide relative continuity on 
foreign policy issues.  But a CL win would bring an end to 
the (Berlusconi) days of Italy automatically engaging on our 
behalf. We will have to work much harder and expect more 
bumps in the road if we are to keep Italy as our strongest 
ally in continental Europe. To achieve this, we recommend 
high-level visits to engage the new government early on, to 
both shore up CR commitments and build a CL consensus on key 
strategic goals. 
SPOGLI