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What’s at stake for Italy in the Brexit negotiations?

Italy’s populist Interior Minister Matteo Salvini has said he hopes the Brexit negotiations “conclude well for the United Kingdom”. Yet the new Five Star Movement-League coalition government has been surprisingly silent on what Italy needs from the negotiations.

Published: 25 September 2018 14:08 CEST
Updated: 25 September 2018 16:08 CEST

What's at stake for Italy in the Brexit negotiations?

Italy's Prime Minister Giuseppe Conte with British PM Theresa May. Photo: Leon Neal/Getty Images/AFP

A lot is certainly at stake for Italian business. Brits love their Chianti or Prosecco: at least 12 per cent of all Italian exports of wines, drinks and alcohol beverages go to the UK, for a total sum of $1.1 billion per year (€937 million), according to Confindustria, the General Confederation of Italian Industry.

“We are all very worried because the situation is very uncertain,” said Cesare Cecchi, chairman of the Cecchi wine dynasty, summing up the feeling among wine industry producers in Italy. Italian agri-foods exporters have shared similar concerns.

Between June 2016 and June 2017, Italy exported €22.7 billion of goods to the UK, states a July 2017 industry report. The trade balance is weighed distinctly in Italy’s favour at more than €10 billion.

The ‘Made in Italy’ brand has always been strong in the UK. If no agreement is reached on geographical indications, Italian food and beverage exports alone would lose €1 billion, according to a 2018 statement by Italian national farmers’ union Coldiretti.

Bad for small business…

The British Chamber of Commerce for Italy represents both British companies trading in Italy and Italian companies with UK interests. “There’s no templated impact or concern that is consistent among members,” Daniel Shillito, the organisation’s president, told The Local.

“Some businesses have been apathetic or passive in their approach, taking a ‘we’ll wait until the end’ approach. Some have a contingency plan – especially those that have British trade.”

The chamber has approximately 300 members, 40 percent of whom are British or of British heritage – the rest are Italian or European. The larger multinationals are more insulated to Brexit because of their experience.

“Energy and transport multinationals are always dealing with geopolitical situations. Brexit is a shock but there are others for them. SMEs are the most affected,” says Shillito.

Photo: DepositPhotos

At least 80 percent of the members of the British Chamber of Commerce for Italy – 70 to 80 percent of which, according to Shillito, are tax advisory firms, accountants, translation companies, banking and insurance firms, or companies in manufacturing (mainly automobiles), life sciences and pharmaceuticals – are centred around Milan. Companies in pharma, public administration, aviation and infrastructure support are also clustered in and around Rome.

With only a few months to go until Brexit, the Italian government is not as prepared as many of its northern counterparts in the EU – the Netherlands, Germany, France and several Scandinavian countries have all set up inter-ministerial committees on Brexit. Italy has not. At least, nothing has been made public.

“Italian trade sectors are generally unprepared” too, says Shillito. In the luxury goods sector, however, companies have been forced to make changes due 18-month seasonal cycles because of stock.

“Some smaller, luxury industry-exposed companies have made contingency plans,” Shillito told The Local. “Some have relocated their e-commerce back to Italy. Some have closed divisions in the UK.”

… but good for Milan?

Milan continues to advertise itself as an alternative for financial firms in the UK concerned about passport rights in the EU post-Brexit.

Within 24 hours of the UK’s decision to leave the EU, Milan’s mayor Giuseppe Sala could already spy opportunity for his city. “Brexit is bad news for the EU but may be an opportunity for Milan that could welcome the economic realities fleeing London,” he tweeted on June 24th, 2016.

The London Stock Exchange owns its Italian counterpart, Borsa Italiana, and Shillito reckons “it’s not a longbow to suggest that if there needs to be outsourcing/devolution of services, Milan and Italy could well benefit.”

“Milan could take a substantial piece of the market exiting London,” Bepi Pezzulli, chairman of Select Milano, a lobby group for UK-Milan trade, told The Local earlier this year.

That optimism has so far failed to bear fruit, as most banks or businesses that have relocated operations from the UK because of Brexit have sought other EU hubs.

“The problem is that the Italian regulatory infrastructure is not set up anywhere near the capacity of the UK financial services environment,” Daniel Shillito told The Local. “Milan is a minnow compared to the size of UK financial services.”

FOR MEMBERS: A Brexit checklist for Brits in Italy

Photo: DepositPhotos

Question marks for Brits in Italy

For British citizens living in Italy, uncertainty looms.

“One of the major concerns to us in Italy is what registration scheme the Italian government is going to adopt, presuming there is a deal,” Jeremy Morgan, vice chair of British in Europe and a committee member of British in Italy, told The Local.

The hope is that the current system for EU residency will be applied, because a completely new residency permit specifically for Brexit could cause confusion in its implementation at regional level, causing substantial headaches for Italy’s British community, which Morgan estimates is between 26,000 and 65,000 strong. Such numbers are hard to quantify: there are 28,000 Brits in Italy, according to ISTAT – Italy’s national institute of statistics – the largest proportion of which are in Lombardy, Lazio and Tuscany.

“The Citizens Rights agreement gives EU Member States the right to introduce new administrative procedures for British nationals resident in their countries. The Italian government has so far given us no indication that they will introduce new administrative processes. We will inform you as soon as we are made aware of any changes,” Jill Morris, the British ambassador to Italy, wrote in a statement on September 14th, 2018. The British Council in Milan is hosting a town hall meeting on September 27th.

Another potential quagmire for Brits in Italy is whether people who have applied for citizenship by March 29th, 2019, in Italy will be treated as third-country nationals or EU citizens. EU nationals can apply for citizenship after four years of residency; the minimum residency period for third-country nationals to apply is ten years.

“Lots of people want to apply for Italian citizenship to safeguard their rights,” says Morgan. British in Italy have held meetings with the UK’s Business Secretary Greg Clark, have been heard by the Italian Senate and are regularly in touch with Italy’s Brexit representative to the EU, Pierluigi D’Elia.

“The noises we have been hearing is that they [Italy] want to maintain the current system,” adds Morgan.

FOR MEMBERS: The ultimate guide to getting residency in Italy

Photo: DepositPhotos

This article originally appeared as part of The Local's Europe and You newsletter, a weekly dose of news, analysis, insights and events about Brexit and the EU27. To receive it in your inbox, sign up here.

Faced with Russia’s war in Ukraine, the potential return of Donald Trump as US president and competition from China, the new commission will need to steward the EU at a time of global uncertainty.

To confront the challenges, von der Leyen handed powerful economic portfolios to France, Spain and Italy — with a hard-right candidate from Rome taking a top role in a commission seen shifting broadly rightward.

“It’s about strengthening our tech sovereignty, our security and our democracy,” the commission chief said as she announced the team at the European Parliament in Strasbourg.

France’s outgoing foreign minister Stephane Sejourne was handed an executive vice president role overseeing industrial strategy, after von der Leyen ousted Paris’s first nominee.

Spain’s Teresa Ribera, a socialist climate campaigner, was also made an executive vice president, tasked with overseeing competition and the bloc’s transition toward carbon neutrality.

As Russia’s war against Ukraine grinds on through a third year, security and defence assumed a new prominence.

Former Lithuanian prime minister Andrius Kubilius landed a new defence role overseeing the EU’s push to rearm, making him one of several hawkish Russia critics in eastern Europe to receive a prominent position.

Those also include Estonia’s ex-premier Kaja Kallas, already chosen by EU leaders as the bloc’s foreign policy chief.

And Finland, another country neighbouring Russia, saw its pick Henna Virkkunen given a weighty umbrella role including security and tech.

As part of the bloc’s careful balancing act, the German head of the EU executive had to choose the lineup for her second term from nominees put forward by the other 26 member states.

That has meant treading a political tightrope between the demands of competing national leaders — and putting some noses out of joint.

The highest-profile casualty was France’s first-choice candidate Thierry Breton, who quit suddenly as internal market commissioner on Monday accusing von der Leyen of pushing Paris to ditch him.

Von der Leyen fell short in her efforts at gender balance, ending up with 40 percent women after pressuring member states for female nominees.

But women obtained the lion’s share of executive VP roles, with four of six posts.

Controversial Italian pick

The choice of who gets which job is an indication of where Brussels wants to steer the European Union — and the weight commanded by member states and political groupings after EU Parliament elections in June.

Cementing its status as parliament’s biggest group, Von der Leyen’s centre-right European People’s Party commands 15 of 27 commission posts — to the chagrin of left-wing lawmakers like France’s Manon Aubry who warned of a lurch “far to the right” in terms of policies too.

Among the powerful vice presidents is Italy’s Raffaele Fitto, handed a cohesion brief in a nod to gains made by far-right parties in the June elections.

Giving a top role to a member of Prime Minister Giorgia Meloni’s post-fascist Brothers of Italy party has raised hackles among centrist and leftist groups — while Meloni said it “confirms the newfound central role of our nation in the EU”.

After Green party losses at the June ballot, whether climate would remain high on the agenda and which commissioners would steer green policy was a subject of scrutiny.

As well as Ribera’s overarching role, the centre-right Dutchman Wopke Hoekstra will carry on in a position handling climate and the push to make the EU carbon neutral.

Among other eye-catching choices, Croatia’s Dubravka Suica obtained a new role overseeing the Mediterranean region, and the enlargement gig went to Slovenia’s Marta Kos — yet to be confirmed as her country’s candidate.

Other important figures going forward look set to be Slovakia’s Maros Sefcovic, handling trade, and Poland’s Piotr Serafin, who will steer negotiations over the bloc’s next budget.

All would-be commissioners still need to win approval from the European Parliament, with hearings to start in coming weeks.

Lawmakers could flex their muscles by rejecting some candidates — or at least dragging them over the coals, as expected with Italy’s Fitto.

Chief among those suspected for the chopping block are Hungary’s Oliver Varhelyi, nationalist Prime Minister Viktor Orban’s man in Brussels these past five years, who received a diminished portfolio covering health and animal welfare.

The stated target is to have a new commission in place by November 1st, but diplomats say that looks ambitious, with December 1 more likely.