The Italian Compass - #8/2025
Making sense of Italian foreign policy, domestic politics, and economic risk.
Welcome to the latest issue of The Italian Compass, your Politica Estera newsletter on Italy’s foreign policy, domestic politics, and economic risk.
First and foremost, apologies if you received a strange email from Politica Estera last week—specifically, an issue of Bar Italia that went out without any actual content. I often save templates for upcoming issues and was indeed planning to publish one, but a few things shifted over the past days, and I’ve had to adjust the publishing schedule accordingly. As some of you know, I’m also preparing to leave the U.S. and return to Europe permanently—another reason things have been a bit hectic lately.
That said, the next—and final, for a little while—Bar Italia issue will be out this coming Friday.
But let me be clear: this is not the end of Politica Estera. Quite the opposite. Starting July 1, Politica Estera will take a step forward and become a more structured, paid project. This project isn’t just a group of newsletters anymore—it will be an integral part of my consulting work as I return to Europe and resume my consulting activities in the fields of political risk, foreign policy, and Mediterranean affairs with my company in London.
This decision wasn’t taken lightly, but it’s a necessary one. Producing high-quality, in-depth analysis takes time, research, and editorial care. To ensure the consistency and sustainability of this work—especially as it becomes part of my professional output—a paid model is the natural and, frankly, inevitable evolution of the project. I’ll share all the details very soon.
In the meantime, this new issue of The Italian Compass shifts slightly away from the immediate headlines to take a broader look at Italian foreign policy. I revisit the longstanding framework of Italy’s strategic “circles”—the Atlanticist and European—first articulated during the De Gasperi era. The first three entries examine Giorgia Meloni’s and her approach to foreign affairs. The first focuses on Ukraine and the Atlantic Circle (an analysis also available in a “Deep Dive” format); the second explores her stance on Europe; and the third highlights the often understated role played by Foreign Minister Antonio Tajani in reinforcing the European dimension of this government’s foreign policy. The final section analyzes the Italian economy and the impact of global geopolitical tensions on Italy’s GDP.
In the next few days, you will also receive a follow-up to our first Deep Dive on “Who Will Be the Next Italian Ambassador to D.C.” with new insights into the political meaning of the new round of diplomatic appointments.
If you’d like to discuss any of the topics covered in this issue, feel free to reach out via email by clicking here.
Thanks, as always, for reading.
Dario
Summary
Meloni and the European Circle: Reluctant but Necessary Engagement
Beyond the Memes: How Tajani became the Quiet Power Broker Between Rome and Brussels
Global Geopolitical Uncertainty Casts Shadow Over Italy’s Short-Term Growth
Italy, Ukraine, and the Atlanticist Circle
This analysis is also available in a Deep Dive format. If you would like to receive a PDF copy of the Deep Dive analysis on Italy, Ukraine, and the Atlanticist Circle, please click here to request it.
Key Takeaways
Italy’s shift toward a clearer pro-Ukraine stance post-2022 has not translated into major Rome’s strategic leadership or military engagement on this issue.
Meloni’s support for Ukraine, driven by Atlanticist loyalty, is making her stance currently vulnerable to shifts in U.S. leadership. She has recalibrated her approach to adapt to Trump’s priorities.
Italy has never been a central diplomatic actor on Ukraine, and expecting it to become one now or in the future—under Meloni or any other leader, even from the center-left—is unrealistic.
Analysis
In May 2025, Giorgia Meloni’s absence from two high-profile diplomatic events on Ukraine—the May 9 commemoration in Kyiv and the meeting at the European Political Community summit in Tirana—sparked debate in Italy. Critics saw it as proof of Italy’s marginalization on Ukraine, while supporters downplayed the significance, arguing that Meloni’s influence does not rely on media visibility. Yet both camps often overlook the deeper context: Italy has historically played a secondary role on Ukraine, and the shift toward a definitive pro-Ukraine stance in February 2022 has not translated into major strategic leadership or military engagement from Rome. These days, Meloni is struggling on Ukraine because the issue is directly linked to her prioritization of the Atlanticist circle in Italian foreign policy, and the shifting approach of the Trump administration on Ukraine is making her job harder. Still, this has little to do with Italy’s relevance on the issue, which has always been minimal.
For decades, Italy saw Ukraine largely through the lens of its relations with Russia. Energy security, particularly gas transit, dominated Italian considerations, with successive governments—Prodi (center-left), Berlusconi (center-right), Letta and Renzi (center-left), and the Conte-led M5S-Lega populist coalition—prioritizing relations with Moscow over active support for Ukraine. Under Conte’s second government (M5S–PD), Italy mildly started recalibrating its position but still emphasized pragmatism over full alignment with Ukraine. Draghi, in his early days, was similarly cautious: ties with Ukraine were improving, but Rome remained skeptical of a Russian invasion and continued business dialogue with Moscow, even as tensions escalated. In the weeks leading up to Russia’s full-scale invasion in February 2022, Draghi hesitated at first. According to multiple sources in Washington, D.C., Draghi’s initial conversation with U.S. President Joe Biden on the issue was widely regarded as disappointing. Italy’s definitive shift on Ukraine began in the immediate aftermath of Russia’s 2022 invasion. A visibly frustrated Ukrainian President Volodymyr Zelensky publicly criticized Prime Minister Draghi on X (formerly Twitter), after Draghi claimed he had been unable to take a call with Zelensky because he had to seek shelter during Russian bombings.
Following that incident, Draghi pivoted decisively: he began promoting financial sanctions, backing Ukraine’s bid for full European Union membership, and adopting a markedly stronger pro-Ukrainian rhetoric. He soon emerged as one of the key European Union leaders supporting Ukraine. The later-iconic photo of him on the train to Kyiv alongside French President Emmanuel Macron and German Chancellor Olaf Scholz symbolized a unified European front. Still, Italy’s actual military support remained limited, and internal divisions on this issue contributed to Draghi’s fall later that year.
When Giorgia Meloni came to power, many expected a more ambiguous stance due to her coalition’s pro-Russian elements and her past admiration for Putin. Yet she fully aligned with the previous government’s stance, maintaining strong support for Ukraine despite dissent within her coalition. When viewed through the historical lens of Italian foreign policy, however, Meloni’s stance is far from surprising. She had tied the Ukrainian issue to the Atlanticist circle—long the preferred frame of reference for center-right governments during the bipolar era of Italian politics. This general pattern dates back to 2003, when the government of then–Prime Minister Silvio Berlusconi supported the Bush Administration’s position on the Iraq War, standing in opposition to the Franco-German axis that rejected the intervention. Since then, despite a general continuity in Italy’s foreign policy posture, a kind of pendulum effect has emerged: center-right governments have tended to prioritize the Atlanticist circle, while center-left governments have leaned more toward the European one
Mario Draghi managed to reconcile the Atlanticist and European circles of Italian foreign policy, thanks to his unique personal status and deep connections on both sides of the Atlantic. Still—as previously noted—even Draghi was not as steadfast on Ukraine as some might have initially expected, and Italy did not become a crucial actor on this issue: Germany and France, and the UK outside of the EU, were still the most relevant and involved. Poland, despite its historically complicated relationship with Ukraine, also emerged as a major player in this context, primarily driven by the fears for Russian revanchism in eastern Europe.
In conclusion, expecting Italy to play a leading role in negotiations over Ukraine is unrealistic, regardless of who governs. Italy has never been a central player on this issue—neither under Renzi, Gentiloni, Conte, nor Draghi. Meloni’s approach on Ukraine is linked to the primacy of Atlanticist circle in Italian foreign policy typical of center-right governments. While Italy will continue to support Kyiv—potentially through economic reconstruction and industrial cooperation—it has not emerged, and will not emerge, as a top-tier actor in diplomatic and military terms on Ukraine. This is not a question of Meloni’s marginality or leadership skills; it reflects Italy’s longstanding foreign policy structure, in which Ukraine remains a function of one of the two, major circles of Italian foreign policy: Atlanticism and Europeanism. The blatant Russian military aggression against Ukraine in February 2022 marked a turning point in Italy’s relationship with Kyiv. However, this shift did not elevate Italy to the level of a leading diplomatic actor on the issue, a role that Italy is also unlikely to play any time in the future. Even with a center-left government, which would merely link the Ukrainian issue to the European circle, without making it a priority in itself.
Meloni and the European Circle: Reluctant but Necessary Engagement
Key Takeaways
Despite her limited enthusiasm for the European Circle, Meloni understands that effectiveness within it is essential for maintaining Italy’s international influence.
Meloni’s European influence is limited by her party’s marginal position in the EU power structure, notwithstanding her domestic strength and transatlantic ties.
A future pivot toward the EPP could significantly enhance her effectiveness in the EU, especially if she wins re-election in 2027(or earlier, in case of snap elections) with a solid mandate
Analysis
As previously noted, Italian Prime Minister Giorgia Meloni assigns less strategic importance to the so-called European Circle—the web of diplomatic, political, and institutional relationships that tie Rome to its core European partners. Nonetheless, she cannot afford to neglect or alienate this sphere entirely. Even if she does not rank among the most pro-European leaders in Italy’s post-war history, Meloni recognizes that a European orientation remains non-negotiable for any Italian government. Effectiveness within this arena is a necessity, not a choice. Moreover, she needs to be effective in that domain because Italy’s status—and international projection—also depend on its capacity to shape European dynamics.
On June 3, 2025, Meloni hosted French President Emmanuel Macron at Palazzo Chigi in Rome for a nearly four-hour bilateral meeting. The summit followed a long period of mutual distrust, frayed communication, and political friction. Their discussion covered a range of high-stakes issues, including reinforced support for Ukraine, the resolution of trade frictions, and the search for European technological alternatives to Elon Musk’s satellite networks. Both leaders also underlined the importance of a unified European strategy on security and economic competitiveness.
Despite their stark ideological and temperamental differences, Meloni and Macron understand that, at least in this stage, dialogue is necessary. Macron is often cast as a political adversary by Meloni’s domestic allies and right-wing media commentators, yet the French President remains an indispensable interlocutor in European affairs. For her part, Meloni, who is seen as Donald Trump’s closest European ally, finds her role as a transatlantic go-between increasingly strained by the unpredictability of the U.S. President (see Deep Dive - Meloni’s Transatlantic Bridge: Fragile, but Still Standing.) In this light, the Rome summit was a tentative yet meaningful step toward recalibrating Franco-Italian relations.
At the G7 in Canada, Meloni also had a new bilateral meeting with the new German Chancellor Friedrich Merz, after she met him already in May in Rome in what was the first meeting between the two leaders since Merz assumed office. Their discussions in Rome touched on immigration, security cooperation, and economic recovery. German media outlets described the encounter in largely favorable terms, portraying it as a step toward pragmatic cooperation between Berlin and Rome.
In those days, Meloni also welcomed Danish Prime Minister Mette Frederiksen to the Italian capital. Their meeting concluded with the launch of a joint initiative aimed at opening a broader European debate on foundational treaties and conventions—particularly those dealing with migration. The two leaders argued that many of these legal frameworks were drafted in a different era and now require comprehensive reform to reflect today’s geopolitical and demographic realities.
In the past weeks, Meloni also congratulated Nicușor Dan on his election as President of Romania, expressing her willingness to strengthen bilateral ties. However, this gesture came on the heels of controversy: prior to the vote, Meloni had released a video endorsing Dan’s rival, George Simion, a member of the European Conservatives and Reformists (ECR) group, to which her own party, Fratelli d’Italia, belongs. This episode underscored the inherent contradictions in Meloni’s European posture—ideologically bound to a marginal and often confrontational parliamentary group, she finds herself constrained when trying to wield influence within mainstream EU politics.
The dynamics described above reveal both the European strengths and weaknesses of Meloni.
As for the former: she remains a domestically stable leader of a major founding member of the EU. Despite ongoing challenges, she still plays a role as a transatlantic bridge. And last but not least, in a continent where even left-wing parties are securitizing the issue of migration, her approach and narrative on these issues are becoming the paradigm many European leaders now reference and adopt.
On the other hand, her weaknesses in Europe stem from a mix of factors:
Influence: Her sway in Brussels institutions—as well as in the so-called “Eurobubble”—remains limited. This is evident in the relatively weak political personnel Fratelli d’Italia (FdI) has in this arena. For instance, sending Raffaele Fitto to Brussels as a commissioner, basically the only option this government had, underscores this weakness due to his low profile (Fitto can barely speak English).
Historical orientation: As outlined in the previous entry, center-right governments—while maintaining continuity in Italian foreign policy—tend to be more active and effective within the Atlanticist sphere. Meloni is no exception.
Ideology: While the impact of ideology should not be overstated—especially since Meloni has abandoned any ideas of Italexit or Euroexit—FdI still struggles in the European context. They often appear ideologically out of place. This is perhaps the most relevant point: Meloni and FdI belong to a marginal political group in the EU power structure—the ECR. Although Meloni may have a good personal relationship with Commission President Ursula von der Leyen, she is beginning to realize that being part of a minor European Parliament group restricts her ability to shape EU dynamics.
Italian right-wing parties, when they start being serious about power, become aware of this. Anyone familiar with Italian politics knows that even la Lega at one point quietly tried to join the European People’s Party (EPP). That pivot ultimately failed, but the intention was clear. The case of Meloni’s support for Simonian is a visible proof of these limitations.
Does Meloni want to become more effective within the European circle? That remains an open question. Whether she can be effective while remaining tethered to the ECR group is instead another matter. Most signs suggest the answer is no. To become more influential within the EU, something will have to change. If she secures re-election in 2027 (or earlier, in case of snap elections) with a strong parliamentary majority, a pivot toward the EPP—and with it, deeper integration into the European mainstream, with a greater capacity to shape European dynamics —should not be ruled out.
Beyond the Memes: How Tajani became the Quiet Power Broker Between Rome and Brussels
Key Takeaways
While Antonio Tajani is often dismissed in the Italian media as ordinary and not charismatic, he enjoys deep respect in Brussels and within the European People’s Party.
His decision to focus his career in Brussels allowed him to build influence while working closely with Berlusconi, yet without clashing directly with him, unlike other Italian center-right politicians.
Tajani’s European stature makes him indispensable to Meloni’s government beyond Forza Italia’s formal electoral weight, particularly in navigating EU institutions and keeping relations with major EU powerbrokers.
Analysis
The past few days have not been easy for Antonio Tajani, Italy’s Minister of Foreign Affairs. First, there was the alleged defeat, at least according to Dagospia, in the Council of Ministers regarding the appointments of new ambassadors (I will discuss this more in-depth in the follow-up to the first Politica Estera Deep Dive); then came the Italian social media sphere, which went wild with memes and mockery of every kind—targeting everything from the words Tajani used during the hearing on developments in the crisis between Israel and Iran with the Parliamentary Groups Chamber and the Foreign Affairs Committees of the Chamber of Deputies and the Senate, to his facial expressions.
However, just a few weeks earlier, Tajani had scored a European success: In late April 2025, he was re-elected as Vice President at the Congress of the European People’s Party, receiving 438 votes and emerging as the second most-voted candidate. Tajani has held this role since 2002, a testament to his long-standing and substantial influence within the party.
This dichotomy—between how Tajani is perceived in Italy and how he is seen in Brussels—has become a structural feature of his political profile. In Italy, journalists and commentators often portray him as an average leader—lacking charisma and not to be taken particularly seriously. Salvatore Merlo (in)famously captured this sentiment in a well-known, rather mean and, to be honest, unfair answer to a letter—one of those pieces that only Repubblica journalists seemed to be able to write, during the prime of this newspaper (which is obviously in decline) especially about Forza Italia figures (remember D’Avanzo on Berlusconi?).
Yet perhaps this very normality has been Tajani’s secret weapon. It allowed him to survive—and even thrive—in a party dominated by one of the most charismatic figures in Italian political history: Silvio Berlusconi. Another charismatic figure in a space already dominated by Berlusconi would likely not have survived politically. Even figures with modest charisma but clear ambitions—like Gianfranco Fini or Angelino Alfano—ultimately failed and disappeared when they attempted to shine by their own light in the immediate Berlusconi’s orbit.
Elected to the European Parliament for the first time in 1994, Tajani chose to build his entire political career in Brussels. In hindsight, this proved to be a shrewd decision. He became Berlusconi’s man in Europe, maintaining strong ties to the party while keeping a certain distance from its leader. Whether this was part of a long-term strategy from the outset remains unclear, but the outcome has been extremely successful.
As mentioned above, in Italy the dominant narrative still paints him as “a leader who is not much of a leader.” However, the perception in Europe is markedly different. During my years working and teaching in Brussels, I had the opportunity to witness this contrast firsthand. Through engagements with officials from the European Commission, the EEAS, and the European Parliament—as well as conversations within the Euro-bubble, particularly in think tanks and cultural circles close to the EPP—I consistently encountered a different view. In Brussels, Tajani enjoys a solid reputation; within the EPP, it is stellar.
He knows political Brussels intimately and is highly skilled at navigating the EU’s complex institutional machinery. This is a major asset for a government that—due to both ideological and cultural distance—often finds itself out of sync with the EU mainstream. Moreover, FdI has a major issue that becomes even more evident in the European context: the lack of a classe dirigente (political leadership class). This structural weakness is partially offset by Tajani’s network and influence in the EU capital.
Since the beginning of this government, persistent rumors have suggested that Giorgia Meloni was looking for centrist allies—first Matteo Renzi, more recently Carlo Calenda—with speculation pointing to Fratelli d’Italia’s long-term ambition to absorb Forza Italia, much like Forza Italia once absorbed Alleanza Nazionale in the days of the Partito delle Libertà.
Yet these scenarios often overlook a key fact: Tajani’s European political weight far exceeds Forza Italia’s current electoral numbers or parliamentary clout. His standing in Brussels makes him indispensable to the government’s European positioning. Neither Renzi nor Calenda—regardless of their eventual electoral and political strength—can match Tajani’s credibility in Europe.
This is a crucial but frequently overlooked aspect of the Meloni administration’s balance. Furthermore, Forza Italia’s role as the stable junior partner in the coalition enables Meloni to keep Matteo Salvini in check, limiting his maneuvering room.
Tajani may seem like a conventional politician—neither loud nor especially magnetic—but he possesses a quiet superpower: a robust European reputation and a deep, intuitive grasp of the EU’s internal logic. These qualities, rare among Italian politicians, make him far more central to the government’s functioning than his party’s vote share would suggest. Despite all the frictions with Meloni and FdI, this is the main reason why they will likely remain together (of course, unless someone can offer Tajani something better…).
Global Geopolitical Uncertainty Casts Shadow Over Italy’s Short-Term Growth
Key Takeaways
Short-Term Growth is Fragile: While Q1 2025 showed moderate growth driven by domestic demand and investment, Italy remains highly exposed to external shocks, particularly trade tensions and geopolitical risks.
Energy Price Surge Is a Major Threat: The Israeli-Iranian conflict has already pushed up energy prices, posing a serious risk to SMEs and heavy industry. Sustained increases could significantly erode margins, raise inflation, and further dampen consumer demand.
Forecasts Are Being Revised Downward: Both the IMF and national statistics agency Istat have presented cautious outlooks, with the IMF cutting growth projections and Istat’s forecast of 0.6% GDP growth for 2025 now appearing overly optimistic in light of escalating global tensions.
Analysis
Italy’s short-term economic outlook appears precarious, shaped by a fragile balance between encouraging domestic dynamics and mounting external pressures in a scenario rapidly deteriorating amid the start of the Israeli-Iranian war and the risks of full American involvement. The economy was benefiting from a rebound in investment and signs of resilience in household consumption, yet it remains increasingly vulnerable to global risks such as deteriorating industrial sentiment across the Eurozone, trade tensions—especially with the U.S.—and, above all, the risks associated with energy prices.
In its April update, the International Monetary Fund (IMF) revised downward its GDP growth forecasts for Italy, citing heightened uncertainty over international trade tariffs. The Fund now expects Italy’s economy to grow by just 0.4% in 2025—a 0.3 percentage point cut from its January projection—and by 0.8% in 2026, down 0.1 points. The revision aligns with a broader trend, as the IMF downgraded growth estimates for most major economies.
Italy’s economic performance in early 2025 was slightly more solid than previously anticipated, although significant headwinds are already shaping the outlook for the remainder of the year. According to Istat’s second estimate, Italy’s GDP grew by 0.3% in Q1 2025 (0.7% year-on-year), a better performance than those of France and Germany, but lower than Spain’s. Domestic demand—excluding inventories—emerged as the key driver of this expansion. Gross fixed capital formation contributed 0.3 percentage points to growth, buoyed by a broad-based recovery in investment, particularly in machinery and construction. Notably, this marked the first positive value-added result in the machinery segment following a series of contractions. Private consumption added a modest 0.1 percentage points, supported by signs of improving consumer sentiment. Conversely, inventories detracted from growth, shaving off 0.3 percentage points and highlighting ongoing caution in production planning amid persistent uncertainty. On the supply side, value-added rose markedly in both agriculture and manufacturing, while the services sector recorded a slight contraction. The statistical carryover for 2025 stands at 0.5%, providing a cushion, though it may not be enough to counteract expected volatility in the coming quarters.
Exports, initially reported as a drag, were instead slightly supportive of Q1 growth, contributing 0.1 percentage points—likely due to a surge in exports to the United States in March ahead of the anticipated introduction of new tariffs. While this export push offered a temporary boost, it is unlikely to be sustained. A deceleration in growth now appears almost inevitable in Q2, driven by both the direct effects of new trade barriers and their broader impact on business confidence and investment decisions. Like other major Eurozone economies, Italy’s early 2025 momentum will face pressure from this shifting global backdrop. The judicial escalation of the tariff dispute has added another layer of complexity to already opaque EU–U.S. negotiations, further muddying the outlook for trade and manufacturing. Industrial investments, particularly those tied to export-oriented sectors, are thus expected to slow in response to these uncertainties.
However, the Israeli attack on Iran has caused an immediate increase in energy commodity prices, with natural gas rising by 4% and oil (Brent and WTI) increasing by 7–8%. According to Unimpresa, if these price hikes persist, Italy—which is heavily dependent on energy imports—risks severe economic repercussions. Small and medium-sized enterprises (SMEs), which form the backbone of the national production system, are particularly vulnerable. A 10–15% increase in gas prices could drive up electricity costs and directly impact company utility bills. The most affected sectors would be transportation, logistics, heavy industry, chemicals, agri-food, and the production of ceramics, glass, and steel.
For the transport sector alone, a rise in fuel costs could result in additional expenses of up to 300,000 euros per year for an average fleet of 50 trucks. Price increases are also expected in maritime and air logistics (+5–10%).
At the macroeconomic level, a 20% increase in energy prices could result in an additional cost of over 15 billion euros for Italian industry, with around 11 billion impacting SMEs. The consequences at the national level would include:
Reduction in company profit margins
Passing costs on to consumers
Higher inflation (+0.3–0.5%)
Erosion of purchasing power and reduction in consumption
Further slowdown in economic growth in 2025
Globally, there is concern about a domino effect on production chains, shipping costs, petroleum-derived goods (such as plastics and fertilizers), and increased uncertainty for central banks, which would be forced to choose between curbing inflation and supporting growth. As things stand, Istat’s forecast for full-year GDP growth at 0.6% sounds slightly too optimistic, and it is more likely that Italy’s GDP growth might come in at 0.3% if global tensions remain significant but subside over the summer. If instead this is the beginning of a longer war in which the U.S. becomes actively involved, a further spike in energy prices and a contraction in trade might trigger a recessionary trend in Q4 2025.
See also…
Politica Estera - Deep Dive - Meloni’s Transatlantic Bridge: Fragile, but Still Standing
Mediterraneo Globale: La nuova lotta per il potere in Libia
Politica Estera - Bar Italia - #11/2025
Politica Estera - Scriptorium Italiae #2/2025