The Italian Compass - #3/2025
Making sense of Italian foreign policy, domestic politics, and economic risk
Welcome to the third issue of “The Italian Compass”, a weekly newsletter dedicated to analyzing Italian foreign policy, domestic politics, and economic risk. This week the main focus is inevitably on the Trump-Meloni “special relationship” following the Prime Minister’s participation in the inauguration ceremony in a (extra) chilly D.C. Then, the newsletter explores Italy’s Atlanticist support for Ukraine and trends in Italy’s approach toward Central Asia.
In the “Briefs” section, you will find two short analyses: one on the SoutH2 Corridor project and the need to keep the Maghreb stable for its implementation, and one on external risks for the Italian economy.
Happy reading!
Dario
Summary
The Trump-Meloni “Special Relationship”: Onori & Oneri (Honors and Obligations).
Italy’s Support for Ukraine: Bound by the Decisions of the New Trump Administration.
Italy and Turkmenistan: Is Rome Serious About Its Central Asian Ambitions?
Briefs
The SoutH2 Corridor and Stability in the Maghreb.
External Problems Threaten Italy’s Economy.
The Trump-Meloni “Special Relationship”: Onori & Oneri (Honors and Obligations)
The Fact(s):
Italy’s President of the Council of Ministers, Giorgia Meloni, attended the inauguration ceremony of the President of the United States of America, Donald Trump, in Washington D.C. on January 20, 2025. The only European leader present in the audience, she said that she is looking forward to making Italy a bridge “between the United States and the European Union,” thanks to “a privileged relationship that restores centrality to our nation.” Meloni was accompanied by the Italian Ambassador to the US, Mariangela Zappia, her diplomatic advisor, Fabrizio Saggio, and by three members of from Fratelli d’Italia: Carlo Fidanza and Antonio Giordano, part of the European Conservatives and Reformists (ECR) delegation, and the Italian Member of Parliament Andrea Di Giuseppe, widely considered as the essential link between Fratelli d’Italia and the Trump world. Di Giuseppe is an MP elected in the North and Central America Constituency for Italians abroad, chairman of the Permanent Committee on International Trade, and a member of the Foreign Affairs Commission of the Chamber of Deputies.
The Analysis:
The presence of Giorgia Meloni at Donald Trump’s inauguration, coupled with some other recent developments - from her visit to Mar-a-Lago to her connections with Elon Musk – indeed shows that describing her relationship with Trump as “special” is no exaggeration. At the same time, it is worth noting that Meloni has successfully promoted a strong relationship with the United States from a broader institutional perspective. Meloni has cultivated remarkably deep ties with Joe Biden as well, despite the significant political and ideological differences. This relationship has been so positive that recent criticisms from parts of Washington’s institutional establishment regarding Italy – whether concerning Russia, China, or Italy’s hesitancy to take the lead in a potential multinational peacekeeping mission in Haiti – have avoided targeting the Prime Minister. Since she took office in late 2022, she has been recognized as Italy’s steadfast Atlanticist anchor. From this point of view, Meloni’s tenure has been marked by success, also evidenced by the sincere, not merely cordial, recognition Biden gave her for Italy’s G7 presidency in 2024. In addition, Meloni’s bipartisan diplomatic maturity and her relationship with Biden have not upset Trump or his circle, as she managed to preserve the relationship built years ago.
The prospects for Italian American relations thus appear promising but Trump’s evolving view of Europe remains a critical factor in this regard. Does he see Meloni as a more credible and influential ideological ally than figures like Viktor Orbán, potentially useful in undermining European cohesion? Or does he see her as a strategic interlocutor capable of fostering a more unified and cooperative relationship with Europe, one that aligns with his broader agenda rather than divides the continent? This question is pivotal. If it is the latter, Meloni could capitalize on this opportunity to strengthen her standing within Europe, using it also to address what is arguably her only major political vulnerability at present: her weak sway inside EU institutions. However, if it is the former, it could spell complications for her and Italy, because it might push several European leaders and countries to work together to contain her.
What’s Next:
Looking ahead, from Italy’s perspective, this special relationship carries onori e oneri (honors and obligations). Certainly, it clearly places Prime Minister Meloni in a situation of strength and centrality within the new transatlantic dynamics, a position unmatched by any other European leader. This position could help balance her – already mentioned - relative weakness in Europe, where, despite the efforts, she struggles to assert herself as a truly central player. However, the special relationship with Trump might paradoxically adversely affect Italy’s interest on certain issues. For example, if Trump were to truly push for an increase in NATO military spending to 5% of GDP, this “special relationship” could become a trap, leaving Italy with little room to maneuver.
Similarly, trade tariffs and duties pose significant challenges. For Italy, tariffs are not only problematic for its popular agro-food exports to the U.S.- some might remember the “diplomatic crusade” launched during Trump’s first term to avoid tariffs on Parmigiano – but are also an overarching issue for its industrial economy. Italian industries, particularly those in the northeast regions, where Fratelli d’Italia is now the leading party, are integrated into Central European supply chains and depend heavily on manufacturing and industrial ties with Germany. Tariffs on German goods, from tech to machinery, would automatically spell economic trouble for Italian businesses. Adding to this, the likely rise in energy costs over the coming months, especially if Trump adopts a hardline approach with Iran, would create a worrying scenario in the short term.
Another critical aspect to consider is how a weakened German economy might push Berlin to turn more strongly towards strengthening ties with China. If Germany moves in that direction, the rest of Europe is likely to follow. In this context, a potential U.S.-led trade war against Europe could have damaging consequences for Europe’s overall geopolitical alignment, putting Italy into an extremely tight spot. For Italy, given its structural ties to the German economy, this will mean being forced to navigate these challenges carefully if it wants to avoid sacrificing those connections. In addition, many in Italy, even in the current government, see fostering deeper ties with China positively, and this might create additional troubles if Germany moves in that direction.
As such, this special relationship is not, alone, a guarantee of success. Yet, it is undisputably an important tool in the hands of Prime Minister Meloni to strengthen Italy’s role in several contexts, depending on how she uses it but also on how much influence she can have in shaping Trump’s moves, in particular regarding his approach to Europe and economic and commercial relations.
Italy’s Support for Ukraine: Bound by the Decisions of the New Trump Administration
The Fact(s):
Italian-Ukrainian relations have been particularly active in January 2025. On January 9, Prime Minister Giorgia Meloni met with Ukrainian President Volodymyr Zelensky at Palazzo Chigi, reaffirming Italy’s unwavering support for Ukraine’s defense and its people. Meloni emphasized Italy’s commitment to helping Ukraine achieve a just and lasting peace. President Sergio Mattarella also welcomed Zelensky at the Quirinale, asserting Italy’s determination to maintain “full, unchanged, and constant support for Ukraine against Russian aggression.” Zelensky expressed gratitude for Italy’s steadfast support, also regarding Ukraine’s reconstruction efforts, noting the importance of the upcoming Ukraine Recovery Conference that Italy will host.
Zelensky emphasized Ukraine’s fight to protect its sovereignty and citizens, thanking Italy’s leaders for their consistent backing, including military support for Ukraine’s armed forces and resistance efforts. A few days later, on January 16, Zelensky also met with Italy’s Defense Minister, Guido Crosetto, this time in Kyiv. Discussions focused on enhancing Ukraine’s air defense, training soldiers, and strengthening defense industrial ties, including plans for joint production and localization in Ukraine. Zelensky also stressed the importance of NATO membership for Ukraine as the foundation for lasting peace and security in Europe.
The Analysis:
After his visit to Kyiv, Defense Minister Guido Crosetto addressed the Senate on January 21, 2025, highlighting that, without international support, “Ukraine would no longer exist today.” Crosetto addressed senators as the Senate and Chamber of Deputies had to vote to extend the government’s authority to provide military support to Ukraine through 2025, following up on the decree on extending military aid to Kyiv that the government approved on December 23, 2024. So far, Italy’s military assistance has been substantial, with ten aid packages delivered to Ukraine, which have included: Storm Shadow cruise missiles, capable of striking targets up to 300 km away; SAMP/T air defense systems, co-delivered with France, designed to intercept ballistic missiles; M109 self-propelled artillery, Spada and Skyguard systems, PzH-2000 howitzers, and multiple rocket launch systems.
Crosetto also expressed his support for European partners deploying peacekeepers to oversee a potential ceasefire, signaling Italy’s willingness to contribute to such a mission if needed. For the Italian government, Trump’s inauguration as U.S. president is a potential turning point for the future of this war, as Trump has pledged to push for negotiations between Ukraine and Russia.
What’s Next:
Indeed, the arrival of Trump to the White House is an essential moment to (re)define Italy’s approach to Ukraine. Despite the substantial improvement in Rome-Kyiv relations over the past three years, this approach still remains primarily a function of Italy’s Atlanticist foreign policy. As such, the future of this relationship is closely tied to the actions that President Trump will take on this issue. If Trump moves to impose peace negotiations that freeze the current territorial status quo – leaving Kyiv unable to recover most of its lost territories – Italy is unlikely to oppose this shift or join other European countries in pressuring Trump to adopt a different course.
This stance, however, does not indicate a change in Italy’s overall approach toward Kyiv, nor does it suggest a return to warmer ties with Moscow. Italy will continue supporting Ukraine’s bids for EU and NATO membership, and any prospects for a return to “business as usual” relations with Russia remain minimal, at least in the short-term. That said, Italy, like much of Western Europe, does not perceive the war as a direct threat to its physical security – unlike countries such as Poland, the Baltic states, and Finland. Italy recognizes the long-term risks to European security posed by Russia retaining control over significant portions of seized Ukrainian territory but it is unlikely to challenge any U.S.-led push for negotiations, even if this should compromise Ukraine’s full territorial recovery.
Italy and Turkmenistan: Is Rome Serious About Its Central Asian Ambitions?
The Fact(s):
Deputy Minister of Foreign Affairs Edmondo Cirielli paid an official visit to Turkmenistan on January 16, 2025. He met with Foreign Minister and Deputy Chairman of the Cabinet Rashid Meredov, and other officials. He also met with the Italian community in Ashgabat. Italy aims to strengthen the partnership with Turkmenistan in several areas. This includes enhancing business relations in sectors where Italian companies can offer specific expertise, such as manufacturing, infrastructure, transportation, and pharmaceuticals; collaborating on environmental protection and water resource management, including a rehabilitation project for the Aral Sea region; and actively supporting the European Union’s Global Gateway Strategy in the broader region. Italy also wants to foster greater industrial cooperation, for instance in the field of defense. This sector is becoming increasingly relevant for Central Asian countries, as they are looking to diversify their suppliers, and Italy – as demonstrated by its ties with Uzbekistan in this field – can become a potential partner for regional countries looking for new partners in this specific domain.
Turkmenistan might not be Central Asia’s most relevant country: its demographic size is limited; it does not play a major geopolitical role in the region; it is a totalitarian autocracy. While it cannot be compared to Kazakhstan and Uzbekistan, at the same time it also cannot be considered like Tajikistan and Kyrgyzstan, the poorest countries in the area: it is a major player in the energy sector, and its historical autarchy made it a country that has untapped, economic potential in case it wants to open its market to foreign partners. As such, this visit is worth being highlighted as it is part of a trend regarding Italy’s intensifying engagement with the region, one that went slightly unnoticed.
The Analysis:
In June 2024, Italy hosted the third Ministerial Conference with Central Asian countries in Rome, bringing together the Foreign Ministers of all five Central Asian nations: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. During the conference, Deputy Prime Minister and Minister of Foreign Affairs and International Cooperation, Antonio Tajani, emphasized Italy’s growing interest in Central Asia, stating that the country “views political collaboration and the opportunities available for our businesses in Central Asia with great interest.” This summit followed two significant diplomatic missions: a visit to Uzbekistan in 2023 and another to Kazakhstan in 2024. The Uzbekistan mission, led by Defense Minister Guido Crosetto, also positioned Italy as a potential partner for regional nations on defense.
While Turkmenistan’s geopolitical and geoeconomic potential remains noteworthy, for instance amid its energy and economic significance, it is not a major regional military power. Recognized as a neutral state by the United Nations General Assembly in 1995, Ashgabat has a limited role in regional political-military frameworks. It is an associate member of the Commonwealth of Independent States (CIS), is not part of the Collective Security Treaty Organization (CSTO), and holds only observer status in the Shanghai Cooperation Organization (SCO). For historical and political reasons, Turkmenistan continues to fall within Russia’s sphere of influence. In 2017, Russian President Vladimir Putin and then-Turkmen President Gurbanguly Berdymukhamedov (father of the current leader, Serdar) signed a strategic partnership agreement.
In recent years, China has emerged as a key player in Turkmenistan, as it is the largest importer of Turkmen gas, accounting for 90% of the country’s gas exports. In recent years, Turkmenistan has also strengthened ties with Türkiye and Azerbaijan, making its role increasingly relevant to Italy. In November 2021, Turkmenistan joined the Organization of Turkic States (OTS) as an observer. That same year, Ashgabat signed a memorandum of understanding with Azerbaijan to develop the Dostlug hydrocarbon field in the Caspian sea, resolving a 30-year dispute over this field, thus initiating a more intense partnership with Baku.
What’s Next:
Deepening ties with Turkmenistan for Italy presents both opportunities and challenges. The country remains a difficult market to penetrate due to a particularly challenging business environment characterized by regulatory volatility and logistical obstacles. However, despite its slow pace, some changes are underway, and Ashgabat’s growing ties with Türkiye and Azerbaijan make it inevitably an interesting country for Italy (on Italy- Türkiye relations, see the latest issue of the Italian Compass).
Rome has long been one of Azerbaijan’s top partners in the EU, a relationship that reached new heights in 2020 as the two countries signed a “Joint Declaration on Strengthening Strategic Partnership,” further upgrading their partnership. That same year, the Trans-Adriatic Pipeline (TAP), the final segment of the Southern Gas Corridor originating in Azerbaijan, began operations. TAP now plays a crucial role in Italy’s energy security. Within this framework, Turkmen gas – if linked to the Azeri gas network, thus becoming available via TAP – could also gain importance as part of Italy’s broader energy diversification strategy. Moreover, as Italy is trying to deepen ties with the two major powers of the region, Kazakhstan and Uzbekistan, strengthening its presence in Turkmenistan might serve these goals as well.
Lastly, the Russian war of aggression in Ukraine has strained Moscow’s relations with all Central Asian states. While this has not led to a complete rupture in political and economic ties – given Central Asia’s continued and structural economic dependence on Russia – it has prompted these countries to seek new business partners in various sectors, including defense, where Moscow has traditionally been dominant. As a result, Italy is expected to increase its diplomatic and economic engagement in the broader Central Asian region in the coming years. Thus, strengthening its role in Turkmenistan will be an integral part of these efforts.
Briefs
The SoutH2 Corridor and Stability in the Maghreb
Algeria and Tunisia have joined the SoutH2 Corridor project, after the signature of the Declaration in Rome, almost two years after the initiative was officially launched (March 2023). The SoutH2 Corridor is a 3,300 km hydrogen pipeline connecting North Africa, Italy, Austria, and Germany, designed to transport 150 TWh/year of renewable hydrogen. Designated as a Project of Common Interest (PCI) by the EU, it is expected to become fully operational by 2030. The project plans to utilize around 70% of repurposed infrastructure, including the Transmed pipeline – the existing connection between Tunisia and Italy – while integrating new pipeline segments where necessary.
Although the signed document remains a political declaration without binding commitments or legal obligations, it nonetheless represents a significant step forward for a major infrastructure initiative that positions Italy as a potential energy hub bridging Europe and Africa. The participating countries – Germany, Austria, Italy, Tunisia, and Algeria – have agreed to meet every six months at the level of a technical working group to monitor and support the project’s implementation.
This project underscores the critical importance of North African stability for Europe. Consequently, ongoing tensions in Algeria-Morocco relations must be closely monitored and addressed to prevent escalation. Over the past few years, U.S. efforts to strike a balance between the two countries have contributed to avoiding a potential military escalation. However, the Trump administration’s alleged pro-Moroccan stance may change these dynamics, although the recent memorandum of understanding (MoU) to enhance military cooperation between Algeria and the United States sends mixed messages.
Against this backdrop, Italy has two crucial tools of influence. First, the special relationship discussed above between Trump and Meloni provides a diplomatic channel for Italy to be heard by the U.S. on this specific issue. Second, Italy’s deepening partnership with Algeria over recent years has solidified its position as Algiers’ main European ally, a role that has even strengthened further as France and Spain moved closer to Rabat. These factors enable Italy to play a constructive role in preventing military escalation in the Maghreb, a development that could have far-reaching consequences for the region and the broader Mediterranean stability.
Moreover, such an escalation would inevitably impact Tunisia, a country increasingly reliant on Algeria economically, and whose stability is essential for Rome. In case of greater instability in the Maghreb, Italy might face: a rise in migration flows, threats to energy security, disruptions to its potential role as Europe’s energy hub, and adverse impacts on trade. Thus, avoiding that latent tension characterizing Algeria-Morocco relations turn into a more open conformation remains a strategic imperative for Rome, in general and also to preserve and develop the SoutH2 corridor project.
External Problems Threaten Italy’s Economy
In early January, Banca d’Italia released its first economic bulletin of the year, painting a somewhat pessimistic picture of Italy’s economy for 2025. Economic activity is struggling to regain momentum following a period of stagnation during the summer. A general slowdown in both the manufacturing and services sectors, only partially offset by positive developments in the construction sector—boosted by projects under the National Recovery and Resilience Plan (PNRR)—and sluggish external demand have weighed heavily on Italy’s economic performance. In the fourth quarter of 2024, Italian exports were slightly constrained by a decline in demand, and the current account balance narrowed although it remained in surplus.
On a positive note, foreign investors’ purchases of Italian government securities remain robust, and the yield spread between ten-year Italian and German government bonds keeps narrowing. Employment growth also continues, but developments in the broader labor market present a mixed picture. A rapid increase in private sector wages is boosting purchasing power and supporting consumption, but the number of hours worked per employee has fallen, reliance on wage supplementation schemes remains high and the unemployment rate has declined significantly only due to a gradual decrease in the labor force participation rate.
Looking ahead to 2025, the most significant economic risks for Italy stem from potential external shocks. These include the protectionist policies announced by the new U.S. administration, both direct and indirect as analyzed in the first part of this newsletter, and the possibility of higher-than-expected global energy prices, as many observers could have a pronounced impact on inflation. According to Banca d’Italia, consumer price inflation is projected to average 1.5% over 2025-26. However, a sudden rise in energy prices could push inflation to 2% as early as mid-2025. Such a scenario would likely have several adverse effects, including a drag on consumption and increased costs for infrastructure projects. Higher inflation could also deleteriously impact an already weak investment climate, which has remained stagnant in recent months. In that case, without an ECB intervention either to reduce further key interest rates to boost demand for loans or take other steps to stimulate consumption and investment, Italy’s economic performance might worsen faster than expected.
See also…
Mediterraneo Globale - Trump fa sul serio sul disimpegno in Medio Oriente? Osservazioni dalle prime nomine
Politica Estera - The Italian Compass #2/2025
Mediterraneo Globale - La Settimana Mediterranea - 3/2025
Politica Estera - Scriptorium Italiae #1/2025
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