Italy is creating a private and non-private fund to boost key parts of its economy.
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Italy is moving forward with a state fund to support critical parts of its economy, amid broader pressure from several European countries to bring global supply chains closer to home.
Italian Entrepreneurship Minister Adolfo Urso announced on Wednesday the creation of a public-private fund to consolidate “national strategic supply chains” in the areas of raw materials and energy. A diplomatic source in Italy confirmed to CNBC that only high-potential or systemically essential firms would receive funding. They added that the plan is anticipated to undergo parliament before the top of the 12 months.
The announcement comes after Ireland, one other EU country, said earlier this month it intended to launch a sovereign wealth fund next 12 months. This may be capitalized by windfall tax revenues and targeted long-term costs comparable to pensions and infrastructure.
France, the eurozone’s second-largest economy, also unveiled a plan for an investment fund for critical metals earlier this month. More broadly, these announcements are in line with a trend in Europe where nations are searching for to reduce their dependence on other countries comparable to China.
“It’s a response to increasing international competition for critical resources and provide chains,” Federico Santi, a senior analyst at political consulting firm Eurasia Group, told CNBC in an email.
“First the pandemic, then the war in Ukraine and the following energy crisis revealed how supply chains are vulnerable to political and geopolitical changes. At the identical time, massive investments in the green transition and related technologies have increased the demand for critical resources,” he said.
Italy created a wealth fund in 2011 that invests in the energy, communications and aviation sectors. The newest plan for a separate fund reinforces the view that Rome is trying to bolster its industrial policy.
When Covid-19 hit in early 2020, many European countries struggled to get masks and other protective gear that were made in Asia. More broadly, multinational corporations with supply chains scattered all over the world have struggled to maintain assembly lines and lots of products have turn into costlier as a result.
Russia’s invasion of Ukraine disrupted further sectors, most notably agricultural commodities and fertilizers.
Strategic autonomy
Macron warned that Europeans are falling into crises which are usually not their work, citing the views of the US and China on Taiwan for example.
His statements have drawn criticism in some European capitals which are more aware of US security support. But Charles Michel, the president of the European Council who chairs regular talks between EU leaders, said there was growing support for Macron’s considering. Michel told Politico that while Macron was speaking as French president, his views reflect that growing change amongst EU leaders.
The subject shall be at the middle of attention when the 27 heads of state gather in June and debate how to develop a new relationship with China that differs from that with the US. While the US administration has considered disconnecting from Beijing by separating their economies, Europeans are developing ways to reduce their dependence on China, but not aggressively sever ties.