Italy in Turbulent Times. Connecting Atlantic, Mediterranean and Europe: Politics, economy and foreign policy

Meloni’s rise and political consolidation

Italy has experienced strategic repositioning under Prime Minister Giorgia Meloni, who emerged as the leader of the right-wing coalition amid strong public demand for new leadership and political polarization beginning around 2013. Meloni’s main strengths in winning the 2022 election were unity, consistency, and credibility. Her party Fratelli d’Italia captured 26% of support, while the broader center-right coalition including Forza Italia and Lega secured 44% of total votes, translating into an absolute parliamentary majority in both the Chamber and Senate through Italy’s electoral law mechanism. In the 2024 European elections, her support strengthened considerably, with Fratelli d’Italia reaching nearly 29%, the best result for a right-wing party in Italian post-war history, while the coalition has maintained resilience at 48%, consolidating Meloni’s government and leadership position.

Contrary to initial international perceptions of Meloni as a far-right leader and potential threat to European Union stability, she demonstrated remarkable policy continuity with her predecessor Mario Draghi’s government. Draghi, a highly respected international banker and technocrat, had led a national coalition government in 2021-2022 that made critical choices: adherence to the Next Generation EU recovery program following the pandemic, and strong support for Ukraine’s military effort against Russian aggression. Meloni maintained both commitments to build international credibility and act in continuity with Draghi’s well-respected legacy.

Meloni faced several key constraints upon assuming office: first was the fiscal discipline under EU shared rules which requires member state compliance, an area where Italy had previously struggled. She chose to avoid any standoff with the European Commission on political economy, instead working collaboratively while respecting European financial rules. She continued implementing the Next Generation EU program, which financed Italy with over 200 billion euros in subsidies and loans, critical for the Italian budget and developmental policies. Despite being depicted as Euro-skeptical, nationalist, or populist by international media, Meloni strategically adhered to fiscal rules to secure positive credit rating updates and reduce pressure on Italy’s massive public debt, the highest and widest in the European Union. Her careful choice to maintain budget balance allowed Italy to achieve better financial positioning and improved ratings, restoring fiscal credibility to the point where Italy now borrows at lower rates than France, something inconceivable just ten years ago.

Economic performance and trade resilience

The geopolitical context significantly shaped Meloni’s government actions from 2022 onward. The Russia-Ukraine war created fundamental shifts in EU energy security and defense priorities. Italy embraced aggressive diversification of energy suppliers with a focus on Northern Africa, with strong EU Commission support, including the state-owned energy company Eni, which skillfully activated new supply chain policies there. Italy also initiated rearmament policies to increase defense expenditure. The energy crisis proved particularly challenging for Italy’s manufacturing and transformational economy, where sustainable energy prices are essential. The diversification strategy, combined with implementation of the EU Recovery Fund’s 200 billion euros for post-pandemic recovery focused on infrastructure, digital transition, and environmental transition, improved Italy’s infrastructure and competitiveness while creating strong economic rebound after the depression due to the COVID-19 pandemic.

Political stability emerged as a crucial factor, as Italy had endured years of instability since 2008, with nearly annual government changes and shifting parliamentary alliances. Meloni’s clear 2022 electoral victory and skillful leadership resulted in her leading what is now the third-longest serving government in Italian history. The 2024 European elections further strengthened government consent, providing stability and propelling Italy’s European role. Meloni also benefited from the rise of other national populist politicians, particularly Donald Trump’s return to the White House, alongside domestic political disruption in France and Germany. By 2024, perceptions shifted: Italy was gaining domestic stability and predictability while other major European partners faced destabilization, enhancing the roles of Meloni and Italy.

From a macroeconomic standpoint, Italy’s growth remained modest, but achieved significant deficit reduction. The fiscal deficit fell from over 8% in 2022 to 3% in 2025 through Meloni’s decision to maintain budget balance and reduce subsidies and tax credit policies that had characterized national policy between 2020 and 2022. This approach gained credit confidence for Italy, with creditworthiness upgraded by major rating agencies, reducing Italian debt costs. Meanwhile, the economy rebounded particularly in employment, with unemployment reaching record lows below 6%, the lowest point in many years for the Italian labor market.

Italy also experienced a dramatic trade balance reversal. An energy-driven deficit from skyrocketing post-2022 energy prices transformed into the record surplus today. Italy moved from a 34-billion-euro deficit to achieving a surplus in 2023 after the energy crisis ended, with continued strong performance in 2024 and 2025 producing a positive trade balance of approximately 40 billion euros. Exports showed particular resilience, with Italy rising to become the fourth largest global exporter with nearly 700 billion euros in exports. Key resilient sectors include machinery, pharmaceuticals, luxury goods, and high-end agriculture. The small-medium enterprise model, now internationalized, remains the backbone of Italian competitiveness, with most firms located in central and particularly northern regions. Exports outside the EU exceeded 300 billion euros, with exports remaining the main driver of Italian trade policy.

Strategic positioning as a Mediterranean gateway

Italy’s strategic fulcrum involves positioning itself as a Mediterranean gateway. This geography-based strategy positions Italy as a geopolitical bridge to Africa and the Middle East, making the country indispensable to EU stability by offering stabilization of the Mediterranean’s northern front. Italy remains the main northern Mediterranean country, a stable nation capable of providing development assistance to Northern and Central Africa while connecting the Mediterranean with Germany and northern Europe on one side, and potentially connecting east to west from the Balkans toward the Atlantic. This becomes possible through different Mediterranean routes, from the Red Sea or through developing new corridors like IMEC (India-Middle East-Europe Corridor), connecting the Indo-Pacific with Europe. Italy positions itself to connect three seas: the Mediterranean, Indo-Pacific, and northern European waters through complex logistic routes and organization.

Italy fills an emerging leadership vacuum in Europe, partly through Meloni’s skillful navigation of the political landscape but also due to other nations’ problems. France has weakened, with Macron increasingly politically isolated both internally and externally. Germany faces deep recession, particularly at the industrial level, alongside coalition stability problems. These circumstances allow Italy to assume greater influence. Meloni’s strategic leverage includes positioning herself as an indispensable mediator, a bridge between Washington and Brussels. Since Trump’s White House return, U.S.-Brussels relations became considerably more complicated regarding tariffs and rearmament demands. Meloni performs a bridging role, siding with European nations against Trump’s most extreme positions while avoiding open U.S. confrontation. She built strong alignment particularly with Ursula von der Leyen, with Brussels granting unusual indulgence to Italy’s policy autonomy, a rare condition for EU members. It can be said that currently Italy influences Brussels more than Brussels influences Italy, representing something fundamentally new for the Italian political landscape. In fields like foreign policy, trade policy, Green Deal reformation, and immigration, Italy influences Brussels more than had previously been possible.

Meanwhile, Italy presents itself as a stable government in a fractured EU, growing in importance not only through Meloni’s capacity but because other European countries face electoral turmoil. This became evident when Meloni met German Chancellor Merz, marking the first time Germany approached Italy seriously, considering the relationship an opportunity rather than viewing Italy as a problem. Italy is emerging as a third pillar, certainly not at France and Germany’s level for obvious reasons—Germany remains a larger, stronger economy and France is a nuclear power—but as a reliable partner and stable country playing decisive roles in trade, defense, and industrial policy.

Migration policy and foreign policy reorientation

Foreign policy reorientation under Meloni proved particularly significant. Initially presented as a nationalist, or in European terminology a “sovereigntist” prioritizing national over European interests, she shifted toward transatlantic pragmatism. This meant consolidating bonds within the EU, particularly pivoting EU conservatives closer to the European majority for greater influence on von der Leyen’s Commission. Beyond focusing solely on Europe and the United States, both crucial poles for Italian foreign policy, Meloni created a third pole after years of indecisiveness: Africa. The Meloni government drafted the Mattei Plan, investing approximately 7 billion euros to support growth and infrastructural development in Northern and Central African countries in exchange for energy supply and tightened illegal immigration controls. This represents the deal Meloni negotiated with African leaders, creating a three-pole foreign policy framework.

The migration externalization model particularly passed at the European level through the new Albania agreement to host asylum seeker processing. Modeled on Australia’s offshore detention system, this represented the first EU experiment receiving support from all other European countries, signaling a European-level attitude shift toward migration. Until recently, migration had been considered a national problem. Italy faced a harsh migration crisis between 2013 and 2017, but today migration is recognized as a European problem requiring European strategy. Over time, Meloni’s policy ideas became increasingly influential and were followed by other governments.

Simultaneously, Italy has an extremely aged population which creates severe demographic problems. Particularly for current and future workers, recruitment difficulties arise because demographics and birth rates are very low. Meloni’s approach contrasts illegal migration while creating legal migration channels—not only from Africa but other areas as well—allowing half a million people over three years to work in northern industries, southern agriculture, and tourism. This combines illegal migration opposition with legal migration growth to avoid labor market shortages. The government achieved a remarkable 60% reduction in illegal arrivals during 2023 and 2024. Italy continues working toward new regulatory reforms making externalization more suitable, with likely agreement this year and official European policy shift adopting the Italian framework.

Defense challenges and international partnerships

Defense policy represents a crucial contemporary concern, particularly Italy’s NATO role. NATO pressure escalated with the Trump administration demanding 5% GDP defense spending by 2030, while NATO Secretary General Mark Rutte calls for 3.5% by 2035. Italy expanded to 1.6% GDP in 2024, approaching 2% in 2025. Potentially, defense expenditure could expand to 2.5% of GDP without requiring European bonds or guarantees. However, exceeding this threshold proves very difficult and the 5% target is unrealistic for several reasons. Italy’s fiscal space remains limited due to high public debt. Next Generation EU funds expire in 2026, eliminating additional funds for defense policy development. Welfare and pensions consume 60% of the budget. The aged population in demographic crisis combined with very high public debt makes reaching 5% or 3.5% thresholds impossible without European funds or tools.

The defense program expansion creates a strategic dilemma. Rising defense expenditure faces public opinion obstacles, as only 17% of Italians support defense spending increases. Italy maintains a strong pacifist tradition and left-wing opposition resists NATO expansion and defense expenditure increases. One Meloni ally, Lega led by Matteo Salvini, also shares this position. A strategic trilemma emerges: Italy must choose between honoring NATO commitments requiring over 40 billion euros in annual increases by 2030, maintaining fiscal discipline under EU rules, or risking transatlantic credibility. This explains why Meloni appears very pro-European regarding defense, constantly stressing the need for new tools and funds for facing defense expenditure challenges for Italy and Europe.

The United States relationship connects closely to this issue. Meloni maintains very good relations with Trump, considered not merely an institutional ally but a political ally. Italy remains among Trump’s closest European allies, particularly evident in the postures toward Ukraine and China. This results from U.S. leverage over Italian politics. Italy hosts numerous U.S. military bases, with the U.S. military umbrella protecting Italy. Additionally, U.S. exports prove very strong for the Italian economy. Trade volume reached 70 billion euros in 2025 despite tariffs, with Italy maintaining over a 40 billion euro surplus. The U.S. is the second largest global destination after Germany, a very important market particularly for machinery and pharmaceuticals. The military umbrella combined with export importance makes Italy-U.S. relations crucial.

Trump’s second mandate poses specific challenges, particularly tariff traps. Potential U.S. tariff costs for Italy range from 10 to 13 billion euros. Meloni’s response included a diplomatic visit at the end of April 2025, advocating exemptions for Italian products while maintaining European unity. However, Meloni has maintained the position against strong EU protectionist retaliation against the United States, attempting to cool European responses against Trump. Despite threats and tariffs, Italian exports to the United States grew 20% in early 2025. In November and December 2025, she successfully negotiated with Trump on pasta tariffs. Trump initially imposed very heavy pasta tariffs, but the government reduced these to lower levels with exemptions on some products, considered a success for Meloni’s Trump relationship.

China relations demonstrate a strategic recalibration. Italy accepted the Belt and Road Initiative memorandum in 2019, but Meloni’s government chose not to renew this in 2023, aligning with Western and particularly Washington preferences. This was replaced by a three-year pragmatic action plan on trade and non-strategic infrastructure. Italy maintains good China relationships with strong commercial ties, but everything considered strategic is now excluded, anything attached to technology or important infrastructure like harbors or technological startups. China remains Italy’s second largest non-EU trading partner, and the relationship has been recalibrated rather than wasted. Industrial tension exists particularly regarding electric vehicles. Italy sided with increasing Chinese electric vehicle tariffs, aiming to attract Chinese factory investments while avoiding destructive competition for European automotive producers. Italy is fully aligned with the von der Leyen Commission ideas on China, a recalibration from when Italy appeared potentially among China’s best European allies in 2019 or 2020.

Japan relationships were also renewed as strategic partnerships upgraded over the last two years with action plans on defense, economy, and technology emphasizing technology resilience. Joint focus includes semiconductor supply chain security and research and development. The most important program involves building sixth-generation jets under the GCAP program with the United Kingdom and Japan. Recent developments include raw materials, space, and technology partnerships discussed between the Japanese Prime Minister and Meloni. Italy demonstrates efforts for Indo-Pacific presence through IMEC and military missions, participating in Indo-Pacific missions over the last two years, also renewing partnerships with Japan and South Korea. All this serves strategic purposes for stronger supply chain resilience and a Chinese influence containment strategy.

The future outlook centers on several key questions: whether Meloni remains in government in coming years; how the Mattei Plan will develop with further resource investment; how structural hurdles like low productivity and demographic decline will be addressed; how Italy’s ambition as a geopolitical bridge mediating between U.S. protectionism and EU regulatory ambition will work, noting this depends not only on Italy but all geopolitical actors; and finally, strategic resilience through diversifying trade toward the Indo-Pacific and Middle East remains essential for making supply chains more resilient and increasing trading and military partnerships with countries like Japan.

Q&A

Q:
Concerning Africa and the Middle East, is it possible for Italy to become a neutral power in this region, considering the history of the refugee and migration issue and its geographical position? Another question is whether Italy’s bridging role between the U.S. and the EU depends primarily on Giorgia Meloni’s personality or character and political skill, or whether it stems from Italy’s structural position. Specifically, if Meloni were to be replaced by another leader, would Italy be able to maintain this diplomatic role? Regarding Italy’s budgetary constraints, given that the country’s recent economic success has been partly supported by the EU recovery fund, which will expire soon, how will Italy be able to handle its financial problems afterward? Additionally, given these budgetary restraints, how can Italy continue to play an important role without tremendously increasing its defense budget? Finally, with French presidential elections coming up next year, will the current right-leaning trend in Europe continue, and will Meloni be able to play a larger role in European politics?

Lorenzo CASTELLANI:
Italy is developing strong relationships with the Middle East, following Trump’s foreign policy line while maintaining good ties with Israel and strengthening connections with Gulf monarchies, with new Saudi investments expected soon. In Africa, the Mattei Plan’s success in increasing Italian influence on energy infrastructure and migration management will need to be assessed in the coming years. Italy’s natural role in the Mediterranean is one of stabilization, as demonstrated by leading the European mission in the Red Sea to counter Houthi threats to sea routes essential for the Italian economy.

Regarding MERCOSUR, Meloni proved skillful in managing domestic farmers’ concerns while avoiding opposition from allies. The agreement is important for Italy given the large markets where Italian products can perform well, plus Italy’s soft power advantage through large Italian-origin communities in Latin America.

The major future challenge is sustaining defense efforts while developing industrial policies. Without another European agreement, increasing defense expenditure beyond 3% of the GDP would be very difficult for Italy. Maintaining budget and fiscal stability without major political consequences also requires additional European programs. Meloni is working to increase European integration on industrial and defense policies while remaining skeptical about political unity. Her approach was demonstrated in crafting the agreement for providing funds to Ukraine, helping develop a solution based on European debt rather than frozen Russian assets.

Italy’s strategy requires strong European policy in economic and industrial sectors to fulfill defense promises and maintain growth. This scenario is more likely now because all European countries face similar challenges in domestic and foreign policy, suggesting further cooperation and integration financed by the EU in industry and defense. However, if new programs do not materialize under the current fiscal rules, Meloni could face political problems, potentially being forced to cut social expenditures or subsidies to maintain public debt credibility. For now, Meloni can reach the 2027 election from a position of relative strength given weak opposition, but post-2027 could present challenges as funds expire.

Q:
Concerning economic security, what situation does Italy face regarding supply-chain resilience of semiconductors and critical minerals?

Lorenzo CASTELLANI:
While Italy is not a major semiconductor producer, like other European countries it mostly relies on imports for critical minerals and other important raw materials. The government is developing new partnerships to secure critical materials from countries other than Russia or China, with a particular focus on energy and food security. The Africa strategy, protecting the Red Sea, and developing IMEC are all part of this approach.

The partnership with Japan is particularly valuable because the two countries are complementary rather than competitive. Japan is stronger in digital services, technology, and robotics, while Italy focuses on traditional advanced manufacturing. Both countries share similarities including aged populations, similar constitutions, and a strong U.S. influence, though they differ in many ways.