May 23, 2023: Italy moves ahead with a sovereign fund supporting critical parts of its economy amid a broader push by several European nations to bring global supply chains closer to home.
On Wednesday, Italy’s Minister of Enterprises Adolfo Urso announced a public-private fund to consolidate “national strategic supply chains” in raw materials and energy. A diplomatic source in Italy confirmed that only high-potential or systemically relevant firms would receive funding. They added that this plan is anticipated to pass through Parliament before.
The announcement comes following Ireland, another EU nation, said that it intends to begin a sovereign wealth fund next year. This would be capitalized by windfall tax receipts and target long-term costs like pensions and infrastructure.
Earlier this month, France, the second largest euro area economy, also presented a plan for an investment fund for critical metals. More broadly, these announcements follow a trend in Europe, where nations aim to reduce their dependency on other countries, like China.
“This is a response to surges in international competition regarding critical help and supply chains,” Federico Santi, a political consultancy Eurasia Group, said.
“The pandemic, first and the war in Ukraine and the resulting energy crisis have laid bare the way supply chains are vulnerable to political and geopolitical shifts. Similarly, massive investment in the green transition and related technologies has surged the need for critical resources,” he said.
Italy completed a wealth fund in 2011, investing in the energy, communications and aerospace sectors. The recent plan for a separate fund reinforces that Rome is trying to improve its industrial policy.
When Covid-19 reached in early 2020, many European nations struggled to get hands-on masks and different protective equipment manufactured in Asia. Multinationals with supply chains worldwide are struggling to continue their assembly lines, and products have become more expensive.
Russia’s invasion of Ukraine disrupted other sectors, notably agricultural goods and fertilizers.
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