What’s at stake for Italy in the Brexit negotiations?

Italy’s populist Interior Minister Matteo Salvini has said he hopes the Brexit negotiations “conclude well for the United Kingdom”. Yet the new Five Star Movement-League coalition government has been surprisingly silent on what Italy needs from the negotiations.

What's at stake for Italy in the Brexit negotiations?
Italy's Prime Minister Giuseppe Conte with British PM Theresa May. Photo: Leon Neal/Getty Images/AFP

A lot is certainly at stake for Italian business. Brits love their Chianti or Prosecco: at least 12 per cent of all Italian exports of wines, drinks and alcohol beverages go to the UK, for a total sum of $1.1 billion per year (€937 million), according to Confindustria, the General Confederation of Italian Industry.

“We are all very worried because the situation is very uncertain,” said Cesare Cecchi, chairman of the Cecchi wine dynasty, summing up the feeling among wine industry producers in Italy. Italian agri-foods exporters have shared similar concerns.

Between June 2016 and June 2017, Italy exported €22.7 billion of goods to the UK, states a July 2017 industry report. The trade balance is weighed distinctly in Italy’s favour at more than €10 billion.

The ‘Made in Italy’ brand has always been strong in the UK. If no agreement is reached on geographical indications, Italian food and beverage exports alone would lose €1 billion, according to a 2018 statement by Italian national farmers’ union Coldiretti.

Bad for small business…

The British Chamber of Commerce for Italy represents both British companies trading in Italy and Italian companies with UK interests. “There’s no templated impact or concern that is consistent among members,” Daniel Shillito, the organisation’s president, told The Local.

“Some businesses have been apathetic or passive in their approach, taking a ‘we’ll wait until the end’ approach. Some have a contingency plan – especially those that have British trade.” 

The chamber has approximately 300 members, 40 percent of whom are British or of British heritage – the rest are Italian or European. The larger multinationals are more insulated to Brexit because of their experience.

“Energy and transport multinationals are always dealing with geopolitical situations. Brexit is a shock but there are others for them. SMEs are the most affected,” says Shillito.

READ ALSO: Brexit planning: What you'll need to do if there's no deal

Photo: DepositPhotos

At least 80 percent of the members of the British Chamber of Commerce for Italy – 70 to 80 percent of which, according to Shillito, are tax advisory firms, accountants, translation companies, banking and insurance firms, or companies in manufacturing (mainly automobiles), life sciences and pharmaceuticals – are centred around Milan. Companies in pharma, public administration, aviation and infrastructure support are also clustered in and around Rome.

With only a few months to go until Brexit, the Italian government is not as prepared as many of its northern counterparts in the EU – the Netherlands, Germany, France and several Scandinavian countries have all set up inter-ministerial committees on Brexit. Italy has not. At least, nothing has been made public.

“Italian trade sectors are generally unprepared” too, says Shillito. In the luxury goods sector, however, companies have been forced to make changes due 18-month seasonal cycles because of stock.

“Some smaller, luxury industry-exposed companies have made contingency plans,” Shillito told The Local. “Some have relocated their e-commerce back to Italy. Some have closed divisions in the UK.”

… but good for Milan?

Milan continues to advertise itself as an alternative for financial firms in the UK concerned about passport rights in the EU post-Brexit.

Within 24 hours of the UK’s decision to leave the EU, Milan’s mayor Giuseppe Sala could already spy opportunity for his city. “Brexit is bad news for the EU but may be an opportunity for Milan that could welcome the economic realities fleeing London,” he tweeted on June 24th, 2016.

The London Stock Exchange owns its Italian counterpart, Borsa Italiana, and Shillito reckons “it’s not a longbow to suggest that if there needs to be outsourcing/devolution of services, Milan and Italy could well benefit.”

“Milan could take a substantial piece of the market exiting London,” Bepi Pezzulli, chairman of Select Milano, a lobby group for UK-Milan trade, told The Local earlier this year.

That optimism has so far failed to bear fruit, as most banks or businesses that have relocated operations from the UK because of Brexit have sought other EU hubs.

“The problem is that the Italian regulatory infrastructure is not set up anywhere near the capacity of the UK financial services environment,” Daniel Shillito told The Local. “Milan is a minnow compared to the size of UK financial services.”

FOR MEMBERS: A Brexit checklist for Brits in Italy

Photo: DepositPhotos

Question marks for Brits in Italy

For British citizens living in Italy, uncertainty looms.

“One of the major concerns to us in Italy is what registration scheme the Italian government is going to adopt, presuming there is a deal,” Jeremy Morgan, vice chair of British in Europe and a committee member of British in Italy, told The Local.

The hope is that the current system for EU residency will be applied, because a completely new residency permit specifically for Brexit could cause confusion in its implementation at regional level, causing substantial headaches for Italy’s British community, which Morgan estimates is between 26,000 and 65,000 strong. Such numbers are hard to quantify: there are 28,000 Brits in Italy, according to ISTAT – Italy’s national institute of statistics – the largest proportion of which are in Lombardy, Lazio and Tuscany.

“The Citizens Rights agreement gives EU Member States the right to introduce new administrative procedures for British nationals resident in their countries. The Italian government has so far given us no indication that they will introduce new administrative processes. We will inform you as soon as we are made aware of any changes,” Jill Morris, the British ambassador to Italy, wrote in a statement on September 14th, 2018. The British Council in Milan is hosting a town hall meeting on September 27th.

Another potential quagmire for Brits in Italy is whether people who have applied for citizenship by March 29th, 2019, in Italy will be treated as third-country nationals or EU citizens. EU nationals can apply for citizenship after four years of residency; the minimum residency period for third-country nationals to apply is ten years.

“Lots of people want to apply for Italian citizenship to safeguard their rights,” says Morgan. British in Italy have held meetings with the UK’s Business Secretary Greg Clark, have been heard by the Italian Senate and are regularly in touch with Italy’s Brexit representative to the EU, Pierluigi D’Elia.

“The noises we have been hearing is that they [Italy] want to maintain the current system,” adds Morgan.

FOR MEMBERS: The ultimate guide to getting residency in Italy

Photo: DepositPhotos

This article originally appeared as part of The Local's Europe and You newsletter, a weekly dose of news, analysis, insights and events about Brexit and the EU27. To receive it in your inbox, sign up here.


INTERVIEW: ‘We must make it easier for non-EU citizens to move around Europe’

The European Union needs to urgently allow non-EU citizens to be able to move more freely to another EU country, the MEP leading the talks on changes to residency laws says. He tells Claudia Delpero why current rules mean Europe is losing out to the US.

INTERVIEW: 'We must make it easier for non-EU citizens to move around Europe'

“Even under Donald Trump, the US was more attractive for international talent than the EU is,” says Damian Boeselager, a German Member of the European Parliament (MEP).

Boeselager, a member of the Greens/European Free Alliance group is leading the campaign at the European parliament to bring about a rule change that would effectively make it easier for non-EU citizens to move to another EU country.

“The EU has a huge benefit of a large labour market having freedom of movement for EU citizens,” he says.

“But the truth is that Europe needs labour migration in all areas and all skill levels and therefore, if we want to be more attractive, we should make it easier (for non-EU citizens) to move from one member state to the next.

“If you are fired in New York, you can move to San Francisco and Miami. So… if third-country nationals choose to relocate to Europe, they should have a similar freedom, they should see a single market and not 27 ones,” he said.

The European Parliament recently voted to simplify rules for non-EU nationals to allow them to acquire EU long-term residence status and make it easier to move to other EU countries.

Under a little known EU-law third-country nationals can in theory acquire EU-wide long-term residence if they have lived ‘legally’ in an EU country for at least five years. 

They also must not have been away for more than 6 consecutive months and 10 months over the entire period (the rules are different for Brits covered by Withdrawal agreement). In addition, they have to prove to have “stable and regular economic resources”, health insurance and can be required to meet “integration conditions”, such as passing a test on the national language or culture.

The status, which was created to “facilitate the integration” of non-EU citizens who have been living in the EU for a long time, ensures equal treatment in the country that grants it and, on paper, some free movement rights.

However in practice, this law has not worked as planned

Specific rules on residency are applied in each EU country. Most countries require employers to prove they could not find candidates in the local market before granting a permit to a non-EU citizen, regardless of their status. And as well as that most applicants are simply unaware the EU status exists and the rights that come with it.

Free movement for third country nationals is just “an illusion,” says Boeselager.

READ ALSO: What is the EU’s plan to make freedom of movement easier for non-EU nationals?

“The EU does not give out a status. It is always the national governments which have the competence to give out visas or grant asylum, and even the EU long-term residence status is not an EU status, it is a national status regulated under EU law,” Boeselager says.

The MEP says that the European parliament will not change this, but that it will seek to get closer to freedom of movement by adjusting the criteria for applications “so that can you have the long-term residence status in the second member state immediately if you already have it in the first.”

“So, if you get the German card of EU long-term residence, which is basically a German visa, you could go to France and say ‘I have already fulfilled the requirements under the EU long-term residence in Germany, please give me the status in France immediately’… I call it portability of status,” he says.

A change to the rules would benefit UK citizens who lost free movement rights in the EU due to Brexit.

“The fact that the British could potentially benefit from this makes me super happy, but in the end the law is nationality-blind and all third country nationals will benefit and I am super convinced this is the right thing to do,” Boeselager said.

Resistance from EU governments

The European Parliament also want to bring about another change that would make it easier for third-country nationals to move to another EU country.

MEPs recently decided the period of legal residence to obtain EU long-term residence should be cut from five to three years and that it should be possible to combine periods of legal residence in different EU member states, instead of resetting the clock at each move.

Time spent for studying or vocational training, seasonal work, temporary protection (the scheme that applies to Ukrainian refugees), which currently does not count, should be included in the calculation too.

All these rules will have to be agreed by the EU Council, which brings together representatives of EU governments.

And getting all EU member states to agree to the changes being put forward by Boeselager and fellow MEPs may prove difficult.

According to a recent questionnaire circulated by Sweden, the current holder of the EU Presidency, several of the EU parliament’s proposals, including the possibility to cumulate periods of residence in different member states, are viewed negatively by certain member states due to difficulties to check continuous stays and absences.

“The issue with member states is that they don’t trust each other, at least when it comes to the processing of documents,” Boeselager says.

“The second point is that on the Council side we negotiate with the ministries of home affairs, the interior ministries. But this is not necessarily an interior ministry decision but rather an economics decision… and we might be losing out because of this focus on control and fraud that ministries of interior have, whereas we should focus on how the EU attracts talent,” he says.

Boeselager warns that “nine out of 10 companies across Europe tell us they lack labour and over the next 30 years we will lose 60 million people from our workforce.”

EU ministers will have to come up with their common position, possibly by the end of June. Then there will be talks with the parliament. Boeselager hopes interior ministers “would not block too much” and the new law will be adopted before the European parliament elections of June 2024

If that doesn’t happen negotiations and discussions will have to continue into the next legislative period and therefor face a long delay.

“What’s important is that we start having a normal discussion about migration. Migration is such a toxic topic for so many, but the reality is that we do not have endless time to figure out how to become a more competitive and attractive Union and it’s important we get there, so we just need to make a better offer,” Boeselager said.

This article was produced in collaboration with Europe Street news.