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Is Italy really pushing to exclude luxury goods sales to Russia from EU sanctions?

As Europe plans further sanctions against Russia following its invasion of Ukraine, reports claim Italy is among the countries asking for exemptions and blocking some tougher measures. But is this true?

Published: 25 February 2022 17:41 CET
Is Italy really pushing to exclude luxury goods sales to Russia from EU sanctions?
Italy's prime minister Mario Draghi has reportedly carved out luxury goods from EU sanctions against Russia. (Photo by Miguel MEDINA / AFP)

EU countries are on Friday planning a third round of economic sanctions against Russia in response to the invasion of Ukraine on Thursday.

Italian Prime Minister Mario Draghi has repeatedly said that Italy is “fully aligned” with its European partners on the issue, pledging a “very tough package of sanctions against Russia” in a speech to the national parliament on Friday.

EXPLAINED: How Italy could be impacted by Russia’s invasion of Ukraine

But Italy may have also been pushing to keep its lucrative trade in luxury goods out of the discussions – at least according to some reports in the UK and US media.

Belgian officials also reportedly wanted an exception for the diamond trade on any list of sanctions.

The UK’s Telegraph newspaper on Friday cited unnamed sources in Brussels as saying Draghi had “carved out” an exclusion for Italian luxury goods from the package.

The Italian government appeared to refute the reports hours later, with a tweet from the Prime Minister’s office in English saying: “Italy has made no requests for carve-outs on sanctions. Italy’s position is fully aligned with the rest of the EU.”

Italy and other European nations were heavily criticised on Thursday for blocking some of the toughest sanctions including a proposal to cut Russia off from the SWIFT international payments system.

Former European Council President Donald Tusk hit out at Italy, Germany, and Hungary on Friday, saying some EU governments had “disgraced themselves” by blocking “tough decisions”.

EU leaders reportedly struggled to unite due to fears about how the sanctions would impact their own economies, with many reliant on Russian gas exports.

This is particularly true for Germany and Italy, the two European countries who import the most Russian gas.

Italy has historically had a closer relationship with Russia than many other European countries, with business relationships reaching beyond energy supply.

OPINION: This is Russia’s war, but we Europeans need to learn fast from our mistakes

There are around 300 Italian companies doing business with Moscow, reports Italy’s Sky TG24 news.

Russia is a major market for Italian luxury fashion  goods, with exports of Italian brands including Moncler, Brunello Cucinelli, Ferragamo and Tod’s worth €1.3 billion in the first 11 months of 2021 alone, according to data from the Italian Trade and Investment Energy Agency.

In the same timeframe, the total trade between Russia and Italy amounted to about €20 billion.

Member comments

  1. Not intelligent! Others will “sanction” Italy’s luxury brands in protest. Net loss to Italy which is otherwise a decent country.

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ECONOMY

France and Italy face spending rebuke from EU

The European Union was expected to issue warnings to France, Italy and several other governments over excessive spending after new budget rules came into force this year.

Published: 19 June 2024 08:59 CEST
France and Italy face spending rebuke from EU

The rebuke comes at a particularly difficult moment for France, where both the far left and far right are piling up spending promises ahead of snap polls triggered by President Emmanuel Macron’s crushing EU election defeat.

This will be the first time Brussels has reprimanded nations since the EU suspended the rules because of the 2020 Covid pandemic and the energy crisis triggered by Russia’s invasion of Ukraine, as states propped up businesses and households with public money.

The EU spent two years during the suspension overhauling budget rules to make them more workable and give greater leeway for investment in critical areas, like defence.

But two sacred goals remain: a state’s debt must not go higher than 60 percent of national output, with a public deficit – the shortfall between government revenue and spending – of no more than three percent.

The European Commission will publish assessments of the 27 EU states’ budgets and economies on Wednesday, and is expected to point out that some 10 countries including Belgium, France and Italy, have deficits higher than three percent.

The EU’s executive arm has threatened to launch excessive deficit procedures, which kickstart a process forcing a debt-overloaded country to negotiate a plan with Brussels to get back on track.

Such a move would need approval by EU finance ministers in July.

Countries failing to remedy the situation can in theory be hit with fines of 0.1 percent of gross domestic product (GDP) a year, until action is taken to address the violation.

In practice, though, the commission has never gone as far as levying fines, fearing it could trigger unintended political consequences and hurt a state’s economy.

The EU countries with the highest deficit-to-GDP ratios last year were Italy (7.4 percent), Hungary (6.7 percent), Romania (6.6 percent), France (5.5 percent) and Poland (5.1 percent).

They may face the excessive deficit procedures, alongside Slovakia, Malta and Belgium, which also have deficits above three percent, according to Andreas Eisl, expert at the Jacques Delors Institute.

The picture is complicated for three other countries, Eisl said. Spain and the Czech Republic exceeded the three percent limit in 2023 but should be back in line this year.

Meanwhile, Estonia’s deficit-to-GDP ratio is above three percent – but its debt is around 20 percent of GDP, significantly below the 60 percent limit.

The commission will look at the states’ data in 2023 but “will also take into account the developments expected for 2024 and beyond”, the expert told AFP.

Member states must send their multi-annual spending plans by October for the EU to scrutinise and the commission will then publish its recommendations in November.

Under the new rules, countries with an excessive deficit must reduce it by 0.5 points each year, which would require a massive undertaking at a moment when states need to pour money into the green and digital transition, as well as defence.

Adopted in 1997 ahead of the arrival of the single currency in 1999, the rules known as the Stability and Growth Pact seek to prevent lax budgetary policies, a concern of Germany, by setting the strict goal of balanced accounts.

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