Italy abandons the 'Belt and Road' initiative

A foot in both camps: that is what Italy is trying to maintain with China and the United States. Rome is at a crossroads: to abandon the 'Belt and Road' initiative, signed by the Conte government and expiring in 2024, and to get closer to Washington by moving away from Beijing, or to renew the agreement? Giorgia Meloni has opted for the former, but what are the risks for Italy? Could an Italian non-renewal be a breach of contract?

"The memorandum of understanding is not a contract, and therefore there are no legal implications and duties that the two parties have to comply with. But it is above all an agreement between the two parties that has political significance for China and Italy," explains Silvia Menegazzi, Professor of International Relations at Rome's LUISS-Guido Carli University.

But Giorgia Meloni has also decided to break off this collaboration to reassure her allies.

Remaining in the Chinese orbit of influence annoys the White House but Meloni does not want to risk damaging Italian companies by distancing her government definitively from China. It is likely that other agreements will be signed with Beijing, but this time only commercial ones.

If Rome has decided to pull out of this initiative, however, it is not only for political reasons but also for economic ones. US President Joe Biden has launched a massive $6.8 trillion economic recovery plan. Many Italian companies want a piece of the pie but to get one, Rome must prove itself to be a reliable ally.

Could Italy risk economic disaster by not renewing this initiative?

"Withdrawing from the Silk Road has very few economic disadvantages, I think. It probably involves marginal economic risks. I don't expect these economic risks to be huge. Perhaps we might see actions against, for example, luxury brands in China through boycotts. It will depend on whether China sees this as something that harms its core interests or not. I don't think we will see any harsh responses (from Beijing)," says Francesca Ghiretti, an analyst at Merics.

Meanwhile, time is running out: the G7 is to be held in Hiroshima, Japan, on 19 May, when Meloni will have to reassure her Western allies.