Dispatch from Rome: February 2024

The Haizum Italian Insider Report is a monthly news service that monitors the most relevant issues in Italy. This document focuses on political, Economic, and Strategic matters, considering the role of Italy within the European Union, the MENA region, and Transatlantic Relations. The report will deliver clever insights by leveraging Haizum’s deep connections in the national institutional ecosystem.

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The Italian Government is spearheading sweeping reforms across crucial institutions, with a particular focus on enhancing governance structures and operational efficiency. This includes a comprehensive overhaul at the Italian Medicines Agency (AIFA). Simultaneously, the Ministry of Enterprises and Made in Italy (MIMIT) has completed its reorganization efforts. Challenges, however, persist within the Ministry of Justice, as the resignation of Chief of Staff Alberto Rizzo hints at internal tensions, potentially signaling impending changes in the ministry’s organizational structure. The Ministry of Labor has announced a reorganization, appointing heads for new departments to enhance coordination and streamline operations, with a focus on social policies, labor issues, and migration matters. Minister Valditara‘s Ministry has confirmed leadership appointments in the Departments of Education and Digital Innovation, reflecting ongoing internal restructuring efforts.

The Senate‘s approval of new arms export legislation reinstates the Interministerial Committee for the Exchange of Armaments for Defense (CISD), indicating heightened coordination on strategic decisions regarding arms exchanges. Diplomatically, Italy is strengthening alliances, as evidenced by Foreign Minister Antonio Tajani’s visit to Croatia and President Sergio Mattarella’s visit to Cyprus. These visits underscore shared priorities in the Western Balkans and highlight deepening alliances in defense, security, and energy exploration in the Eastern Mediterranean.

Economically, Italy faces a mixed outlook in 2024, marked by high inflation rates and challenges in implementing the National Recovery and Resilience Plan. Positive indicators include improving job rates and growth in service sectors, hinting at potential economic stabilization. Strategically, Italian companies are making significant moves in various sectors. Fincantieri‘s joint venture with Edge Group in the UAE aims to establish a robust military shipbuilding industry, while the proposed merger between Ita Airways and Lufthansa faces scrutiny from the European Commission. Leonardo‘s contract with The Helicopter Company in Saudi Arabia underscores its expanding presence in the country.

Italy is navigating complex geopolitical challenges, strengthening alliances, and addressing economic and security concerns, all while its strategic companies engage in dynamic activities both within Italy and abroad. The ongoing reforms and strategic developments underscore Italy’s commitment to adapt and thrive in an ever-evolving global landscape.

AIFA Reform Takes Effect, Palù Likely to be Reconfirmed as President

The Italian Medicines Agency (AIFA) undergoes a significant governance reform as the ministerial decree comes into force. This reform, initiated by the Meloni Government over a year ago, abolishes the position of general director and introduces new managerial roles. The reform also includes changes in the composition of the board of directors and the establishment of the Drug Scientific and Economic Commission.

Giorgio Palù is poised to remain as the president of AIFA, pending official confirmation procedures. The appointment process involves collaboration between the Ministry of Health, the Ministry of Economy and Finance, and the Permanent Conference for Relations between the State, Regions, and Autonomous Provinces of Trento and Bolzano.

Key positions within AIFA, such as the Administrative Director and the Technical-Scientific Director, will also be appointed through collaborative procedures involving relevant Government bodies. The reform aims to streamline governance and enhance the effectiveness of AIFA’s operations, with assurances that the agency’s activities will continue seamlessly during the transition period.

Complete List of Directors General Announced for MIMIT

The Minister of Enterprises and Made in Italy (MIMIT), along with key officials, has finalized the reorganization of the ministry by appointing directors general for its various departments. The reorganization includes four departments and nine directors general. Amedeo Teti leads the Department for Enterprise Policies, overseeing key areas such as incentives for businesses and industrial policy. Giuseppe Bronzino and Paolo Casalino have been appointed directors general for specific areas under this department.

Eva Spina heads the Department for Digital, Connectivity, and New Technologies, with directors general Patrizia Catenacci and Luca De Angelis overseeing digital initiatives and emerging technologies. Additionally, the Department for Market and Protection, led by Amedeo Teti on an interim basis, includes directors general Gianfrancesco Romeo and Antonio Lirosi, overseeing consumer affairs and industrial property.

Benedetto Mineo heads the Department for Internal, Financial, and Territorial Supervision Services. This department includes directors general Stefania De Angelis, Amerigo Splendori, and Giulio Mario Donato, responsible for internal services, territorial supervision, and vigilance services, respectively. The appointments mark a significant step in MIMIT’s efforts to streamline operations and address key areas of focus, including enterprise policies, digital transformation, and market supervision.

Turmoil in Italian Justice Ministry as Chief of Staff Resigns

Alberto Rizzo, the Chief of Staff at the Ministry of Justice, has resigned from his position after nearly a year and a half, having been appointed by Nordio in October 2022. Technically, his departure is not a resignation: Rizzo  has submitted a request to the CSM (Superior Council of the Judiciary) to return to his judicial role. However, the timing of his reassignment depends on the Superior Council of the Judiciary. His request, to be first considered by the third commission, will then be brought up in one of the upcoming plenums of the CSM.

Beyond technicalities, it’s important to understand why Rizzo decided to leave. It revolves around another figure, namely Giusi Bartolozzi. Bartolozzi’s increasingly overbearing role as deputy chief of staff led to exasperation among colleagues, including Rizzo. Bartolozzi, a former magistrate and wife of the former vice president of the Sicilian Region, Gaetano Armao, was a deputy for Forza Italia in the previous legislature. She is known to be a close friend of the Minister.

Alfredo Mantovano, the powerful undersecretary in the Prime Minister’s Office, is keen on suggesting an experienced magistrate to stabilize the office. One potential candidate is Claudio Galoppi, the current secretary of Independent Judiciary (the same group as Mantovano) and former legal advisor to the ex-President of the Senate, Elisabetta Casellati.

Confirmed Leadership in Valditara's Ministry

In a recent development, Carmela Palumbo and Jacopo Greco have been reappointed to lead the respective Departments of Education and Digital Innovation within Minister Valditara‘s Ministry. This decision follows the reorganization of various departments, focusing on the educational system and digital innovation. Carmela Palumbo, affiliated with the Lega party, retains her position as the head of the Department for the Educational System, while Jacopo Greco, unexpectedly associated with the Democratic Party (PD), remains in charge of the Department for Resources, Organization, and Digital Innovation. The appointments signify a mix of confirmations and surprises, showcasing the Minister’s trust in their abilities and the ongoing internal restructuring of the Ministry.

Ministry of Labor's Reorganization

Danilo Giovanni Festa and Alessandro Lombardi have been appointed as the heads of the new departments, reflecting the ministry’s reorganization efforts. Festa, entrusted with leading the Department for Innovation, General Administration, Personnel, and Services, will also serve as interim head of the Department for Labor, Social Security, Insurance Policies, Health, and Safety in the Workplace. Alessandro Lombardi will helm the department responsible for social policies, the third sector, and migration matters.

The reorganization entails the elimination of the secretary-general role, replaced by three department heads overseeing eleven general directorates. Additionally, a permanent conference of department heads and general directors has been introduced to ensure coordination.

Senate Approves New Arms Export Legislation

The Senate has approved the bill amending Law No. 185 of July 9, 1990, which regulates the export of armaments from the national defense industry. Key Changes in the Legislation:

1. Restoration of CISD: The bill reinstates the Interministerial Committee for the Exchange of Armaments for Defense (CISD) under the presidency of the Prime Minister. The committee will include the ministers of Foreign Affairs, Interior, Defense, Economy, and Finance, as well as representatives from industries and “Made in Italy” businesses. Its purpose is to ensure adequate coordination at the highest political level regarding strategic decisions on arms exchanges.

2. Role of CISD: CISD will establish general guidelines for the implementation of the law regulating arms trade (Law No. 185/1990), provide general directives for arms transfers, and define general criteria for applying prohibitions on transfers of materials.

3. Simplification for Businesses: The bill aims to simplify obligations for companies by extending the deadline for submitting documentation on transfers from 180 days to 12 months. It also imposes stricter penalties for failure to submit documentation. The bill specifies that communication obligations for banking transactions in this regard lie with banks and financial intermediaries.

4. Banking Transactions: The requirement for a Parliament report on the activity of credit institutions operating in Italy concerning operations governed by the law has been repealed. However, the obligation for all banking transactions in this matter to be notified to the Ministry of Economy and Finance (MEF), which must authorize them within 30 days, remains unchanged.

Italy Strengthens Cooperation with Croatia in the Western Balkans

Italian Foreign Minister Antonio Tajani visited Zagreb, Croatia, to bolster cooperation with Croatia, a key partner in the Western Balkans. The visit highlighted shared priorities between Italy and Croatia, including EU affairs, energy, migration, NATO, and Ukraine. Tajani emphasized the need for a greater European presence in the region and accelerated accession processes. The discussions also touched upon issues such as the protection of Croatians in Bosnia. The relationship between Italy and Croatia has deepened, with both countries seeing NATO and EU membership as common values. Economic ties are strong, with Italy being Croatia’s top trading partner. Both countries are exploring innovative challenges in the northern Adriatic region, such as hydrogen, energy, and energy transition. Challenges lie ahead, including bilateral issues with Serbia and defending the rights of Croats in Bosnia. Croatia is also actively involved in demining efforts in Ukraine.

Italian President's Visit to Cyprus Strengthens Alliance

Italian President Sergio Mattarella‘s recent visit to Cyprus underscores the strengthening alliance between the two nations. The visit, the first by an Italian head of state to Cyprus, focuses on bolstering bilateral relations and addressing key issues such as defense, security, and migration, while also emphasizing ties with Turkey.

A major aspect of the discussions revolves around the significant gas reserves in the Eastern Mediterranean, particularly around Cyprus, which have drawn the interest of international players including Italy’s Eni. The potential inclusion of Cyprus in NATO is also on the agenda, with discussions revolving around the benefits such a move could bring, including enhancing collective defense capabilities and potentially facilitating a resolution to the island’s division.  The visit highlights the longstanding diplomatic relations between Italy and Cyprus, with economic ties, cultural exchanges, and cooperation on various fronts strengthening over the years. Additionally, Cyprus, along with Israel and Greece, forms a trio focused on gas cooperation in the Mediterranean, indicating broader regional dynamics and partnerships.

New Extraordinary Commissioner Appointed for Ex Ilva

The Italian Government has appointed Domenico Quaranta as the new extraordinary commissioner for the troubled steelmaker, Ex Ilva. Meanwhile, ArcelorMittal, the multinational steel manufacturing corporation that had been operating the plant, has announced the closure of its experience with Ex Ilva. This decision comes after a turbulent period marked by legal battles, environmental concerns, and financial challenges. The appointment of Quaranta as the new commissioner underscores the Government’s commitment to addressing the complex issues facing Ex Ilva and finding sustainable solutions for the company’s future. However, challenges remain, and the closure of ArcelorMittal’s involvement adds uncertainty.

Mixed Outlook for the Start of 2024

The beginning of 2024 shows a mix of positives and negatives: high rates persisting longer, dearer oil, but also increased confidence and expanding services. There’s a notable inflation gap between Italy and the Eurozone, delaying interest rate cuts. Investments are expected to face less credit hindrance in the latter half of the year, but there’s an urgent need to accelerate the National Recovery and Resilience Plan (NRRP). While job indicators in Italy are improving, consumer signals remain mixed. Service sectors are driving growth, hinting at a potential halt to the industrial decline.

The Italian GDP, which saw growth towards the end of 2023 (0.2%), driven by services and construction, is now bolstered by rising confidence and inflation slightly above the lows in the first quarter of 2024. The industry appears close to ending its downturn, but interest rates are expected to remain high longer than anticipated. Trade flows continue to face obstacles due to reduced Suez Canal transits. Gas prices remain high (€28/mwh in February), while oil is on the rise ($82/barrel).

Sovereign rates have been minimally impacted, with Italian BTPs rising to 3.87% in February (from 3.65%) and Bunds to 2.27% (from 2.19%), resulting in a spread of 161 points (from 146). Job indicators are improving. Employment rates rose in December 2023, with unemployment declining to 7.2%. However, the pace of employment expansion slowed in November-December, now closely tied to economic performance.

Transition 5.0 Plan: Boosting Digital and Green Investment in Italy

The Transition 5.0 Plan, approved alongside the NRRP decree-law, allocates €6.3 bln to drive green and digital transition initiatives in Italy. Complementing the European Union’s objectives to reduce CO2 emissions, the plan aims to foster sustainability and innovation. Companies investing in digitalization and green transition efforts between 2024-2025 stand to benefit from tax credits, irrespective of their size or sector. Eligible investments include assets facilitating energy efficiency improvements, renewable energy self-production, and employee training in digital and energy transition skills. The disbursement of incentives is streamlined, with companies able to apply retroactively for investments made in January and February. However, concerns linger regarding the tight timeframe for compliance and the revised semi-automatic nature of the incentives, prompting anticipation for further clarifications through implementing decrees.

Golden Power over Sirti to Safeguard NATO Supplies

The Italian Government is considering invoking the golden power mechanism over Sirti, a Milan-based telecommunications company that also works for NATO, to prevent its acquisition by a foreign investment fund.

Sirti is currently solely owned by PS Reti S.p.A., which is ultimately controlled by the U.S. fund Kohlberg Kravis Roberts (KKR). The sale process, managed by PS Reti’s advisors Goldman Sachs and Intesa Sanpaolo’s IMI, is still in the preliminary stage with expressions of interest from potential buyers, including U.S.-based Searchlight Capital, the UAE’s Mubadala Investment Company, and the UK’s 3i Infrastructure.

Sirti Digital Solutions, a subsidiary specializing in digital services, recently secured a contract for the development of a new data center infrastructure for NATO in Naples. The move to potentially invoke the golden power over Sirti reflects the Government’s interest in safeguarding strategic assets, particularly those involved in critical sectors like telecommunications and defense, amid concerns about foreign ownership.

Fincantieri Strengthens Presence in UAE

Fincantieri  has initiated a joint venture with Edge Group in the United Arab Emirates (UAE) to establish a significant military shipbuilding industry worth an estimated €30 bln. This collaboration aims to create a robust supply chain for naval vessels, leveraging Fincantieri’s expertise alongside Edge Group’s advanced defense technology. 

The joint venture, headquartered in Abu Dhabi, will focus on producing a wide range of military ships, capitalizing on the UAE’s strategic location, and leveraging government-to-government agreements and export credit financing. The partnership underscores Fincantieri’s commitment to becoming a leader in underwater technologies and reflects Edge Group’s strategic vision for maritime defense solutions. The venture is poised to transform the maritime industry globally, fostering innovation and technological advancements.

Why Brussels Will Likely Reject the Ita-Lufthansa Deal

The European Commission has moved to the second phase of analysis regarding the Ita Airways-Lufthansa merger, expressing concerns about potential competition issues. Despite Italy’s highly liberalized aviation market, the Commission’s scrutiny indicates worries about reduced competition on various routes. Examining market segments, particularly domestic and intra-European flights, reveals the dominance of low-cost carriers like Ryanair, raising questions about the necessity of the merger. 

While the Commission focuses on specific routes, concerns regarding reduced competition overlook potential enhancements in other areas, such as increased competition against dominant carriers like Ryanair. Additionally, the examination of intercontinental routes highlights potential shifts in competition dynamics due to changes in airline alliances.

Leonardo Partners with Saudi Arabia

Leonardo has secured a significant contract with The Helicopter Company (THC) in Saudi Arabia. The deal involves the sale of 20 AW139 helicopters and a multi-year framework agreement for over 130 units. These helicopters will primarily be used for medical assistance and search and rescue missions within Saudi Arabia. The agreement signals a substantial growth in the collaboration between Leonardo and THC. Additionally, Leonardo has signed preliminary sales agreements for various other helicopter models. This move underscores Leonardo’s expanding presence in Saudi Arabia, following a Memorandum of Understanding aimed at exploring aerospace and defense cooperation. The deal with THC complements Saudi Arabia’s efforts to meet the growing demand for commercial helicopters and aligns with its Vision 2030 initiative. Leonardo’s success with the AW139 program reflects its cutting-edge technology and widespread adoption globally. This development also follows previous agreements between Leonardo and Saudi authorities, signaling broader cooperation in the defense and technology sectors.

Leonardo Exceeds Expectations in 2023 Financial Report

Leonardo has outperformed expectations in its 2023 financial report, showcasing growth in orders, cash flow, and debt reduction. The company closed the year with orders totaling €17.9 bln, surpassing forecasts by 3.8%. Revenues reached €15.3 bln, a 3.9% increase compared to the previous year. The operating margin improved by 5.8% to €1.29 bln, while the free operating cash flow grew by 17.8% to €635 mln. Leonardo’s net debt decreased by 23% to €2.32 bln. The positive results are attributed to strong performance across various business segments and disciplined cost management. The company’s stock price surged by 4.07% in response to the news. Looking ahead, Leonardo is considering a joint venture with the German firm Hensoldt, with further details expected to be revealed in its upcoming 2024-2028 plan presentation on March 12. CEO Roberto Cingolani expressed satisfaction with the company’s progress but emphasized a commitment to more ambitious goals in the future.

Figari as President, Labriola as CEO Among Proposed Members

The Tim board has greenlit a new list for its renewal, including Pietro Labriola, the current CEO, proposed for the same role, with Alberta Figari suggested as president. The approved list, featuring 15 candidates, comprises both existing and new faces, with 6 women and 9 men. Notably, the board intends to propose a nine-member composition for a three-year term, although it presents 15 candidates to accommodate potential variations in board size. The selection emphasizes continuity while integrating external candidates with diverse expertise. Additionally, the board has unanimously approved reducing the total compensation to €1.3 million annually, down from the current €2.2 million, subject to the new board’s decision on distribution.

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© 2022 Created by ABCPRODUCTION.digital