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Growing Out of Debt: The Business Impact of the Franco-Italian Quirinal Treaty

Last weekend, France and Italy signed the Quirinal Treaty, a bilateral agreement designed to bolster political cooperation and commercial ties. The new treaty will open new business opportunities for businesses and could change the EU's internal dynamics. Such bilateral treaties in the EU are rare but consequential. The 1963 Elysée Treaty between France and Germany, which ended decades of deadly enmity, has powered the Franco-German engine, which has been instrumental in building the European Union. 

What we know 

First and foremost, the treaty calls for greater policy coordination and alignment between the two governments across security and defense, European affairs, economic development, sustainability, technology and space, migration, and education and training. The treaty also lays the foundation for further deepening the already strong industrial and commercial ties between the two countries. There are 4,000 Italian businesses in France and French businesses in Italy employ over 300,000 people. [1] The treaty proposes to increase cross-border investment flows, develop new education and training opportunities for Italian and French youth, and calls for new joint industrial projects in defense, new technologies (AI, quantum computing, 5G/6G), digitization, sustainability (transport, infrastructure, and agriculture), and health. 

France proposed the treaty in 2017, but the election of a populist-led government in Rome in 2018 derailed the project for two years as bilateral tensions mount. By 2020, tensions abated. Rome and Paris conducted successful consultations on what would become the EU recovery package. The treaty itself was revived only when Mario Draghi, an independent pro-EU technocrat, became Prime Minister in February 2021. 

The treaty is largely designed to turn the page on a decade of misaligned policies and counterproductive rivalries. In Libya, French and Italian rivalries reduced their ability to weigh on the outcome and opened the door to Russian and Turkish interventions. In the past few years, disagreements over migration and controversial cross-border M&A projects, have greatly exacerbated tensions and mutual misunderstanding. 

What it means for businesses 

  • Greater bilateral political cooperation will be most visible at the EU level. Both countries will coordinate their policy positions to shift the balance of power on key topics. In particular, businesses and investors should expect France and Italy to push for a loosening of the fiscal rules (which limit the deficit to 3% of GDP and debt to 60%) and strive to maintain accommodating fiscal and monetary policies to support the economic recovery. This appears more doable now than at any point during the past decade when Germany systematically opposed such an initiative. The close coordination will also ensure that Southern countries in Europe have more of a voice in decision-making, with Paris playing a pivotal role thanks to its close relationship with Germany. 
  • More economic policy coordination should consolidate the recovery and fuel higher economic growth both countries need. Both economies stalled in the aftermath of the Great Financial Recession of 2008, fueling a host of social and political problems. Both want to capitalize on the EU recovery package momentum to durably improve economic growth and restore competitiveness. Sectors that should benefit include defense, space, future technologies (e.g., AI, 5G/6G, quantum computing), digitization (e.g., data, cybersecurity, connectivity, digital payments), and environmental sustainability in transportation, infrastructure, and agriculture.
  • Cross-border mergers and acquisitions activity should pick up. Both countries want to bolster the EU's strategic autonomy, reinforce value chains in strategic sectors, and enhance the competitiveness of European firms on global markets. M&As allowing for economies of scale and rationalization of production could help achieve these goals. However, recent mergers have been politically sensitive and controversial. In some cases, mergers have failed altogether, and businesses will still face headwinds if their acquisitions target 'strategic' sectors. 
  • Lastly, the treaty also calls on both governments to step up the fight against corruption, money laundering, and tax evasion. To successfully leverage these new opportunities, businesses and investors will need to ensure they don't run afoul of the rules. 

The treaty is ambitious and has received broad political support in both countries, including from far-right parties like Lega in Italy and Marine le Pen in France. However, both countries will have elections soon and new governments could undo or stall the implementation of the treaty, curbing opportunities.

[1] Secchi, E. (2021, November 22). Le Traité du Quirinal : L'accord bilatéral franco-italien sera-t-il à la hauteur de ses ambitions et Défis ? Forbes France.

© Copyright 2021. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.

The main goal of France and Italy is to grow out of public debt so they will push for fiscal rules that allow for growth-enhancing spending and investments and bigger public debt.


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