Germany and Italy Form New Alliance to Boost Industrial Growth

Germany and Italy's Pro-Industry Alliance

By Andreas Rinke and Angelo Amante

Objectives of the Alliance

ROME, Jan 23 (Reuters) - Germany and Italy pledged on Friday to coordinate within the EU to promote deregulation of industry, a sign of the bloc's two biggest manufacturers exploring closer alignment as their interests diverge from those of members including France.

Challenges Facing European Industry

Italian Prime Minister Giorgia Meloni and German Chancellor Friedrich Merz unveiled a joint plan to push regulatory simplification, stronger industrial policy and closer cooperation on energy, defence and migration.

Defense and Energy Cooperation

The two governments said Europe must strengthen its ability to act in response to Russia's war in Ukraine and wider global challenges, while boosting growth and resilience in the EU's industrial base.

Berlin and Rome see their industrial strength increasingly eroded by China and challenged by EU regulations, notably the so-called Green Deal which has upended the automobile market.

"Today I believe Italy and Germany are closer than ever," Meloni said, speaking at a news conference alongside Merz, adding that the EU's ecological transition had "brought our industries to their knees" and empowered China.

Recent transatlantic tensions have also highlighted policy gaps with France, whose President Emmanuel Macron pushed this week for a tough line against Washington. Germany and Italy, the EU's two biggest exporters to the United States, have been more cautious in public.

Though Meloni's party has roots in the far right, Merz sees her as a pragmatic ally who shares his focus on protecting Europe's industrial base, such as managing U.S. pressure over Greenland without escalation.

"During this eventful week, the two of us have spoken with each other almost every day about how to deal with the difficult issue involving Denmark and Greenland," Merz said.

SLOW MOVING EUROPE SLIPPING BEHIND

In their 19-page plan of action, Berlin and Rome called for a simplification of rules within the 27-nation EU and urged "legislative and regulatory self-restraint" to help cut red tape.

The two nations backed deeper single-market integration, especially in services, while highlighting industrial priorities, including automotive and energy-intensive sectors.

Their bid to improve cooperation underscores growing concern in European capitals that the EU will fall further behind the United States and China on technology, industry and economic security unless member states move in step.

On critical raw materials, they pledged to work together on securing supply chains, looking to counter China's growing influence on prices. With an eye on cheap Chinese e-retailers, they called for the EU to move to ensure fair competition.

Meloni and Merz said they supported the swift entry into force of an EU trade agreement with South and Central American nations - another issue where they have diverged from Paris, which wants more protection for farmers. They also supported finalising Indo-Pacific trade deals.

The two countries also signed a defence cooperation accord to deepen joint work across land, air, maritime and electronic-warfare systems.

(Writing by Crispian BalmerEditing by Peter Graff)