Italy's decision to be the first major European economy to join China's massive investment and infrastructure project, the Belt and Road Initiative (BRI), can only exacerbate tensions between Italy and its neighbors.
On Saturday, President Xi Jinping and the Italian government signed a non-binding agreement for Italy to join China's trade route and inked a total of 29 deals worth 2.5 billion euros ($2.8 billion) across an array of sectors. Italy hopes the project will boost its sluggish economy but the deal raised more than just eyebrows in Europe and the U.S. with officials criticizing the move.
The BRI is something of a 21st century Silk Road with the sea and land route stretching from Asia, the Middle East, Africa and now into Europe — with Italy being the first Group of Seven (G-7) country to sign up to the global infrastructure and development project.
The "Memorandum of Understanding" signed by China and Italy shows that they intend to work together to develop Italy's transport, logistics and port infrastructure, strengthen financial cooperation and expand "two-way" and "unimpeded" trade and investment.
China sees the BRI as a way to efficiently and easily export more of its goods to lucrative markets; its critics see the initiative as a vanity project that increases indebtedness among its participating countries. They also complain that the BRI gives Chinese companies unfettered access to other markets and economies, but that its own is still largely closed to foreign investment.
At the heart of concerns is that the BRI is seen as a way for China to spread its geopolitical influence — an acute concern for a Europe increasingly uncertain of its place in the world.
Italy's anti-establishment coalition government has already clashed with Brussels over immigration and its spending plans. Its deal with China is likely to be another source of tension.
Rory Green, a China and North Asia economist at TS Lombard, told CNBC Wednesday that the deal with Italy was "fantastic" for President Xi Jinping. "It's a really big coup for Xi Jinping and it will give him a foothold in the heart of Europe."
"In terms of Italian-EU relations, it's going to add more strain to their relationship. From the Italian perspective, it shows they are willing to turn to an outside backer and that could be used to show the EU, and France and Germany in particular, that they have other friends they are willing to turn to." He also noted that the deal was likely to accelerate "an ongoing shift" in Europe's view of China as "a strategic competitor."