Italy scraps defence deal with Israel: Why, how this could impact Europe-Israel ties

Then, after Italy’s Foreign Minister Antonio Tajani criticised the Israeli bombing of Lebanon, saying “we want to prevent a second Gaza”, the Israeli government summoned Italy’s ambassador.

Tajani travelled to Beirut on Monday to express solidarity with Lebanon.

Within Italy, there was pressure on Meloni’s government to review ties with Israel. The defence agreement suspended on Tuesday was signed in 2003 and entered into force in 2006. It is subject to renewal every five years. The agreement covered joint military exercises, training of personnel, exchange of military equipment, and research partnership.

“In light of the current situation, the government has decided to suspend the automatic renewal of the defense agreement with Israel,” Meloni said, as quoted ‌by Italian ‌news agencies.

While Israel and Italy have sold arms to each other in the past, and Italy was once among Israel’s major sources of weapons, this stopped since the Gaza war began in October 2023.

More than a direct impact on Israel’s weapons stockpile or military training, Italy’s step marks a rebuke of Netanyahu’s policies, coming from an ally. This is likely to give more momentum to voices within Europe that want the EU-Israel Association Agreement scrapped. Italy recognised Israel within a few months of its establishment, and the two have maintained ties since then.

Where Europe stands on Israel

Many countries, recently led notably by Spain’s Prime Minister Pedro Sanchez, have called for a tougher stance on Israel by the European Union, and the cancellation or at least review of the cooperation agreement.

The agreement entered into force in 2000. According to the European Commission, it “aims to provide an appropriate legal and institutional framework for political dialogue and economic cooperation between the EU and Israel”, including a Free Trade Area deal. Crucially, “respect for human rights and democratic principles” is an essential, stated element of the agreement.

While Israel and the EU have often had terse exchanges over Israel’s human rights record and “antisemite” elements on the continent, they have a robust trade partnership. According to the European Commission, “The EU is Israel’s biggest trading partner, accounting for 32% of Israel’s total trade in goods with the world in 2024. 34.2% of Israel’s imports came from the EU while 28.8% of the country’s exports went to the EU.”

However, the EU makes an important distinction. As the Commission says, “Goods originating from Israeli settlements in territories that have been under Israeli administration since June 1967 are not entitled to benefit from any preferential tariff treatment (neither under the EU-Israel Association Agreement, nor under the Interim Association Agreement on Trade and Cooperation signed with the Palestine Liberation Organization (PLO) on behalf of the Palestinian Authority).”

Thus, Israeli certificates of origin have to pinpoint exactly where the goods are from by providing postal codes.

A review of the agreement was launched last year in response to a call by The Netherlands and supported by other countries. This was under Article 2, which talks of respect for human rights and democratic principles. However, no consenses emerged, and after the Gaza ceasefire, the needle did not move.

Now, fresh calls for a review are emerging. Countries like Germany and Austria, given their Nazi history during World War II, have been reluctant to criticise Israel. Hungary under the right-wing Victor Orban had vetoed moves against Israel. Hungary now has a new leader, though he may not be much of a departure from Orban on Israel.

The bottomline

If the free trade agreement is indeed suspended, exports worth approximately 5.8 billion euros would be impacted, resulting in an estimated 227 million euros a year in duties, Reuters reported.

More than that, pressure on Israel would grow to recalibrate its actions in Gaza, Lebanon, and West Bank. Europe will gain moral and reputational weight.

Any tough move by EU on Israel, however, would further antagonise the US under Donald Trump, who has anyway been heavily critical of Europe.